AN audit embarked upon by the Central Bank of Nigeria (CBN) in 2023 has uncovered irregularities and fraud in the Godwin Emefiele-led foreign exchange (FX) forward contracts.
An FX forward contract is an agreement between two parties to exchange an amount of one currency for another at a predetermined exchange rate on a future date.
In a circular released by the CBN on Thursday entitled, ‘Frequently Asked Questions (FAQ) on the Settlement of Undelivered Forward Contracts,’ the bank said that fraud, misrepresentation, lack of proper documentation, and illegality or breach of law were found in the FX contracts embarked upon by the previous administration of the bank led by former Governor Emefiele.
In September 2023, the CBN had engaged Deloitte to conduct a comprehensive forensic audit of all transactions in the Retail Secondary Market Intervention Sales (RSMIS), including undelivered forward contracts, carried out under Mr Emefiele.
The audit found a company name on approved sales result that was different from the company name on Form M portal. It also discovered that the cumulative value of the approved FX forward sales on the forex form number from Auction 1 in 2021 to the date of the auction exceeded the total value of the forex form number.
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It further discovered “sales higher than demand; non-permissible item of import; unauthorized companies importing milk; vague narration of the item of import; sales without demand; incorrect forex form number; forex form not indicated, and blank Form M.”
According to the audit, more forward infractions were perpetrated under Mr Emefiele, including a rejected Form A application on Form A portal with approved sales; approved sales value higher than the cost of import item on Form A portal; and approved sales value higher than the cost of import item on Form M portal.
“No right to FX settlement can arise under Nigerian law where the underlying transaction is tainted by illegality, misrepresentation, or non-compliance with binding regulatory rules,” the CBN said.
According to the CBN, “The forensic audit uncovered significant irregularities in the execution of some of the foreign exchange forward contracts. Each finding was based on objective and verifiable data, and all affected counterparties were given an opportunity to respond before final decisions invalidating these contracts were made.”
Given the irregularities seen under Mr Emefiele-led CBN, the bank noted that invalid contracts were cancelled in line with audit findings, stressing that no FX payments were made on these contracts as they did not meet the required standards for settlement.
“The Naira previously received from counterparties in respect of these invalid contracts has been returned. The CBN is currently engaging with law enforcement authorities to determine appropriate action in cases involving potential fraud, misrepresentation, or abuse of the FX system,” the CBN said.
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The CBN further said that banks or counterparties cannot appeal the audit outcome, noting that audit conclusions were based on a rigorous process carried out by an independent forensic expert (Deloitte), acting pursuant to a transparent mandate. It noted that the auditor contacted the authorised dealer banks concerning those contracts to get their explanations of the infractions before reaching conclusions on them.
It explained that the findings met procedural fairness standards, and the case of undelivered forward contracts is now concluded and closed.
Emefiele court cases
Mr Emefiele is being prosecuted by the Economic and Financial Crimes Commission (EFCC) on charges bordering on criminal breach of trust, conspiracy, forgery, and unlawful possession of property suspected to be proceeds of crime running into billions of naira.
Emefiele is facing trial for allegedly using his privileged position to unlawfully acquire properties and control large sums of money suspected to be proceeds of unlawful activity.
WIKIPEDIA describes Mr Emefiele as a Nigerian politician, sparking reactions from public commentators, as exclusively reported by Economy Post.
He had reportedly wanted to contest the presidential election in 2023 under the All Progressives Congress (APC). After his reported failed bid to emerge as APC candidate, Mr Emefiele introduced a naira redesign policy in October 2022 and restricted access to cash. This lasted into early 2023 during the 2023 election.
Emefiele had announced that N200, N500 and N1000 would be redesigned, noting that the pre-exisiting notes would cease to be legal tenders in late January, 2023. Efforts by Nigerians to persuade him and his principal, Mr Muhammadu Buhari, to stop the ill-timed policy proved abortive until the Supreme Court nullified the exercise on March 3, 2023.
Reports released by the Special Central Bank of Nigeria (CBN) investigator, Mr Jim Obazee, had alleged that Mr Emefiele used proxies to acquire Polaris, Union Bank and Heritage Bank.
