$7 billion: Why Falana must apologise to me – Soludo

A former Governor of the Central Bank, Chukwuma Soludo, has insisted that senior lawyer, Femi Falana, apologise for making incorrect allegations.

Mr. Falana had called for Mr. Soludo’s probe, after he accused the former bank chief of doling out $7 billion to commercial bankers while he was in office. The Senior Advocate claimed that the loan was never returned by the beneficiary banks.

Mr. Soludo has, however, clarified the disbursements; saying it was never a loan, but deposits placed in the appropriate banks by the federal government.

“I can’t believe that the learned and respected Senior Advocate of Nigeria does not know the difference between a bank LOAN and a bank DEPOSIT,” Mr. Soludo said.

The former Central Bank chief added that “none of the 14 Nigerian banks needed a loan or requested for a loan, and the CBN did not grant any loan with our foreign reserves.”

Read Mr. Soludo’s full statement below:

FEMI FALANA CONTINUES TO LIE: I INSIST ON HIS APOLOGY

Chukwuma Charles Soludo

I have just read further statement from Femi Falana in response to mine and his position that he does not need to apologize to me but that instead I may wish to direct my demand for apology to Mr. Festus Odoko (then head of corporate affairs at the CBN). I hereby further wish to state as follows:

When I read Falana’s original statement, claiming that he had “evidence”, that I ‘dolled out’ $7 billion of foreign reserves to banks as a LOAN, I denied the charge and challenged him to publish such evidence. His “evidence” turns out to be a newspaper report quoting the announcement by CBN through Mr. Odoko that “deposits worth $7 billion representing the apex bank’s share of the foreign reserves estimated at about $38 billion has been released to the consortium of bankers” (The Guardian newspaper of 5/10/2006). The same newspaper report noted that the Investment Committee of the CBN (charged with responsibility for deciding where and how our foreign reserves should be kept) approved the decision to allow 14 Nigerian banks with capital base of more than $500 million to be part of the consortium of banks that hold our foreign reserves as deposits.

In all honesty, I can’t believe that the learned and respected Senior Advocate of Nigeria does not know the difference between a bank LOAN and a bank DEPOSIT, and there is no way I would have imagined that he was referring to the deposits with banks as LOAN. As I stated in my earlier response, Nigeria’s foreign reserves are required by law to be kept in foreign currency abroad. This has been kept either as deposits in banks or invested in sovereign instruments such as the US treasury bill. Before 2006, none of the Nigerian banks was considered big enough or with the infrastructure to manage our foreign reserves. Consequently, our reserves were kept with a consortium of other countries’ banks such as JP Morgan Chase, USA, UBS of Switzerland, Citibank, USA, Bank for International Settlement (BIS), Switzerland, etc. Indeed, in much of the 1990s especially under Gen. Abacha, our reserves were almost exclusively kept with BIS Switzerland.

After the consolidation of banks by December 2005 and as part of our long term vision that Nigerian banks should ultimately take charge and manage Nigeria’s entire foreign reserves, the CBN took the patriotic step of allowing the biggest of our banks to join the consortium of other countries’ banks holding our reserves as deposits. The CBN decided as a first step to give the biggest Nigerian banks a small portion of our reserves, $7 billion as deposits, while the remaining $31 billion as at that date remained with other countries’ banks as deposits and other investments.

It is interesting that Femi Falana would refer to the deposits held by Nigerian banks as LOAN while saying nothing about the other deposits with other countries’ banks.

Let me state that none of the 14 Nigerian banks needed a loan or requested for a loan, and the CBN did not grant any loan with our foreign reserves. As I stated in my earlier statement, the CBN Act does not allow the CBN to grant loans with our reserves to banks, and no loan was ever made. Chief Falana is therefore looking for a repayment of a LOAN by banks that never existed in the first instance. Under my tenure, Nigeria’s foreign reserves grew from $10 billion to all time high of over $62 billion and due to our efficient management, Nigeria never lost a penny of it.

Finally, I must say that I don’t believe any of the conspiracy theories flying around, including those who question the motive, timing, and content of his bogus claims, and some even allude to it as a hatchet job. Going into the archives to fish out a newspaper report of 10 years ago about deposits and making up a fantasy story around it to become a loan, could give anyone cause for suspicion. Even several of the allegations against my successor, Emir Sanusi, are laughable and betray a lack of most elementary knowledge of how a bank such as the CBN works. As one of his admirers, I want to believe that this is one of those cases he is proving to be human after all and therefore could get his facts completely wrong. It may be challenging for him to admit his error and apologize, but if he is not on a mission, it is the only honourable thing for him to do.