Here is an article published in the village voice by Solana Olumhense. It clearly reveals the extent of the former CBN Governor Soludo's involvement in an institution ( AFC ) which has now been listed by the CBN as been indebted to the tune of several billion Naira to one of the five banks whose CEO's have been sacked by the CBN.

The African Finance Corporation was founded as a private sector initiative along the lines of the International Finance Corporation , Soludo is the Chairman Board of Directors but the problem appears to be that of conflict of interest.


African Finance Corporation: Rusting Gold
Written by Sonala Olumhense
Sunday, 03 August 2008
African Finance Corporation: Rusting Gold
Sonala Olumhense

First of all, let me confess my admiration of the Chukwuma Soludo type: a man who does things and is not afraid to err.

To this man, as Governor of the Central Bank, we owe much of the wide-ranging reform of the nation’s banking sector and the relative discipline it now enjoys. He will also be remembered for the bold effort at re-denominating the Naira.

Perhaps his biggest enterprise, if only in terms of its Africa-wide application, is the Africa Finance Corporation (AFC). In its purest form, the AFC was designed as a machinery that would jumpstart the economic revival of Africa by bridging our huge funding gap that stands at about $16bn per annum.

Sitting in front of his computer at the Central Bank, Soludo must have been overwhelmed to see an ocean of funds belonging to Nigeria. It gave him an idea: a revolutionary endeavor that would channel these funds into a revolving investment machinery. His idea, bought immediately by President Olusegun Obasanjo the first time he heard it, was a private-sector entity providing funds for such critical economic sectors as energy, agriculture, telecommunications and tourism, but particularly transport infrastructure. It would also provide an assortment of banking services.

In April 2007, following approval by President Obasanjo and the work of a technical committee of 12 set up in January 2006 to actualize the dream, Soludo embarked on a tour to sell the concept to Africa and the world. Among his stops: London, New York, Egypt, Gambia, South Africa, Kenya, Ethiopia, Algeria and Tunisia.

The AFC was not a hard sell; it is difficult to conceive of any African to whom it was not a significant, powerful, idea. But our problem has never been the availability of good ideas, and the magic of the AFC seemed to have ended in those plush hotels. Implementation was next, on the card, and Soludo was completely unprepared.

The just-published report of the Presidential Committee to Investigate the Activities of the AFC reads like a Mafioso diary, not the record of a high-minded enterprise dedicated to the dream of helping African find development. As a result, not only is Soludo’s reputation now chin-deep in the sewers, the AFC may have died a premature and ignominious death.

What happened? Perhaps our old nemesis: self-interest and fuzzy thinking. How else do we interpret the conduct of the Central Bank of Nigeria, as Soludo led it in the AFC quest? The CBN seemed to have scant appreciation of the law as it hurried to ferry funds into the AFC, knowing that only Nigeria had signed the Agreement. That put it on the same level as Transcorp, a Nigerian company, but without Transcorp’s corporate legality. The AFC was not incorporated either as a domestic or international institution, and nobody, company or government outside Nigeria has placed a kobo in it.

Still, on 22 November 2007, Soludo’s CBN casually and illegally tossed in $462.9 million in easy money, like a casino hustler playing with house money, and another $288million from other Nigerian shareholders.

And then, the game got really interesting, as the AFC’s funds moved from being a casino activity to kalokalo or one-armed bandit involving such Nigerian banks as Ecobank, UBA, First City Merchant Bank, Oceanic Bank, Stanbic Bank, and Access Bank.

Consider, for instance, that five days after AFC illegally opened for business, the UBA New York branch opened with $250 million. Only two weeks later, those same funds began to be repatriated to Nigeria in various seedy ways. Five months later—abracadabra!—less than $19,000 was left in the AFC account.

Some of this information may not be strange to Nigerians who are paying attention. They would recall that on April 28 this year, the Financial Crimes Enforcement Network (FinCen) and the Office of the Comptroller of the Currency in the United States imposed an uncontested $15 million against UBA New York for violations of the Bank Secrecy Act.

That action followed two Cease and Desist Orders on the bank in January 2007 and February 2008, citing its failure to implement the law and report money laundering or other suspicious activity involving approximately $197 million in suspicious transactions.”

In other words, UBA was dubious and unprofessional. But that is exactly where our AFC funds were lodged, and we may not have known had the US authorities been playing the same game. And the funds placed in the UBA account, having been manoeuvred back to Nigeria, began to turn a “profit”. Prof. Soludo told the committee the profit on the CBN investment in the AFC stands at about $11.3 million.

Soludo seems to have taken to heart, the ad hoc approach of the man who appointed him to heart: without reference to the CBN or AFC Boards, he unilaterally authorized the transfer of a total of $300 million to UBA New York, and $593.2 to Citibank London.

Perhaps the absent-minded Professor was in such a hurry to save Africa he forgot the law, due process and transparency. Now, he has to explain how he could so casually dispense with the rules not once or twice, but from the formation stage of the AFC through its funding, operation and management. That would include his chairmanship of the Board in his personal capacity, contrary to the law.

Most of all, he and the management of the AFC have a lot to explain concerning the movement of the funds in their control. Apparently, there are serious legal and ethical issues of abuse of office, gross negligence, round tripping (which is some kind of “money-doubling”), and money-laundering.

The case of Austine Ometoruwa, the AFC Chief Executive Officer is doubly sad because it is difficult to extricate Soludo from the serious charges against him. Ometoruwa had a historic opportunity in his hands, but seemed to have chosen to put it in a chokehold and stuff it into his pockets.

And Nigerian banks! Sometimes, some of them are cited in the media for their “achievements”. Our newspapers and magazines that maintain an incestuous relationship with these institutions install a “Banker of the Year.”

And then came game day and exposed themselves, treating the AFC like their private ATMs). The Report says they “colluded with the AFC Management to mis-apply AFC funds as a source of cheap trading money rather than being deployed to the critical developmental objectives for which the AFC was established.”

Collusion is a very strong term, and the Report rightly recommends they be sanctioned or prosecuted. I expect them to deploy their slush funds to try to buy justice, of course, but the point has been made. They may be banks, but they are not professionals. They are overpriced petty-traders. And criminals.

Will the AFC rise from these ruins? I do not see how, yet it is an idea whose time has come. But then, so was electricity in Nigeria, and Transcorp, and roads.

Yes, we did reform the banking sector, but who will reform the bankers?

sonala.olumhense@gmail.com


I believe we haven't heard the last in the matter.