Last week, Nigeria's financial regulators uncovered massive fraud at the National Economic Reconstruction Fund (NERFUND), established to support manufacturing companies and entrepreneurs. In this report, KINGSLEY ALU traces the genesis of the rot, the accomplices involved and what government should do to reposition the agency for effective participation in economic development
Just last week, the National Economic Reconstruction Fund (NERFUND) made headline news following the CBN and NDIC Joint Special Examination report of the books and affairs of the Fund that unearthed the misappropriation of N5.7billion by the sacked managing director of the agency, Malam Baba Maina Gimba, who superintended over the agency for a record 14 years.
For some time now, there had been indications that the Fund would be comprehensively audited with a view to restructuring it to play an effective role in strengthening the economy. Experts argue that if financial audits were conducted in commercial banks and those found wanting were asked to go, then the ones government has direct control over should not be spared.
Until the hammer came down on him, Gimba, who was on bail at the EFCC, was alleged to be plotting another tenure extension and had only taken a trip to the United States of America (USA) when the rug was pulled off his feet and what followed were sordid revelations that more than anything confirmed the fears of the Economic and Financial Crimes Commission (EFCC), which, for sometime now, has been quizzing the Yobe State-born lawyer over tons of petitions bordering on graft.
Sources in the industry who spoke to LEADERSHIP Sunday said Gimba's sack was long anticipated; the late President Umaru Musa Yar'Adua was said to have been so livid at the inept leadership and the huge graft that were haemorrhaging the Fund that, instantly, Gimba became a marked man for the sack but for the intervention of a powerful northern emir, who he had run to for help.
To perpetuate himself in office, Gimba was also alleged to have had anyone that had a say in NERFUND in his pocket. In fact, he allegedly kept a rogue gallery of senior citizens, legislators, businessmen, senior civil servants, anyone that could press a button in government, including some royal fathers. For the 14 years the man held sway, he dreaded the media and ensured they were shut out, while the Fund's activities were conducted with utmost secrecy.
But he was not alone. Sources who pleaded anonymity told LEADERSHIP Sunday that he was in cahoots with the heads of the Accounts and Administration departments at NERFUND. According to those who spoke with LEADERSHIP Sunday, there is something unwholesome about a nation in which senior officials constantly feature in corruption scandals. The more they defraud the system they serve, the more they want to embezzle. And the public has grown restless about high levels of corruption in the civil service.
The latest revelations by the CBN and NDIC report have given further impetus to public suspicion that there is more corruption going on in the public service than the government has ever admitted. According to them, the rot in NERFUND would not have been if the present and other past supervising ministers of the Fund had sat up to their responsibilities.
For instance, the Minister of State for Finance, Dr Yerima Ngama, is alleged to have been compromised by Gimba when he took up tenancy in NERFUND's guest house for over two years on the pretext that his house was under renovation.
But that was not all, the Yobe-born minister, said to be nursing gubernatorial ambition, was also a beneficiary of a N300 million loan from NERFUND for a tricycle project in his home-state even when he knew that NERFUND does not fund 'services'.
NERFUND was established by Decree No. 2 of 1989 to act as a catalyst towards the stimulation of the rapid rise of real production enterprises in the country. It was specifically mandated to provide long/medium term loans to entrepreneurs through commercial/merchant banks for industrial growth of Nigeria.
While other development finance institutions like the Nigeria Export-Import Bank (NEXIM) and the Bank of Industry (BoI) were recording landmark achievements and gaining the confidence of international donor agencies, Gimba's NERFUND was allegedly grounded without any hope of revival in sight.
Gimba was also alleged to have dreaded any meeting with the Coordinating Minister of the Economy and the Minister of Finance, Dr Ngozi Okonjo-Iweala, and avoided her as best as he could while he was in office. In fact, inside sources in the ministry of finance told LEADERSHIP Sunday that he loathed her more because of her merger policy initiative.
Under Gimba's watch, the agency, until now, had been run for the last 13 years by an interim management committee headed by the permanent secretary, instead of a properly constituted board contrary to the extant rules. It was believed that the operations of NERFUND without a board were only to serve the interest of a clique.
In an earlier interview with LEADERSHIP- a sister publication, Gimba could not account for the whereabouts of $40 million belonging to the Fund, which was lodged with the Bankers Trust of New York; neither could he explain how the agency disbursed N7 billion in its local account, nor the status of that account at the moment. The Fund's N500 million with FinBank was also said to have suddenly developed wings.
Also, monies running into hundreds of millions of naira were said to have been signed off by Gimba for capacity trainings overseas that were never made. An example was a purported management training billed to take place in China for which the estacode was collected but the trip was never made.
In the course of protests in the agency in November 2012, LEADERSHIP Sunday also discovered that several petitions bordering on corruption from the staff of the agency to the ministry of finance (Home Office), Head of Service, EFCC and the ICPC could not be acted upon by the authorities concerned as Gimba had their officials in his pocket.
Gimba also admitted to LEADERSHIP Sunday that he granted interest waivers to the sum of N2.3 billion to projects which were not repaying the loans.
Sources in the agency, who pleaded anonymity, told LEADERSHIP Sunday that the man collected bribes running into millions of naira from them, depending on how much the projects were owing, and ensured that there was no appraisal report on the said projects. Also projects that were viable, but could not pay bribes were denied loans.
Early in 2012, inside sources who had written several petitions to the minister of finance, Dr Okonjo-Iweala, disclosed to LEADERSHIP Sunday how Gimba disbursed loans running into hundreds of millions of naira to over 50 fictitious enterprises.
During an aggressive debt recovery drive by a team in NERFUND, it was discovered that these companies had filed phoney addresses and contact numbers.
Gimba also confirmed to LEADERSHIP Sunday, the allegation that he took the sum of N85 million housing loan which had not been paid back. He however, refused to furnish LEADERSHIP Sunday with records of all housing loans granted to staff of the agency and the modalities for paying back.
Following the plethora of revelations, stakeholders told LEADERSHIP Sunday that the assumption of duty last week of the new management team at the Fund also means a task of redefining and reinvigorating the Fund that has gone through a period of severe rot occasioned by inept leadership and alleged graft.
According to them, the aggressive recovery of all outstanding loans, overhauling of the Fund's records, reconciling all accounts with the Fund's correspondent banks and rendering quarterly reports to the Board of the Fund must be done dispassionately, while ensuring that at the end of the one- year period given to them, a total overhaul of the NERFUND management would have been carried out.
According to the President of the Manufacturers Association of Nigeria (MAN), Kola Jamodu, the latest effort on the part of government to restructure NERFUND should be commended. Jamodu said the restructuring of the agency would put the manufacturing sector of the economy in good stead to benefit as more MSMEs which would be able to access loans.
Jamodu added that it was obvious that the government and development experts have recognised the MSMEs as the main engine of economic growth and a major factor in promoting private sector development and partnership and also as an essential element in the growth strategy of most economies and holds particular significance for Nigeria. Hence, any effort to give impetus to their activity was welcomed.
Dr Kabir Yammama, the President of Greenshield of Nations, told LEADERSHIP Sunday that it was good that government has decided to look into the activities of the agency with a view to strengthening and repositioning it for optimal service delivery.
Yammama observed that one of the greatest obstacles that Micro, Small and Medium Enterprises (MSMEs) have to grapple with was access to funds. This, he maintained is further compounded by the fact that even where credit facilities are available, they may not be able to muster the required collateral to access such.
He lamented that the situation has led invariably to many of them closing shop, resulting in the loss of thousands of unskilled, semi-skilled and skilled jobs across the country.
According to him, about 80 per cent of Nigerian MSMEs were excluded from the financial market, while their condition and capacity to add more value to the nation's economy, and underscores the importance of the recent effort of the federal government to clean up the Fund.
The Director -General of The Abuja Chamber of Commerce Industry Mines and Agriculture (ABUCCIMA), Mr Joe Idowu Wenegieme, said at the moment it would be preposterous for any one to predict the future of the agency, especially in view of the fact that the new management would have to do some house cleaning before coming up with a new road map for the agency, that is if it was merged. He said before the takeover, the agency was providing loans to MSMEs in the country.
While others argue that the ongoing restructuring should at the end of the day be able to show why NERFUND has not been effective as it should have been, adding that it was only when the Fund has been restructured that it could be recapitalised, there was also a call on the government to ensure that Gimba as well as other employees of the Fund who in one way or the other may have contributed to the failure of the institution were prosecuted, if found guilty, punished adequately.
They also suggested that government must look into some systemic conditions in the Nigerian polity that promote corruption on a grand scale such that a man could last 14 years as head of a public institution without the government of the day taking notice or inventory of his activities until things got really bad.
According to them, the civil service code of conduct requires that senior and junior officials who compromise their office or are found guilty of undermining their professional integrity must be disciplined, and that the senior officers who defrauded the government in this latest scandal must be punished heavily in order to discourage potential offenders.