The Standard Bank Group has expressed its readiness for a fair resolution of the tussle between its Nigerian subsidiary, Stanbic IBTC and the Financial Reporting Council of Nigeria (FRCN).
In a statement issued yesterday, the Group reiterated that it fully complied with appropriate Nigerian laws and regulations, and with international financial reporting standards applicable in the country.
The Central Bank of Nigeria last week said after examining past financial statements it did not find any case of ‘material misrepresentation’ by Stanbic IBTC and saw no need to ask it to restate them. The affirmation by the apex bank came after the Financial Reporting Council (FRC) faulted the bank’s audited accounts for 2013 and 2014 and ordered a restatement of the accounts. FRC failed to follow due process, CBN said.
Speaking during a meeting with a delegation of the Nigeria-South Africa Chamber of Commerce in Johannesburg,Sim Tshabalala, CEO, Standard Bank Group, tracked the genesis of the controversy to the franchise arrangement between Stanbic IBTC and Standard Bank. He said the Standard Bank Group’s operating model, which covers a wide range of services, including IT, are provided by the Standard Bank Group to all its franchises in Africa. In the case of Stanbic IBTC, the charges for these services amount to approximately five percent of the total cost base of Stanbic IBTC.
Over the past few years, the Nigerian National Office for Technology Acquisition and Procurement (NOTAP) has objected to the payment of the fees, which resulted in the accumulation of an outstanding inter-company balance between Stanbic IBTC and Standard Bank South Africa as these charges cannot be remitted without NOTAP’s regulatory approval, Tshabalala explained.
FRCN’s assertion that the absence of approval for the franchise fee and recent IT license fees from NOTAP invalidates the accruals raised for such intra-group items, and that the reflection of these accruals as liabilities on the financial statements as a misstatement, is incorrect, Tshabalala said. “Essentially, in our view, the regulator has sought to reject the validity of an established contractual arrangement between Standard Bank SA and Stanbic IBTC. We argue that the regulator is not in a position to make this call, and we are not alone in this opinion. To quote KPMG, ‘We wish to state categorically that KPMG does not agree with the decision taken by the FRC as it does not reflect the true position in this matter. The decision of the FRC is erroneous on its merits and the process that led to it is significantly flawed and not in compliance with the requirement of the FRC Act,” Tshabalala further stated.
The Standard Bank chief said the charges for services and IT licenses have been correctly reflected as liabilities under International Financial Reporting Standards, despite the fact that foreign currency payments due to the Group cannot be remitted in the absence of NOTAP’s approval. “More fundamentally, we believe that these are not matters of financial reporting at all but matters under the commercial discretion of Stanbic IBTC’s board of directors.”
While acknowledging that disagreements are inevitable in partnerships, Tshabalala said Nigeria and South Africa, as the continent’s foremost economies, have to complement each other to drive overall growth on the continent. He expressed the Standard Bank Group’s strategy in eight words: ‘Africa is our home, we drive her growth.’ In other words, we’re firmly committed to doing all we can to support and promote inclusive economic growth in Africa. We believe that the long-term profitability and sustainability of our business is inextricably linked to the development, stability and prosperity of the African continent.”
In resolving the current dispute, Tshabalala said Standard Bank Group remains committed to doing business in Nigeria, and to building constructive relationships with the Nigerian authorities based on clear communication and transparency.
“In the short term, we will continue to engage with the relevant authorities to resolve these issues as quickly as possible. In the longer run, indeed for as long as there is such a thing as the Standard Bank Group, we will continue to uphold the highest standards of corporate governance, of adherence to the law and of ethical conduct.”
Justice Ibrahim Buba of a Federal High Court in Lagos, who last week restrained FRCN from interfering in the operations of Stanbic IBTC Holdings Plc, will on November 12 begin hearing on the suit filed by Stanbic IBTC to challenge the sanctions imposed by FRCN.
Nigeria Agribusiness Group (NABG), the Agribusiness sector Operators platform has thrown its weight behind the Central Bank of Nigeria (CBN)’s foreign exchange restriction policy as well as the refusal of the apex bank to devalue the naira as is being suggested by international finance institutions and multi-lateral agencies.
Meanwhile, the NABG has signed a Memorandum of Understanding (MoU) with a Dutch Organisation, Top Sector Agric Food, the agribusiness development unit of the Dutch government, to facilitate and encourage the growth of agribusiness in Nigeria, ranging from livestock to horticulture and other agro-allied industries. Chairman of NABG, Mr. Sanni Dangote, disclosed this, saying this would expose Nigeria’s agricultural sector to global opportunities while also bringing investment opportunities into the country.
Dangote who was part of the panel of discussant at the 4th EU-Nigeria business forum in Lagos said: “The CBN in the past few months has been under pressure over the decision to restrict foreign exchange for the importation of 41 items for which Nigeria has comparative advantage as well as its resistance to international pressure for the devaluation of the nation’s currency.
“This group believes that the CBN forex policy especially as it affects commodities like tomato puree, rice, palm oil and other agric produce is the correct step to save the nation’s economy from impending crisis and return it to the path of sustainable growth.
“We commend the Central Bank Governor, Godwin Emefiele, for having taken this bold step. We have companies that employ thousands of Nigerians; we have small farm holders who will produce for the country’s need. We cannot do this overnight but it has to start from somewhere and if the federal government kills the incentive to start from the grass root level, you can never reach the level to be self sufficient,” he said.
He said the decision by CBN is the right move required to stimulate local production, maintaining that allowing imports would only suppress local production.
“If we do not stimulate it now, when will there be the time to do this. Once you allow some imports to come in and be dumped on the local market it will certainly suppress local incentive and indigenous initiative and there is no way any investor will deploy resources to develop the sector, there is no way the local farmers, rural farmers will find the opportunity to grow.
“This is the right step forward, whatever Nigeria has the capacity to produce must be encouraged to grow, whether we have trillions of dollars in the government coffers or not, the federal government should continue with this policy until local capacity is enhanced,” he said.
He advised that the CBN should make more capital and funding available and affordable for the farmers to grow in order to achieve the nation’s quest for economic diversification, while stating that it was heart warming that the apex bank recently agreed to provide funds for tomato out-growers in the country toward enhancing their capacity to boost output and meet the requirement of tomato processing companies in the country.
Also speaking at the event, the Managing Director, Presco Oil Palm Plc, Mr. Francis Nwabogu, said the decision by the CBN would at its initial stage be challenging for businesses, but stressed that it would benefit the economy at large in no distant time.
“Looking at this decision from the national point of ?view, it is better for us to cry now and laugh later than to laugh now and cry later. There have been attempt to go down this route but there have been lobbies to thwart the decision. If we take the bull by the horn, those feeling the hitch now will be better for it in the nearest future,” he said.
On his part, the Coordinator, NABG, Mr. Emmanuel Ijewere, said that Nigeria must be ready to experience what he called a “short-term suffering” to achieve economic growth and development.
“We need to take some decisions to achieve what we want going forward. We must be ready for short-term suffering to be able to achieve economic growth and development. Most of the developed economies in the world today did not go through a pleasurable time all through but sacrificed and today, they are benefitting from it. We cannot continue to postpone the sacrifice we have to make. The sacrifice is easier made today because it will become even more complex next year or in ten years’ time?,” he said.