NIGERIA-CENTRAL BANK SCAM Nigeria central bank fraud case shows corruption challenge in sector

Record ID: 151288

  • Title: NIGERIA-CENTRAL BANK SCAM Nigeria central bank fraud case shows corruption challenge in sector
  • Date: 15th June 2015
  • Summary: ABUJA, NIGERIA (FILE) (REUTERS) VARIOUS OF NIGERIA PRESIDENT MUHAMMADU BUHARI RIDING OPEN TOP VEHICLE AFTER INAUGURATION LAGOS, NIGERIA (FILE) (REUTERS) VARIOUS OF AERIAL VIEWS OF BUSY STREETS
  • Embargoed: 30th June 2015 13:00
  • Keywords:
  • Location: Nigeria
  • Country: Nigeria
  • Topics: General
  • Reuters ID: LVACJQBIZM66XWPVFIRPTIPYUQCJ
  • Aspect Ratio: 16:9
  • Story Text: PLEASE NOTE EDIT CONTAINS 4:3 MATERIAL
    Nigeria's anti-corruption body, Economic and Financial Crimes Commission (EFCC) recently charged in court several senior officials of the Central Bank and some commercial lenders following their arrest in connection with an alleged 8 billion naira ($40 million) currency fraud scheme.
    The EFCC said the six Central Bank officials and 16 commercial bank staff re-circled defaced and mutilated currency notes intended for destruction by substituting it with newspapers neatly cut into naira size.
    The Central Bank regularly withdraws old and torn notes from circulation to replace them with new ones.
    The alleged fraud was uncovered last September when a routine audit revealed irregularities in the branch at the Southwestern city of Ibadan.
    Officials said the alleged scheme had no impact on money supply or inflation, which has hovered around 8.7 percent since April but analysts say it could dent the reputation of the bank.
    "The amount involved is what is mind blowing, so you start wondering how did this take place and are the people currently being charged to court, are they the only people involved? Because I am beginning to wonder if that amount of fraud could take place, there must have been a control break down, and that control break down wouldn't have been at just the middle level, it could have come... it could have gone all the way up or down," financial analyst, Anthony Osae-Brown.
    The case came days after President Muhammadu Buhari was sworn in as leader of Africa's biggest economy and top oil exporter. A crackdown on corruption was one of his central election campaign pledges.
    Investors are cautiously optimistic that any crackdown on corruption by Buhari will stimulate investment and boost flagging growth in the oil-dominated economy.
    Financial analyst Tunde Obrimah says the scam could affect the banking sector and lending rates.
    "It has implications for the economy. There is more money in circulation because if you are destroying that it should reduce the money in circulation - 'in quotes', because what happens is that the money that is supposed to be destroyed is actually coming back in circulation so it is increasing the amount of money in circulation. So, CBN says "oh there is too much money in the banks," so we need to withdraw money from the banks and when that happens, like I said inter bank rates will go up, lending rates go up depending on how long the impact takes. So, it has grave ....it has an impact on the.... a negative impact on the economy and especially in the banking sector, and then they say "oh lending rates are too high" that is because there are liquidity issues, because CBN is withdrawing money but it is actually its own money that is coming back into the system," Obrimah explained.
    The EFCC, a law enforcement agency with powers of arrest, investigates crimes such as fraud, money laundering and corruption, was set up in 2003, partly in response to international pressure to tackle endemic graft.
    Human rights' groups and diplomats have criticized it in the past for failing to bring any senior politicians to justice despite a string of high profile arrests reported in the papers.
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