Nigeria suspends bank governor - market falls

2014-02-20 20:34
The Governor of the Central Bank of Nigeria, Lamido Sanusi. (Pius Utomi Utomi, AFP)

The Governor of the Central Bank of Nigeria, Lamido Sanusi. (Pius Utomi Utomi, AFP)

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Lagos - Nigerian President Goodluck Jonathan suspended Central Bank Governor Lamido Sanusi on Thursday, removing an increasingly outspoken critic of the government's record on tackling rampant corruption in Africa's leading energy producer.

Currency, bond and money markets stopped trading because of the uncertainty created by the suspension. Trading in the naira currency resumed after the central bank intervened with dollar sales, by which time debt markets were closed.

The intervention enabled the naira to rebound from a record low of 169 to the dollar to 165, dealers said, its biggest one-day swing since a December 2009 devaluation.

Sanusi, who was due to end his term in June, had been presenting evidence to parliament that he said showed the state oil company Nigeria National Petroleum Corporation (NNPC) failed to remit $20bn that it owed to federal government coffers. NNPC has repeatedly denied Sanusi's allegations.

Deputy Governor Sarah Alade was appointed acting governor, presidential spokesperson Reuben Abati said on Thursday.

"Lamido Sanusi's tenure has been characterised by various acts of financial recklessness ... inconsistent with the administration's vision of a Central Bank propelled by the core values of focused economic management," Abati said.

He later said Sanusi had failed to comply with procurement procedures in managing the central bank's budget and unlawfully spent money on projects outside his mandate, but did not give further details.

Sanusi was not immediately available for comment on those allegations.

Jonathan nominated the managing director of Zenith Bank Godwin Emefiele to be next central bank governor. If Emefiele wins the Senate's approval, he will start in June, when Sanusi's term would have expired, the head of its finance committee Senator Ahmed Makarfi told Reuters.

Sanusi told broadcaster CNBCA he was proud of what he had done and hoped the economy would not be hurt by his suspension.

Obvious

Asked whether it was politically motivated, he said: "It's not for me to comment. I think the answer to that is obvious."

Analysts predicted that foreign investors would now be active sellers of assets in Africa's second biggest economy, just when it had been attracting more interest than ever for the huge potential of its 170 million population and a backlog of work needed to update its inadequate infrastructure.

"The suspension will come as a significant shock to foreign portfolio investors, whose willingness to invest in Nigeria was very much influenced by the transparency and anti-inflation credibility associated with Sanusi's policies," said Razia Khan, head of Africa research at Standard Chartered.

The stock market closed down 1.47%.

Makarfi said a full removal of Sanusi would need Senate approval, but that the presidency had made no such request.

"The president has the prerogative under our laws to suspend him," without the Senate's consent, he said.

The governor himself questioned the legality of the move.

"It's important to establish the point legally ... because if not established, then the very next governor of the central bank can be suspended for any reason, and the independence of the central bank is totally undermined," he said.

Sanusi, a career banker, earned a reputation as a monetary policy hawk while governor from June 2009 - raising interest rates, tightening liquidity and aggressively defending the naira with frequent foreign exchange auctions.

"Sanusi has been the face of naira stability," Nwabueze Okonne, a Nigerian currency trader, told Reuters.

Massive fraud

The governor's suspicion of massive fraud at the heart of one of the world's most opaque national oil companies - in a country where oil provides 90% of foreign exchange and around 80% of government revenues - has brought him into conflict with the administration of President Jonathan a year before elections.

Jonathan was already under pressure from several corruption scandals and a failure to quell an increasingly violent Islamist insurgency in the north.

"It doesn't bode well for anti-corruption efforts in Nigeria," said Transparency International's West Africa head Marie-Ange Kalenga. "The government is not delivering results."

In a letter leaked in December, Sanusi said almost $50bn in revenues from oil exports from January 2012 to July 2013 had not been remitted to the federation account. He later lowered the estimate to $20bn.

It was not the first time that high-profile figures have put the spotlight on corruption during Jonathan's presidency.

Jonathan's one-time mentor and former president Olusegun Obasanjo said in a letter leaked in December that it would be "morally flawed" for Jonathan to seek a second term in 2015, saying corruption under his tenure was worse than that of General Sani Abacha, the military dictator who looted billions from the treasury and stashed it in Swiss bank accounts.

Jonathan rejected that criticism, and he frequently retorts that corruption in Nigeria is being exaggerated by his enemies.

The governor made a name for himself two months into the job when he rescued nine Nigerian banks in the wake of a financial crisis that nearly caused a wave of bankruptcies. He bailed them out and forced out eight of their chief executives.

Heir apparent

In doing so he made a rare example of some of Nigeria's most powerful people. Critics said he was getting too big for his boots when last year he began using bi-monthly policy meetings to lampoon the government for reckless spending.

Yet his aristocratic lineage - he is heir apparent to the throne of Kano, traditionally one of West Africa's most powerful Islamic caliphates, with a history going back to mediaeval times - had made him seem untouchable.

However, his exposure of what he said was severe malpractice at the state oil company spooked debt investors worried about government squandering of oil revenues during election cycles. Sanusi says graft is slashing foreign currency reserves.

The biggest gap in accounting is for $8.5bn the NNPC says it retained from revenues during the 19-month period to cover subsidies it was owed on importing petrol and kerosene.

Sanusi also says some of the $6bn that the NNPC's producing arm, NPDC, earned during the period should have been submitted to government accounts. Instead, he says, it has been funnelled into private hands through special deals given to oil companies. NPDC denies this.

Read more on:    nnpc  |  goodluck jonathan  |  lamido sanusi  |  nigeria  |  west africa
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