The Central Bank of Nigeria (CBN) has imposed a N5.87 billion fine on Standard Chartered Bank, Stanbic-IBTC, Citibank, and Diamond Bank over alleged illegal remittance of foreign exchange to offshore investors of MTN Nigeria Communications Limited.
This is even as the CBN has directed MTN to refund 8.13 billion dollars which was illegally repatriated by the company with the aid of the four Nigerian banks.
In a statement issued by the CBN on Wednesday, the nation’s apex bank accused the commercial banks of carrying out the transaction without regular ‘Certificates of Capital Importation (CCIs)’ which is a compulsory pre-requisite for such transactions.
The CBN Acting Director, Corporate Communications, Department, Mr Isaac Okorafor who issued the statement described the action of the banks and MTN as ‘flagrant violation of extant laws and regulations of the Federal Republic of Nigeria,”.
Giving a breakdown of the imposed fines, Okorafor said Standard Chartered Bank would pay a fine of N2.47 billion, Stanbic IBTC, N1.88 billion, Citibank Nigeria, N1.26 billion and Diamond bank, N250 million.
Okorafor while explaining the banks’ offenses, disclosed that investigations by the CBN revealed that 3.45 billion dollars was repatriated by Standard Chartered Bank on the basis of illegally issued CCIs.
Similarly, he said the sums of 2.63 billion dollars, 1.766 billion dollars and 348 million dollars were repatriated by Stanbic IBTC Nigeria, Citibank Nigeria and Diamond Bank Plc, respectively during the period 2007 and 2015.
He said the CBN had directed the affected banks to pay the fines to the apex bank immediately.
Okorafor said that “the CBN investigation further revealed that on account of illegal conversion of MTN shareholders’ loan to preference shares (interest free loan) of $399,594,146.00, the sum of $8,134,312,397.63 was illegally repatriated by the company.
He advised all banks and multinational companies in Nigeria to adhere strictly to the provisions of all extant laws and regulations of Nigeria in their foreign exchange transactions.
He warned that failure by the management of banks and companies to abide by the existing guidelines, they would be appropriately sanctioned adding that the sanctions may include denial of access to the Nigerian foreign exchange market.
More Details:
CBN’s letter to MTN says:
Our investigation also revealed the following, among others:
- The shareholders of your company invested the sum of $402,590,261.03 in the company from 2001 to 2006;
- The investment was carried out through the inflow of foreign currency cash transfers and equipment importation, which was evidenced by the CCIs issued by Standard Chartered Bank (SCB), Citi Bank (CB) and Diamond Bank (DB);
iii. The CCIs issued at the time of the investment by the above banks to your organization in respect of the $402,590,261.03 showed that $59,436,923.44 was invested as shareholders’ loan and $343,153,339.56 as equity;
- However, a review of your organization’s financial statements for the year ended December 31, 2007 revealed that $399,594,146.00 was recorded/invested as shareholders’ loan and $2,996,117.00 as equity investment, in accordance with the shareholder’s agreement but contrary to the CCIs issued by the banks in (iii) above;
- Following a request by your organization through Standard Chartered Bank for CBN’s approval to convert the shareholder’s loan to preference shares, an approval-in-principle was granted vide our letter dated November 13, 2007; with the grant of final approval made subject to the fulfilment of the following conditions by your organization.
- Implementation of the decision in item 5B of your board resolution dated November 08, 2007 and submission of documentary evidence to that effect to the Director, Trade and Exchange Department of the Central Bank of Nigeria; and
- Provision of an undertaking that no remittance for either interest or principal repayment would be made to the shareholders from the date of the loan to the date they were converted to preference shares.
- In spite of the non-fulfilment of the conditions in (v) above and consequently, the non-issuance of a final approval by the CBN, your organization converted the shareholders’ loan to preference shares with Standard Charted Bank issuing new CCIs in respect of the illegal conversion;
vii. The action of your banker in aiding your organisation in the illegal conversion of the shareholders’ loan was later described by SCB in a letter to the CBN dated December 10, 2009 as an “unintended omission”; and
viii. On account of the illegal conversion of your shareholders’ loan to preference shares (interest free loan) of $399,594,146.00, the sum of $8,134,312,397.63 was illegally repatriated on behalf of your company by the aforementioned banks between 2007 and 2015.
