Standard IBTC Nigerian row takes new turn

Stanbic IBTC has found support from an unexpected quarter as it battles Nigeria’s Financial Reporting Council.

BANK

The Central Bank of Nigeria has questioned the council’s findings against the bank, which included a $5m penalty and the barring of some directors from signing off financial statements.

It offers a sharp contrast to another row involving a prominent South African company MTN, which has been penalised $5.2bn by the telecommunications regulator but appears to be caught in a stalemate.

In a letter sent this week, the central bank questions the reporting council’s handling of the matter and its penalising of Stanbic, saying the law required that a court and not the council impose the punishment.

After claiming irregularities in Stanbic’s 2013 and 2014 financial statements, the council last week withdrew the registrations of chairman Atedo Peterside, CEO Sola David-Borha, and two other directors. It also imposed a 1-billion naira (about $5m) fine on the bank, and directed it to withdraw and restate the financial statements.

Standard Bank said on Wednesday that Stanbic IBTC, its 53.25%-held unit had filed opposing papers in the Nigerian courts.

A spokesman for Stanbic declined to elaborate.

In a strongly worded letter that Business Day has seen, central bank governor Godwin Emefiele criticised the reporting council for failing to follow due process in publicising the sanctions against Stanbic, causing an 18% plunge in its share price.

He also said applicable regulations did not allow the council to suspend registrations, only to deregister them.

Nigerian consulate officials in Johannesburg confirmed the authenticity of the letterhead and Mr Emefiele’s signature.

Mr Emefiele said the central bank had revisited the financial statements in dispute. It found only one issue corresponding with the council’s findings.

"We agree with FRC (Financial Reporting Council) that (Stanbic IBTC) erred in the classification of some line items," Mr Emefiele said.

"However, the identified misclassifications did not understate or overstate its assets and liabilities; neither did (they) increase nor decrease its income nor expenditure, such as would have caused a material misrepresentation of the financials."

The council found that Stanbic sold software to Standard Bank for nearly R151.5m without approval, with the regulator preferring that Stanbic instead licence the software in Nigeria.

The council had also alleged Stanbic failed to record the sale, or any fee income.

The central bank found differently: Mr Emefiele said Stanbic had obtained approval to pay licence fees to Standard Bank for three years from June 2012.

Standard Bank chief financial officer Simon Ridley has previously said the software dispute was the sole material issue over which its unit and the council had been at loggerheads.

The central bank has declined to impose any disciplinary action on Stanbic.

Sanlam Investments head of equities Patrice Rassou said there was expert judgment involved in the preparation of financial statements.

"With auditors having reviewed them, Stanbic appears to have a case to support their view," he said.