Sanusi's Letter Of SuspensionFrom The CBN

19th February, 2014

Reference:
Mallam Sanusi Lamido Sanusi
Governor,
Central Bank of Nigeria, Abuja.

SUSPENSION FROM OFFICE
1. Following the Report of the Financial
Reporting Council of Nigeria on the
Audited Financial Statements of the
Central Bank of Nigeria (CBN) for the
year ended 31st December 2012, and
other related issues, I write to convey
to you His Excellency, Mr. President’s
decision that you be suspended from
office as Governor of the Central Bank
of Nigeria with effect from Thursday
20th February 2014.

2. The decision is predicated on the
loss of confidence in your ability to
lead the Apex Bank towards the
achievement of its statutory mandate.
Of particular concern is the fact that,
under your watch, the bank has carried
out its functions in a manner
characterised by disregard for due
process and accountability.

3. This is exemplified by various acts
of financial recklessness and
unprofessional conduct which are
inconsistent with the administration’s
vision of a Central Bank propelled by
the core values of focused economic
management, prudence, transparency
and financial discipline.

4. The particulars of the infractions are
highlighted below:

5. Persistent Refusal and/or
Negligence to comply with the Public
Procurement Act in the Procurement
Practices of the Central Bank of
Nigeria
(a) By virtue of Section 15(1) (a) of the
Public Procurement Act, the provisions
of the Act are expected to apply to all
‘procurement of goods, works and
services carried out by the Federal
Government of Nigeria and all
procurement entities.’ The definition
clearly includes the Central Bank of
Nigeria.
(b) It is however regrettable the
Central Bank of Nigeria under your
leadership, has refused and/or
neglected to comply with the
provisions of the Public Procurement
(PPA). You will recall that one of the
primary reasons for the enactment of
the PPA was the need to promote
transparency, competitiveness, cost
effectiveness and professionalism in
the public sector procurement system.
(c) Available information indicates the
Central Bank has over the years
engaged in procurement of goods,
works and services with billions of
naira each year without complying
with the express provisions of the PPA.
(d) By deliberately refusing to be
bound by the Provisions of the Act, the
CBN has not only decided to act in an
unlawful manner, but also persisted in
promoting a governance regime
characterised by financial
recklessness, waste and impunity, as
demonstrated by the contents of the
2012 Financial Statements.

6. No responsible government will
tolerate this blatant disregard for its
laws and procedures by any person or
institution. The Central Bank, by its
unique position, ought to show good
example and be the leading light in the
promotion of the culture of observance
of due process.

7. Unlawful Expenditure by the Central
Bank of Nigeria on ‘Intervention
Projects’ across the country
(a) The unacceptable level of financial
recklessness displayed by the
leadership of the Central Bank of
Nigeria is typified by the execution of
‘Intervention Projects’ across the
country. From available information,
the Bank has either executed or is
currently executing about 63 (sixty-
three) such projects across the
country. Please find attached hereto
as Annexure I, a letter dated January
7th, 2014 from the CBN confirming the
list of projects across the country to
which the CBN has committed N163
Billion (One Hundred and Sixty Billion
Naira).
(b) It is inexcusable and patently
unlawful for any agency of
Government to deploy huge sums of
money as the CBN has done in this
case, without appropriation and
outside the CBN’s statutory mandate.
It is trite that the expenditure of public
funds by any arm of government must
be based on clear legal mandates,
prudent costing and overriding
national interest.
(c) Cognisant of the attendant negative
consequence of the CBN’s action, a
review of the Central Bank
(Establishment) Act 2007 does not
disclose any legal basis for the huge
expenditure on intervention projects in
default of appropriation.

8. Financial Infractions and Acts of
Financial Recklessness Committed by
the Central Bank as reflected in its
Audited Financial Statements for 2012.
(a) Pursuant to Section 50 of the CBN
Act 2007, a copy of the Audited
Financial Statement of the Central
Bank for the year ended 31st
December 2012 was sent to Mr.
President (Please, find a copy attached
hereto as Annexure II). Based on the
issues raised in the financial
statement, a response was requested
from Sanusi to enable a proper
appreciation of the nation’s economic
outlook. (Please, find attached a copy
of the letter dated 4th May, 2013 as
Annexure III).
(b) Your response to this query
(Annexure IV) was further referred to
the Financial Reporting Council by a
letter of 12th April, 2013, for review
(Annexure V).
The review of the Financial Reporting
Council of Nigeria, rather than allay the
fears of Government, further confirmed
concern about the untidy manner in
which you have conducted the
operations of the CBN (Annexure VI).

9. Some of the salient observations
arising from the review are highlighted
below:
(a) In a most ironical manner, it has
become obvious that the CBN is not
able to prepare its financial statements
using applicable International
Financial Reporting Standards (IFRS)
whereas Deposit Money Banks that the
CBN is supervising have complied with
this national requirement since 2012.
Undoubtedly, this laxity on the part of
our apex bank, apart from calling to
question its capacity for proper
corporate governance, is capable of
sending wrong signals to both
domestic and international investors
on the state of the Nigerian economy.
(b) The provisions of the Memorandum
of Understanding (MoU) signed by the
CBN and other Deposit Money Banks
(DMBs) on Banking Resolution Sinking
Fund have been breached in a
material manner. For example, a
Board of Trustees (BOT) to manage
the Fund has not been constituted
since 2010 when it was established.
The CBN has however continued to
utilise the Fund for certain operations
without the approval of the said BOT.
(c) Contrary to Section 34(b) of the
CBN Act 2007 which provides that the
CBN shall not, except as provided in
Section 31 of the Act, inter alia,
purchase the shares of any
corporation or company, unless an
entity set up by the approval of the
authority of the Federal Government,
CBN in 2010, acquired 7% shares of
International Islamic Liquidity
Management Corporation of Malaysia
to the tune of N0.743 Billion. This
transaction was neither brought to Mr.
President’s attention nor was a Board
approval obtained before it was
entered into.
(d) The CBN has failed or refused to
implement the provisions of the
Personal Income Tax (Amendment)
Act 2007. Accordingly the Pay-As-
You-Earn (PAYE) deductions of its
staff are still being computed in
accordance with the defunct Personal
Income Tax Act 2004, thus effectively
assisting its staff to evade tax, despite
the generous wage package in the
CBN, relative to other sectors of the
economy.
(e) The CBN had an additional brought
forward to General Reserve Fund of
N16.031 Billion in 2012 but proceeded
on a voyage of indefensible expenses
in 2012 characterised by inexplicable
increases in some heads of
expenditure during the year. Examples
include:
(i) The bank spent N3.086 Billion
‘promotional activities’ in 2012 (up
from N1.084 Billion in 2011). The bank
spent this sum even when it is not in
competition with any other institution
in Nigeria;
(ii) The CBN claimed to have expended
N20.202 Billion on ‘Legal and
Professional Fees’ in 2011, beyond all
reasonable standards of prudence and
accountability;(iii) Between expenses
on ‘Private Guards’ and ‘Lunch for
Policemen’, the CBN claimed to have
spent N1.257 Billion in 2012;
(iv) While Section 6(3) (c) of the CBN
Act 2007 provides that the Board of the
CBN is to make recommendations to
Mr. President on the rate of
remuneration to Auditors, the Bank has
consistently observed this provision in
the breach and even went to the extent
of changing one of its Joint External
Auditors without notifying the office of
the President.
(f) In the explanations offered by the
CBN pursuant to Presidential
directives, it offered a breakdown of
‘Currency Issue Expenses’ for 2011
and 2012. Interestingly, it claimed to
have paid a total of N38.233 Billion to
the Nigerian Security Printing and
Minting Company Limited (NSPMC) in
2011 for Printing of Banknotes’.
Paradoxically however, in the same
2011, NSPMC reported a total turnover
of N29.370 Billion for all its
transaction with all clients (including
the CBN)
(g) It is significant to note that the
external audit revealed balances of
sundry foreign currencies without
physical stock of foreign currencies in
the CBN Head Office.

10. Questionable write-off of N40
billion naira loans of bank
You may wish to specifically not
Annexure VII which highlights a
number of transactions and breaches,
which include the write-off of loans
totalling N40 billion.

11. The above issues are only few of
the infractions highlighted by the
review and which point to the gross
incompetence and recklessness which
characterised the operations of the
CBN in the period under review.

12. In light of the foregoing, and
pursuant to the provisions of Section 7
(2) (a), Section 8 (1) (k), Section 62
(1) (c) and 62 (3) of Financial
Reporting council of Nigeria Act, a
copy of this letter is being forwarded to
the Executive Secretary of the Council
for his notification and further
necessary action with a view to
addressing the urgent need to
reposition the bank for the effective
discharge of its statutory mandate.

13. You are, by this letter, directed to
hand over to most senior Deputy
Governor, Dr. Sarah Alade who will act
as Governor till the conclusion of the
investigation into these far reaching
breaches.
Please accept, as always, the
assurances of my highest regards and
esteem.

Anyim Pius Anyim, GCON
Secretary to the Government of the
Federation