In clear defiance of its enabling act and without the approval of the president, the Central Bank of Nigeria CBN has invested N743 million in International Islamic Liquidity Management (IILM) Corporation of Malaysia.
Also, up till now, the CBN is yet to show to Nigerians, how many shares it bought with this huge sum of money and neither has it showcased the share certificate that was issued to it in this regard.
IILM, set up on 25 October 2010, is an institution established by central banks, monetary authorities and multilateral organisations to create and issue short-term Shari’ah-compliant financial instruments to facilitate effective cross-border Islamic liquidity management.
Its current shareholders are the monetary agency of Indonesia, and central banks of Kuwait, Luxembourg, Malaysia, Mauritius, Nigeria, Qatar, Turkey, the United Arab Emirates and the Islamic Development Bank.
Section 34(b) of the CBN Act, 2007 however provides that the CBN shall not, except as provide in Section 31 of its Act, purchase the shares of any corporation or company including the shares of any banking institution.
Section 31 stipulates that the CBN may subscribe to, hold and sell shares of any corporation or company or debenture thereof set up with the approval of the federal government for the purposes of promoting the development of money or capital markets in Nigeria or of stimulating financial or economic development so however that in any such case, the total value of the holdings of shares or, as the case may be, debentures to which this section applies shall not at any time exceed ten times the aggregate of the bank’s paid up capital and the general reserve fund of the bank.
According to a report submitted to the presidency in 2014 and which President Muhammadu Buhari is currently studying, “the apex bank in 2010 acquired the shares of International Islamic Liquidity Management Corporation of Malaysia to the tune of N0.743 Billion”.
InsideBusiness sought comments on this and other issues from Isa Muazu, the apex bank’s spokesperson in an email titled Enquiries on CBN on 13 October, but response was yet to come as at the time of filing this story. Two other members of the Corporate Communication unit of the bank were also copied. They are all keeping mum.
This investment, according to the report “is not included in the exception as provided for in Section 31 of the CBN Act, 2007”.
The investment seen as not right for a secular state like Nigeria where its Muslim population occupies only one-third or 12 of the entire 36 states of the federation, “was not brought to the attention of Mr. President or secured the approval of the CBN’s governing board who will provide it for the review of the president”.
What makes it more worrisome was the withdrawal of Saudi Arabia believes to be the cradle of Islam in the world. Saudi Arabia pulled out without any reason on 3 April 2013 and its stake in the IILM was bought by the central banks of Qatar and Malaysia.
The withdrawal which has thus brought the number of the body’s shareholders to ten
The 12 states that are fully and partially sharia compliant are Kano, Jigawa, Katsina, Sokoto, Zamfara, Kebbi, and Borno. Others are Yobe, Bauchi, Gombe, Kaduna and Niger. The remaining 24 states and the Federal Capital Territory (FCT), Abuja are not.
Surprisingly however, the report noted that as at date, the CBN has not displayed the share certificate to this equity investment or the number of shares allotted.
“The right of the CBN to this investment may be challenged and consequently lead to a risk of disagreement or litigation by the organization”.
Nigeria’s population according to the official 2006 census figures by the National Population Commission (NPC) put the country at 140 million of which the 12 Muslim dominated states accounted for 53,240,321.
The report which underlines weak corporate governance in the apex bank shows that some its financial statements and transactions such as the N743 million are not discussed by the Board’s Audit and Risk Management Committee.
“A number of transactions and events, of financial nature, were carried out without board’s approval (as no Board approvals were provided as requested), this shows a very weak corporate governance at the CBN and a clear evidence that statutorily allowing the CBN Governor to be both the Chief Executive Officer of the Bank as well as the Chairman of the Board is the highest error made in the conception of the CBN Act, 2007”.
The report cited the board approval for the N743 billion equity investment in the shares of the IILM which is also not provided. “The share certificate is also to be provided as it seems that Section 34 of the CBN Act, 2007 has been violated”.
This, according to the report is contrary to section 3(b) of the CBN Act, 2007 which requires that issues like such be considered by the board and decisions taken.
“Accounting issues identified usually lead to adjustment in the Financial Statements before the approval of the Board is secured on the accounts (a number of issues on the draft management letter can testify to this)”.
“Since this was not the case, it means that the financial statements submitted to Your Excellency by the Governor of the CBN was not approved by the governing Board of the Bank”.
Reuters in one of its repot noted that since its inception, the IILM has had to grapple with the laws of the many jurisdictions to which it wishes to cater, quoting its chief executive at the time, Mahmoud AbuShamma. AbuShamma was hired in 2011 on a three-year contract from HSBC in Dubai.
A few weeks after the interview, Reuters noted that AbuShamma was replaced by Rifaat Ahmed Abdel Karim, former secretary-general of the Malaysia-based Islamic Financial Services Board, a standard-setting body for the global industry.