By Umar Tafida
The recent news report of the sordid and stinking details of the findings of what transpired in the early days of the Kaduna Light Rail Project by the Independent Corrupt Practices and Other Related Offences Commission (ICPC) is an eloquent testimony to the fact that the previous administration of Mallam Nasir El-Rufai has questions to answer as far as the finances of the state are concerned during those years when he held sway as the Chief Executive of Kaduna State.
This must not be construed as a case of political witch hunt or attempts to smear the name of a past governor by the incumbent. Indeed, it is a legitimate and most compulsory duty for the incumbent to ask questions about previous financial dealings in the state. And if in the course of seeking answers to apparently knotty financial transactions, some officials of the past administration are needed to shed light on such difficult to understand deals, so be it and they should be invited by all means necessary to step forward and provide the needed explanation. That is not witch hunting nor does it amount to giving a dog a bad name to justify the desire to hang it. It is rather far from such insinuations. It is indeed the right and necessary thing to do.
The news report detailed an expose by the ICPC to the effect that a commercial bank opened an account for Indo Kaduna MRTS JV Nigeria Limited—a joint venture entity set up in 2016 by the Kaduna State Government and some Indian business people—and reportedly received billions of naira totaling over 11 billion on its behalf well before the company was legally registered, is indeed a worrisome discovery.
The revelation raises a lot of posers. Was the Nasir El Rufai administration aware the company was yet to be registered or not? Was concerned commercial bank also in the know or not? Was it a deliberate act to evade scrutiny? Was the Central Bank aware of what transpired? If it did, as the nation’s financial regulator, what steps did it take or fail to take? Or was it kept in the dark altogether? There are certainly more questions begging for urgent and honest answers.
What has been uncovered has legal, moral and economic implications for Kaduna State. And this is all the more reason why the incumbent owes it a duty to ask previous key players to step forward and provide pertinent answers to questions of what they know, did or did not do and the whys behind their actions.
According to a news report, the investigation by the ICPC uncovered the alleged diversion of N1.37 billion from the N11 billion paid by the Kaduna State Government under the immediate past governor, El-Rufai.
The payments were made with respect to the state’s now-abandoned light rail project. The ICPC in its investigation found that El-Rufai’s government made payments to Indo Kaduna MRTS JV before it was officially registered as an entity in flagrant violation of extant rules and regulations. Going by the rules governing banking in Nigeria, that was a major affront to banking regulations in the country which require corporate accounts to be opened only for legally incorporated businesses.
Importantly, the Central Bank of Nigeria’s (CBN) Know Your Customer (KYC) guidelines, make it compulsory that financial institutions must verify the legal status of corporate entities before opening accounts for them. Financial institutions are not to process any transactions for companies considered to be what is technically called “brass plate” companies. Banks are required to confirm a company’s registration number, official corporate name, directors, shareholders, and principal trading address through official documents and searches at the Corporate Affairs Commission (CAC). All these were not done or deliberately overlooked as if they do not amount to anything.
The ICPC reportedly discovered that the entity did not meet the necessary requirements when its account was opened. It was only formally registered with the Corporate Affairs Commission on 10 May 2017, almost 11 clear months after it allegedly began operation. Instructively, El-Rufai allegedly approved payments into the account as early as December 2016. Indeed, between December 2016 and January 2017, the then-governor authorised N11.1 billion in payments to the entity, according to the report. This is at least four clear months before it was supposedly registered, thus raising questions about the commercial bank’s capacity for due diligence or complete absence of it.
From the foregoing, the important standard in procurement procedures, which requires contracts to be awarded only to legally recognised business entities with proper verification of their operational status was viciously breached in a most brazen manner.
Also, the CBN’s KYC framework which prescribes a risk-based approach to corporate account openings, requiring banks to verify that applicants are not shell companies or vehicles for money laundering was discountenanced. All these requirements were discarded as if they do not exist or at best only optional.
What then are the implications of this discovery for the state? From a legal standpoint, the operation of a bank account for an unregistered company raises profound concerns. In Nigeria, the Companies and Allied Matters Act (CAMA) mandates that businesses must be registered to operate legally. An unregistered company lacks legal standing, which can lead to complications in enforcing contracts, seeking legal recourse, or holding the company accountable for its financial obligations. If commercial bank knowingly facilitated transactions for an unregistered entity, it should face regulatory scrutiny from the Central Bank of Nigeria (CBN) and other financial oversight bodies. This certainly has dire consequences. It could result in penalties, loss of banking licenses, or reputational damage.
Moreover, the transaction could be viewed as a violation of anti-money laundering (AML) regulations. Banks are required to conduct due diligence on their clients to prevent illicit financial activities. If the funds are linked to corruption or mismanagement or for terrorism financing, it could lead to investigations and legal repercussions for both the bank and the individuals involved.
The moral implications of the scenario at hand in Kaduna are equally profound. The facilitation of financial transactions for an unregistered company raises questions about ethical banking practices. It suggests a potential disregard for regulatory frameworks designed to ensure transparency and accountability in financial dealings. This could erode public trust in the banking system and the integrity of financial institutions. But above all, it questions the intentions of the administration and the direction it was headed with apparent illegal transactions.
Furthermore, the involvement of a high-profile figure like El-Rufai in the Kaduna Light Rail Project adds a layer of moral complexity. With the funds now perceived as mismanaged or misappropriated, naturally will stir up public outrage and a loss of confidence in government projects. The perception of corruption or favoritism in public contracts can undermine the legitimacy of government initiatives and fuel cynicism among citizens.
Economically, the implications of this type of shady transactions can be far-reaching. The misallocation of funds to an unregistered company can lead to inefficiencies in project execution, resulting in delays, cost overruns, and subpar infrastructure. Additionally, the potential for corruption and mismanagement can deter foreign investment. Investors seek stable and transparent environments, and incidents involving unregistered companies and questionable financial practices can create an unfavorable perception of the Nigerian business landscape. This could lead to reduced investment inflows, stifling economic growth and development.
It is in the light of the above that every player in the revealed dealing must be held to account. Though the actors involved have reportedly denied in strong terms any forms of culpability, the administration of Senator Uba Sani owed the people of Kaduna the duty to fish out all monies illegally taken out of the state’s coffers and reinvest the same for the good of the people. Importantly, no stone must be left unturned in bringing individuals who wilfully and whimsically administered the state’s resources in a manner that benefits individuals and their foreign collaborators than the generality of Kaduna people. That is not witch hunting, it is simply sticking to accountability and integrity in office.
• Tafida, PhD, a Development Economist, writes from Abuja, FCT