How Four Nigerian banks killed capital market

Facts emerged on how four banks participated in the collapse of the Nigerian capital market.

The revelation on the sharp practices was exposed by the Director General of Securities and Exchange Commission, SEC, Ms. Aruma Oteh, who appeared before the House of Representatives adhoc committee investigating the near collapse of the capital market, Monday.

The report of the external auditors' investigation initiated by the Commission on the statement of account of Nigeria Stock Exchange (NSE), one of the three nationalised banks, Afribank as well as Afribank Trustees, Afribank Registrars and their directors allegedly committed "grave market infractions in share buybacks schemes, misrepresentations in the returns to SEC to prevent detection that the bank funded its public offer, violating section 106(4) and section 110 of the ISA 2007 as well as Rule 109B of SEC Rules, adding that FAlcon Securities, Fidelity Finance and Spring capital were some of the entities used.

Similarly, Finbank executive team engaged six law firms to incorporate 95 companies and transferred over N25 billion of depositors' fund to nine of these companies and purchased 2.8 billion units of its own shares between August 2006 and December 2008.

Another acquired bank, directors and principal officers of Intercontinental Bank allegedly engaged in unlawful buyback schemes worth 3.4 billion units of shares using depositors' fund between June 2007 and December 2008 in violation of sections 105, 106 and 110 of ISA 2007 as well as CAMA and Rule 109b of SEC Rules; Union bank borrowed N30.4 billion from tow foreign investment banks and transferred the fund to Union Trustees which in turn transferred the money to Falcon Securities which carried out 181,088 share price of Union Bank stocks from a low of N23.30 in January 2007 to N50.33 in November 2007, a price appreciation of over 110 percent within 11 months.

According to her, the owners of Wonder Banks defrauded unsuspecting Nigerian public to the tune of N106 billion.

The external Auditors' investigation of the Nigeria Stock Exchange (NSE) also revealed the distribution of accrued sum of £41.2 billion to employees and council members as bonuses and share of surplus for the 2009 financial year.

On the allegations that led to the sack of the former chief executives of the NSE, Ms Oteh disclosed that "the Exchange (NSE) also spent N186 million on 165 Rolex wrist watches as gifts for awardees out of which only 73 were actually presented to the awardees. The outstanding 92 Rolex watches valued at N99.5 million remain unaccounted for."

Other  fraudulent transactions perpetuated by former NSE management include "the reclassification of the sum of N1.3 billion originally expended on business travels. Of this sum, N953 million was reclassified under "Software Upgrade" and subsequently xpended as against being capitalized. There were other cases of such unethical accounting practices," Oteh alleged.

May 08, 2012