TERM OF REFERENCE 8
3.10 Enter into appropriate correspondence with the receiving Bank and take all further necessary action for the purpose of preventing further transactions on the account, and effecting the return of the invested funds to the paying Bank as soon as possible.
3.10.1 The Committee, in addressing this term of reference, wrote separate letters to the Governor of the Central Bank and the Chief Executive Officer of the Africa Finance Corporation (AFC) on 17th April, 2008 requesting a list of Bank accounts maintained or operated by the AFC since inception. In response, the CBN identified the following as the Accounts, which to its knowledge were maintained by the AFC as follows:
(i) A/c No. 68959001 maintained with UBA New York;
(ii) A/c No. 68959013 maintained with UBA New York;
(iii) A/c No. 0011815768 maintained with Citibank, London.
(iv) A/c No. 0230449534013 maintained with CBN Lagos Branch (Pre-Operational Expenses Account).
3.10.2 The Committee subsequently wrote letters dated 21 April, 2008 to the Group Managing Director of the United Bank for Africa (UBA) and the Managing Director of the Nigeria International Bank (NIB) the Nigerian affiliate of the Citigroup, respectively, requesting them to freeze further transactions on the accounts pending the conclusion of the Committee’s assignment and a final decision by the Federal Government (See ANNEXURES 17 and 18).
3.10.3 The Committee observed that due to the fact that the CBN’s investment of US$462million had become mixed with the equity contributed by other shareholders, and that the AFC had apparently invested the funds in diverse financial instruments around the world, it is no longer practicable to isolate the CBN’s investment to a particular account. It was therefore resolved by the Committee that the burden of making a demand for the funds should be placed on the CBN which had made the investment in the first place.
Thus, by a letter dated May 2, 2008 (ANNEXURE 19) the Committee requested the Governor of the Central Bank to immediately effect the withdrawal of the CBN’s investment in the AFC and return it, together with accrued interest payments, to the “AFC Equity Investment Account” within the CBN being the last point from where the funds were transferred to the AFC.
3.10.4 By a reply dated May 8, 2008 (ANNEXURE 20), the CBN informed the Committee that the said sum of US$462,923,000.00 had been retrieved by the CBN from the AFC and placed in an account designated as the ‘AFC Equity Investment Account’ with JP Morgan Chase Bank in New York, United States of America.
3.10.5 The Committee followed up this correspondence with a visit to the New York offices of JP Morgan Chase on Monday, 9th June, 2008 where it met with its officials led by the Vice-President for Middle East and Africa Region, Mr. Stuart Macdonald. The Minutes of the said Meeting are attached to this Report as ANNEXURE 21. The outcomes from the Meeting can be summarized as follows:
(i) The CBN gave instructions for the opening of the account (‘CBN AFC Equity Investment Account’) on May, 8, 2008 for the receipt of its investment which it had directed the AFC to return;
(ii) The said total principal sum of US$462,923,164.71 (USD 164.71 more than the original invested sum of USD 462,923,000.00) was received by JP Morgan Chase in two installments of US$268,824,503.31) and US$194,098,661.40, respectively on May 8, 2008;
(iii) The first trance above was transferred by the CBN to JP Morgan Chase after receipt of the Naira equivalent by the CBN from the AFC in Nigeria while the second trance was received as a direct transfer in United States Dollars from the AFC to JP Morgan Chase;
(iv) The account effectively became operational on May 13, 2008 and is designated as Account No. 000000400130300;
(v) The total sum of US$462,923,164.71 had been transferred by JP Morgan, New York Branch to JP Morgan, London Branch in order to take advantage of the more favourable interest rate regime in the London market compared to New York’s;
(vi) The sum has been invested at the rate of 2.44% and as at the 12th day of June, 2008 had therefore grossed an interest amount of US$972,653.01;
(vii) The total principal invested by the CBN in the AFC in the sum of US$462,923,000.00 has been recovered from the AFC by the CBN and deposited in Account No. 000000400130300 with JP Morgan Chase Bank in London under the CBN’s signatories;
(viii) The Committee considered the possibility of repatriating the investment immediately, but decided that in view of the fact that the funds are now effectively back under the control of the CBN and the fact that JP Morgan Bank holds twenty-eight other FGN accounts, the funds can remain in its custody pending a final decision by the Federal Government on the continuation of its investment in the AFC;
(ix) As a control measure, the Committee has written a letter dated 27th June, 2008 to the Governor, CBN (and copied to JP Morgan Chase) directing that there should be no withdrawals or other adverse dealings on the account pending the communication of Government’s final decision on the matter;
(x) The Committee has reviewed the routes through which the CBN investments in the AFC were recovered and notes that the fact that the larger portion (US$246m) of the principal sum of US$462m was repaid in Naira before being re-transferred to New York in Dollars raises serious questions as to the uses to which the money was put by the AFC since it was raised from the shareholders. We are particularly worried from the nature of the transaction that the AFC funds have been used as a source of trading funds by certain Nigerian banks (Ecobank Nigeria Plc, United Bank for Africa Plc, First City Monument Bank, Oceanic Bank, Stanbic Bank Nigeria Ltd (now Stanbic/IBTC Bank) and Access Bank Plc, respectively. l, respectively) in the money market;
(xi) The Committee notes that by a letter dated 10th June, 2008 (ANNEXURE 22), the Governor of the CBN notified the Committee that the accrued income on the CBN investment in the AFC to date has been computed by the AFC management at US$11,370,350 (Eleven Million, Three Hundred and Seventy Thousand and Three Hundred and Fifty United States Dollars). However, the ‘the expenses incurred in generating the said income’ are yet to be computed by the AFC Management. The Committee considers this position as inconclusive and unhelpful, since the AFC has not furnished it with a net interest amount which is immediately payable.
3.11 To determine the role(s) played by any authority or person in the formation and funding of the AFC and make appropriate recommendations in respect of such authorities or persons.
3.11.1 The Committee identifies the following authorities and persons as significant in the formation and or funding of the AFC:
(a) Professor Chukwuma C. Soludo, CFR …Governor of the Central Bank of Nigeria;
(b) The Technical Committee on the Africa Finance Corporation
(c) KPMG Consulting/Banwo Ighodalo & Co. (Consultants)
(d) The Board of Directors of the Central Bank of Nigeria
(e) Ex-President Olusegun Obasanjo, GCFR
(f) Chief Bayo Ojo, SAN , Former Honourable Attorney General of the Federation & Minister of Justice
(g) Mr. Austine Ometoruwa….Chief Executive Officer, Africa Finance Corporation
(h) Other Domestic Shareholders
(i) The Governments of Sierra-Leone and Guinea-Bissau, respectively.
(a) PROFESSOR CHUKWUMA CHARLES SOLUDO, CFR (Governor of the Central Bank of Nigeria)
(i) Professor Soludo was the chief visioner and active directing mind of the Africa Finance Corporation initiative. He authored the initial proposal to former President Olusegun Obasanjo in 2006 to propose the establishment of the AFC with Nigeria as its chief promoter and with its headquarters to be sited in Nigeria.
(ii) In his two memoranda to the former President dated January 13, 2006 and March 24, 2007 respectively, as well as in the presentations he made to the Committee, he anchored his proposal, among other things, on the need for Nigeria to leverage on its rising foreign exchange reserves to fast-track infrastructural development through the establishment of a development institution modeled substantially after the International Finance Corporation. The role of the AFC was conceptualized as that of a mobilizer of resources from within and outside the African continent, to tackle infrastructural development issues within the African continent in a timely and focused manner.
(iii) The approval of his proposal for the establishment of a Technical Committee to lay the groundwork for the AFC resulted in his emergence as Chairman of the said Technical Committee, which comprised several Chief Executive Officers of Nigerian Commercial banks as well as some of the well-known captains of industry within the Nigerian economy.
(iv) It is further noted that upon the approval of the constitution of the Technical Committee by the former President, the CBN Board which Prof. Soludo chaired, at its 371st Meeting on 2nd August, 2006 purportedly approved that the CBN should invest US$462,923,000 in the AFC. Ultimately, Prof. Soludo emerged as the first Chairman of the AFC (in his personal capacity) at the AFC Board Meeting held in Abuja on 4th June, 2007.
(v) While it is true that there was a Presidential approval for the constitution of a Technical Committee for the AFC as well as to ‘fast-track’ its establishment, the decision of the CBN Board under his headship to commit funds to the AFC in November, 2007 before it had legally become operational (even by the terms of its own Agreement which required the signatures of at least two African countries), was hasty, procedurally wrong and legally flawed. The Committee further noted that under section 26(i) of the 1991CBN Act (the new Section 31(1) and (2) of the CBN Act No. 24 of 2007) under which a Board approval was secured for the AFC investment, the investments anticipated by the laws were in the domestic economy and not for multilateral ventures such as the AFC;
(vi) The acceptance by Prof. Soludo of the Chairmanship of the Board of the AFC in his ‘personal capacity’ on June 4, 2007 was a contravention of Section 9 of the CBN Act 2007 which forbids the Governor from holding any such position except by virtue of his office as Governor of the Central Bank of Nigeria.
Prof. Soludo’s justification of his actions
Prof. Soludo submitted two written Position Papers to the Committee. The first was entitled ‘Establishment and Activities of the Africa Finance Corporation’ dated (ANNEXURE 23) while the second was entitled ‘Additional Information in the matter of the Federal Government Investigation in Respect of the Affairs of Africa Finance Corporation’ (ANNEXURE 24). Both papers contain, inter alia, his comprehensive explanation of the rationale for the establishment of the AFC, the justification for the processes that had been undertaken thus far by the CBN, and an argument for the retention of the AFC.
In response to the issues noted by the Committee in sub paragraphs (v) and (vi) above, Prof. Soludo in his presentation to the Committee, justified his actions in the following manner:
(i) In respect of sub-para (v) above, he claimed that he acted on the basis of the Presidential approvals which directed him and other officers of State to fast-track the establishment of the AFC as evidenced by ANNEXURES 6 AND 7, earlier-referred to in this Report. In addition, he pointed out that the CBN Board approved the investment in the AFC and that under the CBN Act, the Board approval was all that was needed for the Bank to take such investment decisions since such investments did not require appropriation by the National Assembly or Presidential approval.
He further claimed that he acted on the basis of the execution of the legal agreements for the establishment of the AFC by the immediate-past Hon. Attorney-General of the Federation which, in his opinion, cleared any legal hurdles for the investment by the CBN.
In response to the query raised as to why CBN transferred the funds to the AFC in November, 2007 when Nigeria was still the only signatory country and the Agreement had not been ratified by the Federal Executive Council, he said he acted on the basis of legal advice to the effect that under international law, Nigeria’s obligations to the AFC became effective the moment the Country executed the AFC Agreement and did not therefore depend on accession by any other country, , and that in any case the duty of ratification of the Treaty belonged to other agencies to whom Mr. President’s approval was copied, and not the CBN.
He further argued that it was the norm in international financial circles for countries to deposit their investment equity with an institution such as the AFC before the conclusion of legal formalities. In conclusion, he noted that Nigeria took 10 years to ratify the ADB Treaty and had still not ratified the AFREXIM Treaty 15 years after the country joined the organization, and despite the continued servicing of financial obligations by the country.
(ii) In respect of the second issue of his Chairmanship of the AFC Board in his personal capacity, Prof. Soludo claimed that he is only holding that position in an interim capacity.
He claimed to have declined the appointment and proposed the appointment of another shareholder as Chairman, but that the shareholders insisted on his acceptance of the position in order to guide the Corporation through the present teething period. He said the use of the words ‘personal capacity’ were meant to clarify the fact that the Chairmanship of the AFC would not automatically always be held by a CBN Governor since it was conceptualized as a private-sector driven organization, and that in any case, his appointment had not yet been ratified by the shareholders in General Meeting, thus robbing it of finality.
In spite of the above explanations, the Committee is of the opinion that Prof. Soludo accepted the Chairmanship of the AFC Board in contravention of section 9 of the CBN Act which forbids him to hold such a position in a personal capacity. Even though he claimed to have held that position in an interim capacity, a perusal of the Minutes of the AFC Board Meeting of June 4, 2007 did not disclose this. Flowing from this action, we believe that his action contravenes Section 25 of the ICPC Act.
(j) The Committee discovered that when it directed the CBN on May 2, 2008 to return the USD462 million in the AFC, the larger portion of the Principal amount (i.e. USD268, 824,503.31) was repaid in Naira in Nigeria before being converted to Dollars and re-transferred to New York. This situation, in our view, leads to the plausible conclusion that there was no justification for the initial transfer of the money out of Nigeria in November 2007/March 2008 by the CBN and the AFC, since part of the money was ultimately transferred back to Nigeria.
(k) (ii) The Committee equally views it seriously that the duo of Prof. Soludo and Mr. Ometoruwa were in breach of due process by transferring the initial huge sums of USD750 million and USD 143 million in November, 2007 and March 2008 respectively out the country (to Citibank, London and UBA New York) without the benefit of Board approvals either by the CBN or the AFC.
This being the case, we strongly believe that Government should take appropriate action against the two officers commensurate with the gravity of the breach.
(iii) Prof. Chukwuma Soludo authorized the first transfer of funds sourced from the CBN in November, 2007. It is mind-boggling that up till April, 2008 when this Committee was constituted by the Federal Government of Nigeria to investigate the affairs of AFC, Prof. Soludo deliberately failed to brief either the President or the Federal Executive Council for ratification as provided under Section 3 of the Treaties (Making Procedure, etc) Act, LFN, 2004.
This action, in our view, amounts to a gross abuse of office.
(iv)It is rather heart-rending that till date nothing realistic has been done with the funds invested in AFC, concerning its core objectives. Our observation is that apart from playing the money market around the globe, the AFC Management has only been engaged in signing Memoranda of Understanding (MOUs) with various stakeholders without any indication of actual commitment to specific dates for the commencement of real projects.
(v) The Committee further observes that Prof. Soludo intimated the Committee that the accrued income for the CBN investment in the AFC has been computed by AFC Management at US$11,370,350. As indicated earlier on in this Report, AFC has not been able to compute the expenditure incurred to generate this income in order to net off and determine the amount payable to the CBN/FGN. In view of this inconclusive and unhelpful state of affairs, the Committee is of opinion that Prof. Soludo and the CEO of the AFC, Mr. Austine Ometoruwa should be personally accountable for the determination of the actual interest that has accrued to the CBN/FGN from the investment in the AFC, and ensure its prompt payment.
This opinion is premised on the way and manner the fund invested by CBN in AFC found its way to UBA, New York and Citibank, London only for it to be repatriated to Nigeria after a few weeks. This constitutes “Round Tripping” which is a serious criminal offence with attendant consequences under the Money Laundering Act.
It is our view that Government should take appropriate action against Prof. Chukwuma C. Soludo and Mr. Austine Ometoruwa who are instrumental to this action.
In conclusion, the Committee finds Prof. Chukwuma C. Soludo liable for gross negligence, recklessness and gross abuse of office.
(b) The Technical Committee on the African Finance Corporation
The Technical Committee on the AFC was constituted following the approval of the former President, Chief Olusegun Obasanjo, GCFR for its formation to mid-wife the establishment of the AFC. It comprised the following persons:
1) Prof. Chukwuma C. Soludo, CFR…………….Chairman
2) Mr. Tunde Lemo, DG (CBN)…Alternate Chairman
3) Dr. Shamsuddeen Usman DG, CBN
4) Mr. Chris Edordu Ex-President, AFREXIM Bank
5) Dr. Seyid Abdulai DG, OPEC Fund
6) Oba (Dr) Olu Fajana Retired ADB Executive
7) Alhaji Aliko Dangote CEO, Dangote Group
8) Mr. Tony Elumelu CEO, UBA Plc
9) Dr. (Mrs.) Cecilia Ibru CEO, Oceanic Bank Intnl
10) Mr. Tayo Aderinokun CEO, Guaranty Trust Bank
11) Mr. Aigboje Aig-Imoukhuede CEO, Access Bank Plc
12) Mr. Ugochukwu A. Okoroafor SA to the CBN Governor
(Ag. Secretary)
This Technical Committee, working with KPMG Corporate Finance (Consultants), laid out the framework which ought to have guided for the ultimate establishment of the AFC.
(i) The Technical Committee together with the Consultants committed a serious error of judgment in assuming that the AFC, conceptualized as a private-sector driven entity, should rightly be entitled to diplomatic privileges and immunities as well as tax exemptions at corporate and individual levels. This Committee has already noted that several of the institutions to which the AFC is compared, such as the ADB, are represented at State level and not by individuals. We reiterate that allowing AFC staff, to enjoy tax-free status while working for a profit-making organization, would amount to the tax-payers in any signatory country subsidizing the operations of an entity set up to make profit for its private shareholders.
(c) KPMG Corporate Finance (Consultants)
(i) KPMG Corporate Finance was engaged in an advisory professional capacity to assist the CBN in setting out the legal and procedural framework to guide the establishment of the AFC. The firm produced, on behalf of the CBN, the ‘Information Memorandum’ which was circulated to prospective shareholders of the AFC.
(ii) The Committee notes that the Consultants set out a detailed procedural route for the setting up of the AFC, including the requirement for ‘ratification and gazetting of the Agreement by each of the signatory countries. The Committee is however at a loss as to whether KPMG at any subsequent point stepped in to advise CBN against the commencement of the AFC operations prior to ratification by the Nigerian Government. We do not have any evidence of such intervention by the Consultants.
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