Nigeria’s central bank may have stirred up controversies with the sale of Polaris Bank Limited to Strategic Capital Investment Limited, which its owners have not filed annual returns to the Corporate Affairs Commission (CAC) over the years.
Osita Nwanusobi, Director, Corporate Communications of the Central Bank of Nigeria,(CBN) on Thursday night announced that Strategic Capital Investment Limited (‘SCIL’) has formally acquired 100 per cent equity of Polaris Bank, formerly Skye Bank.
Nwanusobi disclosed that SCIL had paid an upfront consideration of N50 billion for the equity of Polaris Bank and had also accepted the terms of the agreement which include the full repayment of the sum of N1.305 trillion, being the consideration bonds injected over a period of 25 years.
The CBN announcement came on the heel of the endorsement of the acquisition by Henry Nwawuba, chairman of the Ad-Hoc committee of the House of Representatives that investigated the sale of the bank.
He said the acquisition followed the laid down procedure and has received relevant presidential approval.
However, a check by InsideBusinessNG into the status and ownership of SCIL as well as the bank and the transaction itself threw up several corporate governance issues that could plunge the transaction into controversy.
Femi Falana, reacting to a query from InsideBusinesNG on the acquisition, described the transaction as a huge package of fraud that will be contested in court.
Findings by InsideBusinessNG showed that SCIL, which appears to be a Special Purpose Vehicle (SPV) for the acquisition of Polaris Bank was registered with the Corporate Affairs Commission (CAC), the nation’s business registry on April 28, 2022, with registration number RC 1924504 by one Zakaria Maimalari.
The report generated from CAC also shows that SCIL has two promoters who are, Ponglomerape Limited, a Nigerian firm, and Zagamon Limited, a Mauritanian company that is being represented on SCIL by Clotaire Investment Limited, as its Nigerian subsidiary.
Ponglomerape according to findings at the CAC has 55 per cent equity in SCIL while Clotaire (representing ZAGAMON) has a 45 per cent shareholding in Strategic Capital Investment Ltd.
Interestingly, the two promoters of Strategic Capital Investment Ltd, -Ponglomerape Limited and Clotaire Investment Limited (ZAGAMON) acquired equities in SCIL on April 25, 2022, some days ahead of its registration by the CAC on April 28, 2022.
Also, CAC papers show that the two companies that are owners of SCIL are inactive on the Commission’s portal.
A company is declared by CAC as inactive if it has defaulted on filling annual returns to the commission over a period of time. The most important component of annual returns is the audited financial statements according to accredited agents of the CAC.
“Judging by the way the ownership is structured, the real owner or investor in the purchase of Polaris Bank is hidden’, says Aremu Aleshinloye of Arle Professionals, a firm of Chartered Accountants.
Alesinloye who is also an accredited agent of the CAC stated that it is expected of every firm registered by the Commission to always submit its annual returns which is the audited financial statement by the end of June to the CAC.
“For firms with an inactive status on the CAC to be allowed to go that far in such a bidding process is a breach of corporate governance”, he concluded.
Ponglomerape Limited has registered with the CAC over 10 years ago specifically on September 5, 2002, with registration number RC 461335 while Clotaire Investment limited with RC 878216 was registered on March 30, 2010.
Ponglomerape has two addresses and they are 3A, Oguta Lake Street, Maitama Extension, and Number 3, Gongola Street, Area 11, Garki both in Abuja in the Federal Capital Territory (FCT).
Clotaire Investment limited contact address is R10 Plaza, (second floor) Muri Okunola street, Victoria Island Lagos according to CAC filings.
The Mauritanian firm, Zagamon Limited’s registration number in Mauritius is RC 129098.
There is also Ponglomerape Properties Investments Ltd, with RC 846610, registered with CAC on September 28, 2009. Its address is 25, Herbert Macaulay Way, CBD, Abuja. The status of this on the CAC platform is also Inactive.
CAC Filings shows that Ponglomerape limited which owns 55 per cent of SCIL as of October 21, 2022, has N10 million share capital, while its principal business activity is sales of motor vehicles, motorcycles, and other automobile products.
Findings by InsideBusinessNG at CAC also showed an interesting twist, as the Mauritanian firm, Zagamon Limited acquired 100 per cent equity of Clotaire Investment which has 45 per cent equity in SCIL, a few days ago, specifically on October 18, 2022.
Sources at the Bureau of Public Procurement (BPP), a Nigerian government institution that sets the rule for bidding processes in the country said the Bureau outlaws a company with an inactive status on CAC from participating in any of government procurement processes.
“Every company that wants to participate in the government’s procurement or bidding process must regularise its status with the CAC and be active on the portal”, he says.
Polaris Bank acquisition according to Nwanusobi was coordinated by a Divestment Committee (the ‘Committee’) comprising representatives of the CBN and AMCON, and advised by legal and financial consultants.
The Committee, he said, conducted a sale process by ‘private treaty, as provided in Section 34(5) of the AMCON Act to avoid negative speculations, retain value and preserve financial system stability”.
Submissions were said to have been subjected to a rigorous transaction process from which SCIL emerged as the preferred bidder having presented the most comprehensive technical/financial purchase proposal as well as the highest-rated growth plans for Polaris Bank.
The CBN Corporate Communications Director stated that invitations to submit financial and technical proposals were sent to 25 pre-qualified interested parties, out of which three (3) parties eventually submitted final purchase proposals following technical evaluation.
Speaking on the acquisition, Falana, a lawyer and human right activist said the transaction would be contested in court owing to the manner in which it was conducted.
Falana who wrote the CBN for information on the acquisition process in August 2022, alleged the bank was given away to friends of CBN officials without a proper valuation of its assets, its branch network, and its goodwill.
Polaris Bank’s assets according to its 2020 audited financial statement were N1.8 trillion with a Profit Before Tax (PBT) of N28.9billion.
Details of the year 2020 performance reflect a 4 per cent Year on Year (YoY) increase in Profit before Tax (PBT), and a Return on Asset (ROA) and Return on Equity (ROE) of 2.4 per cent and 29.4 per cent respectively.
The Shareholders’ Funds grew by N14billion (17 per cent), while customer deposits increased by N56billion.
These results, Falana said do not show that the bank is distressed and, having been capitalized up to N1.305 trillion should not have been sold for a meager N50 billion.
“The acquisition is a fraud because they wanted to give away the bank to their friends while the N1.305 trillion that the CBN said the new owners will pay, will be taken from the income of the bank’s earnings over the years”Falana argued.
The human right activist who said he would contest the acquisition in court argued that it was wrong to give a buyer, grace to pay up acquisition fees over a period of 25 years.
“That is no longer a sale but a giveaway, he said.
Falana said he earlier requested details of the transaction earlier but CBN’s response to his query was not definite.
Invoking the Freedom of Information (FOI) Act, Falana Chambers had in a letter dated August 25, 2022, and signed by Samuel Ogala, requested from the CBN, information on the proposed sale of Polaris Bank.
“We commend the CBN for bailing out Polaris Bank with N1.2 trillion.
“We have however read in the People’s Gazette Online Medium that the CBN has concluded arrangements to sell the Polaris Bank at a ridiculous N40 billion.
“In view of the foregoing, kindly furnish us with detailed information on the proposed sale of Polaris Bank limited including the lucky buyer.
“As this request is made pursuant to the provisions of the Freedom of Information Act 2011, you are required to accede to our request within 7 days of the receipt of this letter.
“Take Note that if you fail or refuse to furnish us with the requested information, we shall not fail to pray the Federal High Court to compel you to accede to our request.
The apex bank in a response titled, “Re-Request For Information On the Proposed Sale of Polaris Bank”, signed by Aminu Mohammed, on behalf of the Secretary to the CBN Board, was neither here nor there.
The CBN letter referenced CSD/FOI/CON/FFC/001/013, read, “We write to acknowledge the receipt of your letter dated 25th August, and received on 1st September 2022 on the above subject, and wish to inform you that information being sought, where available, will be communicated to you in due course”.
Polaris has been operating as a bridge bank since 2018 when the Central Bank of Nigeria intervened to revoke the license of the former Skye Bank Plc and established Polaris Bank to assume its assets and certain liabilities.
As part of the CBN intervention, consideration bonds with a face value of N898 billion (future value of N1.305 trillion) were injected into the bridge bank through AMCON, to be repaid over a 25-year period.