Beyond amending the CBN Act

Following the opening of a public debate on the autonomy of Nigeria’s Central Bank, I will like to do a follow up on my earlier blog post that touched on the autonomy of the Central Bank of Nigeria (CBN). 

You may read the earlier blog post here

In that blog post I had argued essentially that in the name of granting autonomy to the CBN, we may have inadvertently placed too many powers in the hands of governor.

Sanusi Lamido Sanusi, Governor, Central Bank of Nigeria. 

Globally, there have been a lot of regulatory reforms in response to the global financial crisis. These reforms have been on how financial institutions operate and how financial regulators regulate. 

In Nigeria, there has been more of a reform of how financial institutions operate with little on how financial regulators regulate.

The current move by the house to amend the CBN act, if that is all it is about, then will fall far short of what the Nigerian financial system needs. The challenge with the Nigerian financial system goes beyond a cosmetic amendment of the CBN act.

There are critical questions about the Nigerian financial system that need to be addressed. These questions include asking if the current highly fragmented regulatory system is really working for the Nigerian financial system? Why is the Shadow banking system in coma despite the existence of several licensed operators in the sector? Why is the insurance sector in coma and why is it that the only time the insurance industry showed some promise was when banks went into the insurance business? Why are banks thriving why all other financial institutions are not? How do you harness the whole financial system, banks and non-banks for the benefit of the economy?

The single act of just amending the CBN Act will not deal with the bigger issues faced by the Nigerian financial system. What we need is complete approach to reforming the Nigerian financial sector. This would involve reforms that include transparency in financial services, accountability, consumer protection and efficient competition in the financial system.

In the raging debate over the proposed CBN amendment act, there has been the consistent argument that it would interfere with the independence of the CBN. However, if the purpose of the bill is to balance independence with accountability and transparency in the operations of the CBN, then the proposed amendment could actually enhance the capacity of the CBN to efficiently manage the Nigerian economy but not enough to make the Nigerian financial system work for the Nigerian economy. So far media reports have not revealed the full details of the reform other than argue that it is meant curtail the independence of the Central Bank of Nigeria.

But a look at the UK financial regulatory system shows that even the Bank of England (BoE) does not have complete autonomy.

The Governor of the Bank of England (BoE) which is equivalent of Nigeria’s Central Bank Governor reports to a supervisory body for the BoE called the Court of Directors (CoD) chaired by an independent chairman different from the governor of the BoE appointed by the Chancellor of the Exchequer, equivalent to Nigeria’s Finance Minister.  The CoD is responsible for managing the day to day activities of the BoE except the formulation of monetary policy. The CoD delegates its functions to  the Governor of the BoE which has to give account of its operations to the CoD.

The CoD is made of 12 members appointed by the HM Treasury, and includes the governor of the BoE, two deputy governors and nine non-executive directors appointed for three year tenure each. The nine executive directors are appointed from different sectors of the economy including the banking industry.  To ensure, the accountability of the board, they are subject to an effectiveness review by an independent external body on an annual basis.

The CoD operate through different committees one of which is the Committee of the court (Nedco) made mainly of the Chairman of CoD and the non-executive directors of the committee and its main role is to review the performance of the BoE against its objectives and strategy. The bank also has the Financial Stability Committee (FSC) made up of the Governor of the BoE, two deputy governors and four non-executive directors of the CoD and a representative of the HM treasury. The committee is saddled with considering and approving all actions that are needed to preserve financial stability.

Other committees of the CoD include the Financial Policy Committee (FPC), Remuneration Committee and the Audit and Risk Committee. The new Bank act 2009 and a proposed new Financial Services Bill put the BoE effectively in charge of ensuring financial stability of the UK Financial system.

However, there are still specific areas like bank resolution options that involve the use of public funds that the 2009 UK banking act ensures that BoE can only act with the express collaboration of the HM Treasury equivalent to Nigeria’s ministry of finance.

In terms of direct accountability to the parliament, the BoE annual reports are first presented to the UK parliament before they are presented to the public. Also BoE has to attend the UK House of Commons Committee on the Treasury, equivalent to Nigeria’s House Committee on Finance, regular hearings on its inflation and financial stability report. This helps the committee members to question the BoE rational for arriving at its monetary policy decisions.

The House Commons committee also organises hearings for new member appointment into the MPC and the FPC though it has no power to reject the appointments.

Most readers may ask if it is possible to replicate this elaborate system of controls and balances in Nigeria, monitored by politicians without it being abused for personal gains. The answer lies in a quotation from the UK House Treasury Committee report which states that “accountability processes for monetary policy, built around published minutes, individual votes, regular evidence sections at the Treasury committee and pre-appointment hearings show that it is possible to create effective accountability structures while at the same time removing politicians from day to day decisions”

In essence, it is possible as along as  the process is made  transparent through mandatory disclosures of all processes. 

However, amending just the CBN act is not enough. There need to be a debate on the regulation of the whole financial system and whether the current fragmented regulation is appropriate for the Nigerian economy. The amendment of the CBN act can be the trigger for such a debate. By the way, the UK financial services bill will put the regulation of the insurance sector and other financial services under the BoE. 

For more on the governance structure of the BoE click here

The year of the hoodie

This is the year of the hoodie. At no time has a dress sense raised so much mixed emotions. It started when Geraldo Rivera, a Fox TV host said Trayvon Martin, a 17 year old teenager, killed while walking home with a Can of Ice Tea, was killed because of the hoodie he was wearing.  

He was killed by George Zimmerman, a 28 year old man who had earlier called the police to say that Martin was acting suspicious.

Watch Geraldo Rivera blaming the hoodie for Martin’s death.

This sparked a backlash in the US which led to the Million Hoodie Match in tribute to Trayvon Martin, with thousands of people walking the streets of New York wearing hoodies.

US Congressman Bobby Rush famously joined the push against the negative hoodie branding when he wore a hoodie to the floors of the US Congress.

Mark Zuckerberg’s appearance at an investor road show wearing a hoodie while planning for one of the biggest IPO’s in US history may however have crowned 2012 as the year the hoodie left the gangster street for the boardroom.

Mark Zuckerberg’s appearance at the investor road wearing a hoodie drew many criticisms.

“He’s actually showing investors he doesn't care that much; he's going to be him," analyst Michael Pachter told Bloomberg TV. "I think that's a mark of immaturity."

The Wall Street suit guys were obviously shocked that Mark did not care about their suit culture.

Interestingly, Mark Zuckerberg who walked to Wall Street, and raised $16 billion in the second biggest IPO in US history, putting his company's value at about  $104 billion, is the same age as 28 year old George Zimmerman, the man who pulled the trigger that killed 17 year old Trayvon Martin, allegedly because he was wearing a hoodie. 

The listing of the Facebook IPO was also the crowning of the hoodie. NASDAQ for the first time in its history presented a hoodie to a listing company’s Chief Executive. And guess what, Mark was still wearing his hoodie and so were good number of Facebook staff.

Facebook's success may have announced the arrival of the corporate hoodie fashion. The corporate three-piece suit may just be on its way out as the dominant fashion in the corporate world. 

The hoodie is the new business model represented by Facebook, Google, Zynga, Linkedln and many more, started by youths on their Laptops, Car boots and Garages. This is not the typical business environment for the suit wearing traditional business executive.Suit wearing may actually stifle the creativity that represents this new business model than promote it.

The knowledge economy is fast changing the traditional business models. The knowledge economy is driven by creativity. Hoodie  is synonymous with the creative music industry. It has shifted to the creative tech industry.

Those who understand this shift are already building a bridge across the fashion gap. Welcome to the world of the pinstripe hoodie. 

Perhaps, time to order your pinstripe hoodie. 

First few minutes of the Facebook listing

I am sitting in front of the TV watching as the airwaves and the social media stream get taken over with the Facebook mania. The Facebook IPO has turned out to be the biggest media event today May 18, 2012. I am watching Bloomberg TV now and the presenters are all Facebook as they wait for FB to start trading on NASDAQ.

Mark Zuckerberg

The pre-trading banter from the presenters are full of speculation on what the FB price will open at. A $70 price was mentioned based on the report that a trader in France was getting demand from retail investors that were ready to buy at that price. On retail stocks trading platforms like Markets.com, FB quoted prices rose above $100 per share.

The touch of drama and tension were further intensified by delays experienced by NASDAQ in opening trade on the FB stock.

At 16.15 pm (London Time) Bloomberg announced that NASDAQ was experiencing delays in opening trade on FB stock.

This delay resulted in a fall in NASDAQ share price and added to the tension of investors waiting for FB stock to start trading.

The news was that the opening trading volume of about 72 million was what was stalling opening the trade on the FB shares. Bloomberg also announced that NASDAQ said the massive demand was coming from retail investors. 

Meanwhile, an analyst is speaking on Bloomberg TV on the FB stock and says that he gets sceptical when he hears of “frenzy” and “mania”, and advises that investors should be cautious.

Watch Mark Zuckerberg ringing the opening bell on NASDAQ

Another analyst says he can justify a price target of $70 and price of $10 for FB based on the inputs into the forecast data. Basically, saying optimistic forecasts about FB share price should be taken with a pinch of salt.  Another notes that there was a lot of insider selling which should be of concern.

At 16.29pm Bloomberg finally announced that trade is expected to open at 11.30 am US time

At 16.30 pm FB starts trading at $42.05 at exactly 11.30 am US time

At 16.33 pm FB drops to $41.00

At 16.34 pm FB drops to $40.36

At 16.36 pm it drops to $40.06

An analyst speaking on Bloomberg TV says FB has made fantastic hires which can help it drive its business. That fact was not just driving stocks right now. 

At 16.37 pm   FB is selling at $40.02

At 16.39 pm FB drops to $40 and then briefly flirts with $39.99

At 16.44 pm Bloomberg announced that the share prices of technology stocks like Zynga, Linkedln, Groupon and the major underwriters of FB shares are also falling.

At 16.45 pm, FB shares seem to have settled at about $40 per share, flirts with $38.99 briefly then stays for a few more seconds at $39.95

At 16.48 Bloomberg informed viewers that global stock markets have lost $4 trillion this month

At 16.49 pm FB share price drops to $38.18

At 16.51 FB flirts with $37.96 dropping below the IPO offer price for the first time.

At 16.57 pm, Bloomberg TV live coverage of the opening trade of the historic FB IPO comes to an end and FB is selling at $38.40

In the opening few minutes, FB never neared the optimistic price of $70 per share. Rather, it has settled below its opening price. Would it ever go near the $70 price?

Watch this video of Mark Zukerberg meeting My Space founder

What do you think? 

Barrels for guns and dollars

-an inside look at the stolen crude oil trade in Nigeria’s Niger Delta

In the creeks of Nigeria’s Niger Delta, home to the world’s third largest wetland, more than two million barrels of crude oil are pumped and exported daily, but an estimated 30,000 to 300,000 barrels are also stolen. The Niger Delta is home to about 31 million people, belonging to 40 different ethnic groups, bound by fishing, farming and hunting.

Since 1958 however, the people of the Niger Delta have also been bound by the misery of crude oil exploration.  Farmlands have been destroyed and water ways overtaken by thick slicks of crude oil. Amnesty International estimates that nine million barrels of crude oil has been spilled in the region since the first oil well was dug.

An oil bunkering scene in the Niger Delta

The degradation of the Niger Delta environment was revealed in a 2011 study by the United Nation Environmental Programme (UNEP).

“In some areas of the Niger Delta, there was heavy contamination present, 40 years after an oil spill occurred”

Surface water throughout the Niger Delta creeks contain hydrocarbons with floating layers of crude oil varying from thick black oil to thin sheets, according to the UNEP study. It cites community actually drinking water from a well that is contaminated with benzene, “a known carcinogen, at levels 900 times above the World Health Organisation (WHO) guidelines.

Life in the Niger Delta is no longer the same.

Forced out of their traditional way of life, the people of the Niger Delta have found a new way to survive. Under the cover of darkness, in the midst of the forests, a trade is booming. Wooden Canoes once used for fishing have become transport vehicles for barrels of stolen crude oil. 

Crisscrossing the wetlands of the Niger Delta are long pipelines carrying millions of barrels of crude oil. These pipelines tap into a fraction of the 34 billion in proven crude oil reserves in the Niger Delta. The region also holds another 186 trillion cubic feet of gas reserves, the eight largest in the world.

The exposed pipelines are the source of stolen crude oil. A copy of a  report  obtained by this reporter, describes how crude oil is stolen from the exposed pipelines. Hacksaws are used to damage to pipelines. This forces the oil company to shut down oil flow on the affected pipeline to reduce the impact of any oil spill on the environment. As soon as this is done, the oil thieves install bunkering points on the hacked portion of the exposed pipes and attach hoses and suction instruments to the pipes. As soon as oil starts flowing on the pipelines again,  they siphon the flowing crude to waiting locally made barges; said to be able to store up to 40,000 barrels of crude oil at a time and large canoes called “Cotonu boats”. 

The oil thieves have two markets for their stolen oil, the local refineries in the creeks and offshore large tankers waiting patiently for such cargoes.  The  report confirms that the portion that is sold to the local refineries in the creeks is refined into diesel, transferred to a storage depot and then sold in the local Nigerian market.

A local journalist familiar with the Niger Delta says the stolen and locally refined diesel is sold at about N150 (59 pence) per litre compared to the official price of N190 (75 pence) per litre for the imported none locally refined diesel.

“In this region, if you want to be a small-time bunkering baron, you raise N10m (£39,000) and pay to a syndicate, then you get supplies as your share. Many people in the big dark jeeps you see here are in it. People introduce themselves as being in 'oil' business. That is it. It is no big deal here.”

Corrupt security agents are behind the trade, he says, explaining how large barges of stolen crude oil are able to move around the creeks unchallenged.

“If you go to Bonny Island, some soldiers lodge N3m (£12,000) daily in their accounts. My bank source tells me that some top brigade commanders get N25m (£98,000) lodgements at a time. There is piecemeal payment to security operatives and also one time pay-offs.  Has government agencies questioned the source of money?”

The exact number of barrels of crude oil stolen is not certain. But various reports put it between 30,000 to 300,000 barrels of crude oil every day. Ian Craig, Shell’s director for Sub Saharan Africa told an oil and gas conference in Abuja in December 2011 that Nigeria could be losing as much as 150,000 barrels of crude oil a day to the oil thieves.

Tony Attah, Vice President at Shell in Nigeria in an emailed response to this reporter’s enquiry disclosed that the “theft of equipment or leaks caused by crude oil thieves drilling into pipelines or opening up wellheads to steal oil, accounted for 74% of all oil spill incidents and 73% of all oil volume spilled from our facilities in the delta between 2007 and 2011.”

He puts the estimated cost of oil theft at “around $4.5bn a year to the Nigerian state and operators in lost revenue”

A special report by the United States Institute of Peace (USIP) titled “Blood Oil in the Niger Delta” estimates that the loss to the Nigerian economy from stolen crude oil between 2003 to 2008 could be as high as $100 billion.

Despite the significant loss of revenue to the Nigerian state, the government seem reluctant to deal with the massive theft of crude oil taking place in the creeks.

Andrew Walker explains the reason for the Nigerian government reluctance, in a report in 2009 for the BBC titled “Blood Oil dripping from Nigeria” quoting a source close to the Nigeria’s former president Olusegun Obasanjo as saying that “This is an industry that makes £30m ($60m) a day, they'd kill you, me, anyone, in order to protect it”

"If the president goes after them, they could destabilise the country, cause a coup, a civil war. They are that powerful, they could bring the state down."

Toyin Akinosho, a previous employee of Chevron and publisher of “Nigeria Oil and Gas” confirmed the fears expressed by the BBC source in a phone chat with this reporter.

“It is not unusual to hear militants in the Niger Delta boasts that they will make the government uncomfortable if they are prevented from stealing crude oil. They always threaten that they will blow up the pipelines.”

Nigeria earns 90% of its revenues from crude oil exports. So blowing up the pipelines could collapse the government.

But the inability of the government to deal with the situation could also be traced to top level political involvement in the oil theft trade.

Top level involvement in the stolen crude oil business may explain how in 2004 a detained Russian Ship carrying an estimated $2.6 million in stolen crude oil vanished. The Nigerian Navy detained the ship and claimed they handed it over to the Nigerian police. The Nigerian police claimed that they never received any ship from the Navy. The Nigerian legislature launched an investigation into the missing the ship. The report of the investigation was never made public.

Since then, several more ship detainments have been reported in the media. In 2011, security agencies are said to have arrested 145 people and seized among others 18 tankers, 22 vehicles, 16 barges, and 35 locally made boats. Sources familiar with the stolen crude oil trade however say these arrests target just the foot soldiers fronting for local and international financiers.  

There is evidence of well-established international syndicates facilitating the stolen crude oil trade in Nigeria. The route to the international markets for Nigeria’s stolen crude oil is a collaborative effort between the foot soldiers in the creeks, the communities hosting the oil wells and pipelines, the Nigerian Navy and security agencies, and an international syndicate of oil thieves that finance the whole process.

The international syndicate involves well established players in markets for stolen Nigeria crude oil in West African countries like Sao Tome, Liberia, Senegal, Cote d’Ivoir, Gambia supported by Moroccan, Venezuelan, Lebanese, French and Dutch Financiers.

The stolen oil is usually exchanged for cash, illegal drugs and weapons from the ships lurking out at seas waiting for the stolen oil to be delivered. The large tankers that buy the stolen crude oil take them directly to spot markets like Rotterdam or directly to refineries in places like Cote d’Ivoire a neighbouring West African country.

“There are large international syndicates involved in this operation, which also handle the money laundry for the international players” according to the USIP report mentioned earlier.

The report notes that the players in the creeks are just the front end of a complex international trade in stolen crude oil.

“While the Niger Delta youth may handle the local tapping and loading, international players from Eastern Europe, Russia, Australia, Lebanon, The Netherlands and France all play roles in financing, transporting, and laundering the money associated with blood oil. One money trail followed a path from Senegal and Cote d’Ivoir, through French banks and French credit agencies to Syria and Lebanon.” The USIP report revealed.

The report reveals deep involvement in the stolen oil trade of Nigerian Lebanese (those of Lebanese descent, born or naturalized in Nigeria) “especially those with good political connections”

Attah, Shell’s Vice President says only international collaboration can stop the booming trade in stolen crude oil from Nigeria.

“Nigeria needs the cooperation of the international community to checkmate the organised crime syndicates engaged in crude theft.  Buyers can demand assurance that the oil they buy comes from a legitimate source.”

The Nigerian state may be too compromised to stop the massive oil theft taking place, unless as Attah suggests, the international community intervenes. 

The brotherhood of greed and profits -how UK banks help Politicians to loot Nigeria (II)

Joshua Dariye another fugitive governor loved by UK banks

Joshua Dariye is another governor who use of British banks to launder money was revealed in the Global Witness report. The former governor of crisis prone Plateau State is said to have brought into the UK £2.85 million (N741 million) of suspected stolen funds through two banks, NatWest and Barclays. Following his arrest in 2003, Police also recovered £80,000 (N21 million) in cash from his London home.

Goodluck Jonathan-Nigeria's President

David Cameron-Prime Minister-UK 

The report revealed that about £1.17 million (N304 million) of the £2.85 million funnelled into the UK by Dariye was done through the accounts of one Joyce Oyebanjo at NatWest Bank. From July 2003 to March 2004, Dariye made seven payments into Oyenbanjo’s NatWest Account in different instalments that came to about £1.17 million or £1.48 million (N385 million) including interest. At the time of Dariye and Oyebanjo’s arrest only £198,045 (N385 million) remained in the account.

As the money was transferred to Oyebanjo’s account, she issued several cheques to Dariye on his frequent visits to London. Her account thus became a convenient conduit for Dariye to get money into the UK. In April 2007, Oyebanjo was convicted for money laundry charges and sentenced to three years in prison. Dariye remains in Nigeria a free man after fleeing from justice in UK.

Abacha was another top Nigerian leader known to have used UK banks to launder millions of pounds. According to an FSA report, Abacha used 23 different London Banks to launder about £900 million. A report by the Financial Times identified three of the banks to be Barclays, NatWest and UBS.

An African banker, working in the London financial district, who prefers to remain anonymous, said he was marvelled at the complicity of UK banks in helping launder money despite all the checks that are in place to prevent it from happening.

“One question I need to ask is what the UK police and anti-fraud officials did at the onset of this scheme.”

 “Since the end 2001 and early 2002, there has been anti-terrorist financing laws in the financial world and financial firms have been mandated to report unusual cash transactions and systems are supposed to be in place to alert officials, so where were they, did they look the other way thinking that it will stop? Did they not act because they were afraid of others finding out and as such damaging the image of London as a financial centre?”

Speaking on the Ibori case he said “To think that Ibori could go to Barclays at Knightsbridge and deposit £1.5m in cash is just extraordinary. How did Barclays accept that? But if I travel with more than £2,000 on me, I will be questioned for money laundering and possibly the cash ceased. Is this not double standard depending on your status?

“But Coming to think of it, he was smart enough to have gone to Knightsbridge branch of Barclays where –almost certainly – anyone who opens an account with that branch is likely to be a rich person. He would have been turned away and the cops called had he ventured into any Barclays four miles south in Clapham or Brixton. Makes you wonder if Barclays anti money laundering procedure is tight.”

“Ibori’s case raises serious questions about the due diligence that Barclays and the other banks carried out on Ibori and his associates. What checks did these banks do to ensure that the funds they were handling were not the proceeds of corruption?”

“It is sad what African leaders are doing to us and our unborn children, it is a shame.”

He narrated an experience he had.  “I was at a lunch meeting with some officials from Luxembourg and a convoy of cars drove by, the guy I was at launch with told me that the convoy belonged to an African head of state who came to Luxembourg with his army of ministers to beg money but the funny thing was that the authorities had a dossier of the president and his convoy and how much money they have stashed all over the world which is far more than what they have come to beg for.”

Another banker who also works in the London Financial district however explained why UK banks are so eager to take stolen money from Africa’s political looters with little or no questions asked. 

 “We know how this works, any stolen money moving from one bank to another will lose at least 5%, that coupled with broker and lawyer fees will at least attract another 15% charge and the asset manager’s initial fee of at least 5% tells us that any money taken illegally away will automatically loose at least 25%. This is money we are giving people richer than our people, what are we doing to ourselves” He asked.

However, the Financial Services Authority (FSA), the UK bank regulator, is already taking some action to reduce money laundry in UK banks. They carried a review in 2011 which showed that British banks were systematically failing to carry out the required anti-money laundering checks especially when dealing with senior foreign politicians.  

Nigerian banks are the other side of a bad coin.

Analysts however say that the British Banks are just one side of a bad coin. The other side of the bad coin are Nigerian banks. Most of the money that end up in British banks is first passed through Nigerian banks who are supposed to know the status of the governors. For example, the Global Witness Report discloses that of the £2.7 million held in RBS bank account by Alams in 2005, £1.6 million (N416 million) was transferred into that account by now defunct Bond Bank, one of the banks that collapsed into the Skye Bank Group during the 2006 bank mergers and acquisitions in Nigeria.

The Financial Action Task Force (FATF) last February classified Nigeria among countries with strategic Anti Money Laundry/Combating Terrorism Financing deficiencies that have not made sufficient progress in combating those deficiencies or have not committed to an action plan to working with the FATF address these deficiencies.

Sanusi Lamido Sanusi-Governor, Central Bank of Nigeria

Insiders in the Nigerian banking industry however note that competition for government deposits is a facilitator of political corruption in Nigeria. Most banks in Nigeria will do anything to get a state government’s account which usually runs into several billions of cash inflows every month as crude oil revenue is shared. To get this state government account, bank managements usually have to incentivise the governors by agreeing to secret terms that ensures that they keep these accounts from competitors.

Some of the bargains reached with the governors who are the ones who decide where these account should be kept include agreeing to facilitate these transfers even when they know it is State funds that are being transferred illegally. The sad part insiders say, is that, the banks also fund the States corruption with loans which costs are then borne by ordinary Nigerians. Most State governments are known to committed their states to significant debts from private banks most of which are transferred into their personal accounts abroad. Most State governments are known to be significantly indebted to banks without the citizens knowing what the money borrowed from the banks were used for.

“The banks just lend the governors money without asking questions. Money is learnt to governors for all sorts of things and at the end of the day, no one accounts for how this money is spent. Yet the State’s future allocations and tax revenues are tied to the repayment of these loans. A good number of States have mortgaged the future and welfare of their citizens to satisfy their present greed. And they are doing these with the active collaboration of Nigerian banks” an insider who prefers to be anonymous said.

Analysts insist that if the governors have to be stopped from stealing their states blind, Nigerian banks and the Central Bank of Nigeria (CBN) has to enforce more stringent anti money laundry legislations.

However, the increased scrutiny from Britain has forced Nigeria’s political looters to start diverting funds to places like China, Brazil, India and other parts of the world where there is less scrutiny. Dubai and other friendly Gulf states in the Middle East have also become a major destination of stolen funds from Nigeria.  Top Nigerian politicians are said to be very active in the Dubai property market where they are said to prefer paying  cash  for properties while living in the most expensive hotels. Taxi drivers on the streets of Dubai are most likely to talk about the escapades of Nigeria's money bags once you identify yourself as a Nigerian in Dubai.

Those who know say that the increased scrutiny is also driving stolen funds into the local Nigerian property market and the over the counter securities trading market in Nigeria. A top Nigerian telecom firm’s over the counter shares is said to be a preferred investment choice for Nigerian politicians because of its high cost and good returns. Its high cost means that politicians can use it to stash away millions of Naira without raising too much interest. It is even more attractive since it is traded over the counter with little scrutiny. Private equity funds are also said to be getting some of these stolen funds from Nigerian politicians who are doing everything to hide their loot in the face of increased scrutiny.

 The UK however still remains a preferred destination by Nigeria's political looters, most of whom cannot resist the assumed prestige of owning a property in London and sending their children to UK schools. This means that Nigerian political looters still want to launder money in the UK.  For financial regulators in Nigeria and the UK, the challenge will remain how to break this brotherhood of the banks and Nigeria’s political looters, oiled by profits and greed, which will endure as long as there are banks to help them cover their tracks for a share of the loot.    

The brotherhood of greed and profits -how UK banks help Politicians to loot Nigeria (I)

In the dock on Tuesday in cold and rainy London, James Ibori, former Governor of Nigeria’s oil rich Delta State stood alone. “His Excellency”, stood humbly before a judge at Southwark Crown Court. Ibori waited with racing heart for the judge to tell him how long he was going to stay in a cold lonely UK jail. He was eventually told 13 years though likely to serve four and half years.

In jail, Ibori is not going to be alone. He will be with his wife, mistress, sister and even lawyer all serving different jail terms ranging from five to ten years for helping Ibori launder millions of pounds stolen when he was governor of Delta State between 1999 and 2007.

The only partners in crime that Ibori will miss in jail are his bankers. While all close acquaintances that helped Ibori launder the millions he stole as Delta State governor are behind bars, his bankers who facilitated the process are walking free. Yet, they made millions from helping Ibori move the funds around.  

The leading prosecutor in Ibori’s case Sasha Wass QC, revealed in court how Ibori used multiple accounts at Barclays, HSBC, Citibank and Abbey National to launder the millions he stole. The prosecutor revealed that these banks helped pass around millions of pounds, some of which were used to purchase expensive properties in London and South Africa.

 Giving insights into how the money moved around between the banks, the prosecutor revealed how US$4.8 million (N1.25 billion) was transferred from a Barclays account belonging to a company in which Ibori was formerly a director to another account at Barclays controlled by Ibori’s lawyer, Badhresh Gohil who is currently serving a 10 year jail sentence for helping Ibori launder money.

The Prosecutor revealed that the funds were passed through two Swiss accounts, including one at a branch of Schroders in Zurich, a global asset management company which manages about £187 billion on behalf of global clients. This money was used as part payment for a private jet for Ibori.

The prosecutor also revealed how Ibori had numerous Barclay’s accounts. They described how in one case between 1999 and 2006 Ibori deposited £1.5 million (N390 million) in cash in a Knightsbridge branch of Barclays.

Also Ibori had two bank accounts in America at Citibank and was said to have ran up a $920,000 (N143 million) American Express credit bill between 2003 and 2006. He bought a $1.8 million (N279 million) house in Houston, as well as moving at least $500,000 (N78 million) through his lawyer’s client account at now liquidated AIDT bank in Denver, Colorado.

Among the properties that Ibori splashed money include a house in Hampstead, North London, for £2.2m (N572 million), a property in Shaftesbury, Dorset, for £311,000 (N81 million), a £3.2m (N832 million) mansion in Sandton, near Johannesburg, South Africa, a fleet of armoured Range Rovers valued at £600,000 (N156 million), £120,000(N31 million) Bentley, and Mercedes Maybach for 407,000 euros (N69 million) that was shipped directly to his mansion in South Africa.

Though the value of the fraud that Ibori was charged with in court was put at £50 million (N13 billion), but the judge admitted that the actual money stolen by Ibori is unquantifiable and could be as much as £200 million (N52 billion).

UK banks love affair with Nigeria’s political looters

Goodluck Jonathan-President, Federal Republic of Nigeria

Interestingly, in the past many of the banks now named in Ibori’s case were also involved in laundering money on behalf of former Nigerian governors. It would be recalled that Alamieyeiaseigha, (Alams for short) who was former governor of Bayelsa state, had to jump bail and escape from the UK when he was arrested in September 2005 on money laundering charges by the metropolitan police.

Global Witness, an NGO which campaigns for transparency in resource rich countries, in October 2010 released a report titled “International Thief Thief” revealing the details of how UK banks helped Alams launder millions of pounds in the UK when he was governor.  

 The accounts used by Alams in UK to launder millions as a governor include two different bank account in UBS one with £306,000 (N80 million) as at December 2005 and another with £1.05 million (N273 million) as at the same date. He also had three different accounts with HSBC. One of the accounts had £420,000 (N109 million) as at December 2001, another had £110,948 (N29 million) and third one had $178,947.50 (N47 million) as at February 2003. Alams also had £2.65 million (N689 million) as at November 2004 in Royal Bank of Scotland (RBS), which is currently majority owned by the British government.

He had two different accounts with Barclays Bank, one with £205,376 (N53.3 million) as at March 2005 and another with Barclays Cyprus with £3 million(N780 million) (held in six different accounts) as at September 2005. Finally, Alams also had another £290,000(N75 million) in Natwest Bank as at August 2005. All the accounts were opened by him between 1999 and 2003 when he was still the governor of Bayelsa State and he was barred from opening foreign banks accounts.

In the detailed report, the Global Witness describes how UBS helped Alams launder millions of pounds in UK. It shows that Alams started stealing money from the accounts of Bayelsa State just three months after becoming a governor when he approached UBS to open an account at its Mayfair Offices on Curzon Street, London.

Shortly after opening the account, Alams is said to have told UBS staff that “he anticipated a sharp rise in his deposits from $35,000 (N9.1 million) to $1.5 million (N390 million). Alams is said to have filled a form stating that before he became governor, he was a financier and fertilizer magnate who made his money before he became governor. He said that he had never held accounts outside Nigeria before but because of rising tension in the country, he seeks to safeguard his vast wealth by transferring money outside the country.

Diepreye Alamieyeseigha-laundered billions through UK banks 

Following the opening of the account, in early 2001 one Aliyu Abubakar, identified in court documents simply as Aliyu, who was said to have been given a £19 million (N4.9bn) contract to construct the Bayelsa State government lodge paid $1.5 million into Alams UBS account. These payments were said to have been made at the same time, Aliyu was also arranging to buy a £1.4 million (N364 million) house in Kilburn area of London for Alams.

Also Alams is said to have told UBS, when asked for the sources of these funds that he sold a palace he owned in Abuja to Aliyu who Alams described as an oil businessman. Yet, when Alams made his asset declaration forms in 1999, he declared his total assets to be worth just £210,000 (N55 million) and he had no property in Abuja in his asset declaration forms.  Later, when Alams tried to prevent the forfeiture of his money in UBS accounts to the Nigerian government, he is said to have claimed that the money were donations from his close friends towards the education of his children.

The Global Witness Report states that “By December 2005, Alams account in UBS had a balance of $1.8 million (N279 million) in an account that was in the name of a trust named Falcon while in another account in his personal name, he had $535,000(N83 million). This was despite declaring in his 2003 asset declaration form that he was worth only £485,400 (N126 million) with an expect income of £22,680 (N6 million).

In 2001, Aliyu was said to have facilitated the purchase of £1.4 million (N364 millin) property on 14, Mapesbury Road, in Kilburn in North West London for Alams using his account with HSBC. The house was bought in the name of a British Virgin Island registered Shell company called Salomon and Peters which was wholly owned by Alams.

Also eight months after Aliyu bought a property for Alams, he is said to have approached HSBC to open an account with the bank with an opening balance of £420,000(N109 million) paid in by Aliyu. In total, Alams is said to have opened six different accounts with HSBC between December 2001 and 2003, all at the same branch.

Alams taste for London properties grew more expensive the longer he stayed as governor. The Global Witness report shows that in December 1999, few months after becoming a governor, he bought  flat 202 at Jubilee Heights in Cricklewood, northwest London in the name of his company, Salomon and Peters and paid for by one Mr Soberekon “who had received a contract to repair and overhaul two gas turbines in Bayelsa State” The payment was made through London Trust Bank Plc. Interestingly though London Trust Bank describes itself as non-bank financial institution registered with the HM Revenue and Customs, the company is also listed by the UK Financial Services Authority (FSA), which regulates the financial system in UK as a “unauthorised internet bank”

Also in July 2003, Alams bought a fourth London property for £1.75 million (N455 million), a luxury penthouse apartment, 247 The Water Gardens in the heart of London’s West End. This was the house that Alams was arrested and when searched, the metropolitan police recovered £1.0 million (N260 million) in cash.

Another Bank that received bribes on behalf of Alams was the Royal Bank of Scotland (RBS) which received £1.5 million(N390 million) paid into an RBS account held in the name of another offshore Shell company registered owned by Alams called Santolina. Alams was the sole shareholder and director of Santolina.  Between January 2004 when the Santolina Account was opened and March 2005, the account received 26 deposits totalling £2.7 million (N702 million). On 1 November 2004, a transfer of £949,000 (N247 million) was made out of this account to pay for a penthouse apartment in the upscale Waterfront development in Cape Town.

Alams in 2007 pleaded to six counts of corruption in Nigeria. He was sentenced to two years in imprisonment on each count but spent just a few days in prison on the excuse that he had served part of the time already. His stolen assets were sold and the money returned to Bayelsa State government. Though the Bayelsa state government claimed that the money will be used to build what it called a Transparency Plaza in the state, it is not clear if this plaza was ever built.

Please, is there anyone reading this blog, who is sure what this recovered loot from Alams was ever done with in Bayelsa State? Your comment will be appreciated. It is also interesting that Timipre Sylva, the last governor of Bayelsa State is also now facing a six count charge of stealing N2.6 billion (£10 million) from the State.

Read the second part of this post tomorrow on how UK banks helped Joshua Dariye and Abacha launder money in UK and the role played by Nigerian banks.

Why do you think corruption is so endemic in Nigeria? Please share your comments below.. 

What does Boko Haram really want?

It is usual to hear that Nigeria’s deadly Boko Haram sect wants the implementation of sharia in Nigeria. In the past one year, the group has launched a bloody campaign that has claimed the lives of about 1000 Nigerians.

Interestingly, if a critical break down of the lives claimed by Boko Haram attacks is done, it may surprise many to know that more Muslims may have died from Boko Haram attacks than Christians. Yet the common assumption is that Boko Haram is fighting for an Islamic state in Nigeria. If that is the case, then the group must be defeating its own fight by killing the same people it is claims to be fighting for.

It is usual to see in media reports that Boko Haram demands the adoption of Islamic law or Sharia in Nigeria. This statement seems to lack merit. Is it the media that is not getting right the demand of Boko Haram or Boko Haram that is not sure of what exactly it wants from Nigeria and Nigerians?

My confusion about Boko Haram’s demand for Sharia implementation in Nigeria is because Sharia law is already implemented in Nigeria. As at last count, 12 states are already implementing Sharia law. Nine of these states implement Sharia law in full. These States are Zamfara which kicked off the implementation of Sharia law as far back as 2000. The other states that implement sharia fully in Nigeria are Kano, Sokoto, Katsina, Bauchi, Borno, Jigawa, Kebbi and Yobe State. Three other States have imposed Sharia law in parts of their States because of the large segments of non-Muslims in parts of their states. These States are Kaduna, Niger and Gombe State.

Most of these states have been implementing Sharia law for several years now. These States are predominantly Muslim states and have chosen to do so. It is therefore confusing if Boko Haram will be said to be fighting for the implementation of Sharia law. Where else do they want Sharia Law? All over Nigeria? Will that be fair considering that there is a predominance of Christians in other parts of the country? Would it be fair if Christians were demanding that all Muslims become Christians even if they did not want to?

Then there is these other claim in the media that Boko Haram hates western education and wants it abolished. This demand by Boko Haram, if true is also confusing. This demand is confusing because all over the North, Koranic schools are run concurrently with western schools. There are parents who voluntarily choose to send their children to only Koranic schools or Western Schools or both? What is wrong in having a choice to decide what form of education or knowledge to pursue? Is it not true the mathematics, the foundation of western education has Arabic origins? Why would such valuable knowledge that has benefitted the West be a taboo to those that gave it to the world?

It is regrettable that an initial effort at dialoguing with Boko Haram was discontinued because it was leaked to the Press. In as much as it was regrettable that the negotiation process was leaked, it is even more regrettable that it was abandoned because of the leak. Now more people are dead. Families are being destroyed, business activities in Northern Nigeria are at standstill and the violence is taking a heavy toll on the economy and social activities in the North. No one is safe any longer in Northern Nigeria, not even Muslims who are equally being attacked by Boko Haram.

As I am writing this, a day after Easter Sunday when Boko Haram detonated a car bomb that has claimed 38 lives, most of whom were poor Okada riders and taxi drivers, Reuters report that in Yobe state, where Sharia law is already in operation, suspected members of Boko Haram on Sunday stormed the home of local policeman Hassan Isa and shot dead his 6-year old daughter, injuring two of Isa's other children, a police spokesman there told Reuters. Even Children   yet to understand what Boko Haram stands for, are now in the line of fire.

 The BIG question for Boko Haram is if the killing of fellow Nigerians is the best way they prefer to advertise their ideology or beliefs? Is the best advertisement of their beliefs the blowing into pieces  innocent Okada riders, worshipers and gunning down people walking on the streets of Northern Nigeria struggling to make a living in a country that has offered them little or nothing since they were born? When will the killing stop? Is it when no one can walk safely in any city in Northern Nigeria or when they have killed everyone that does not agree with the Boko Haram ideology? Is killing the Boko Haram answer to the inability to convince others of the righteousness of their ways?

Definitely, blowing up and shooting down unarmed civilians is a poor advertisement of any ideology  that Boko Haram stands for. Whatever BoKo Haram demands may eventually be, that demand will only make sense when they realize that other Nigerians have a right to life, just the same way they do and that blowing up innocent Nigerians leaves them with no Nigerian to support their cause, whatever that may be.