Bank of Agriculture may become distressed over bad loans, others — Auditor-General warns

The Office of the Auditor General for the Federation has raised the alarm over the possibility of the Bank of Agriculture (BOA) becoming distressed as a result of the inability of the bank to meet its obligations and provide meaningful service to the public.

In eight audit queries contained in the 2019 report submitted to the Clerk of the National Assembly and signed by the Auditor -General of the Federation, Adolphus Aghughu, the AuGF also queried the high turnover of Chief Executives by the bank and the non-composition of the Governing Board to oversee the affairs of the bank.

It said events within the bank were a major threat to the bank’s continuation as a growing concern, which could lead to loss of stakeholders’ funds and investments.

The Report of the Auditor- General concerning the bank is contained in pages 393-402 of the Auditor General for the Federation annual report on non-compliance/internal control weaknesses issues in Ministries, Departments and Agencies of the federal government of Nigeria for the year ended 31st December 2019”.

Reference AuGF/AR.2019/ 02 and addressed to the Clerk to the National Assembly, the report dated 15th September 2021 was signed by the Auditor General for the Federation, Adolphus Aghughu.

The queries against the bank include rising non-performing loan amounting to N75.595 billion, indication of problem due to continuous loss-making decision amounting to N49.582 billion and non- payment of outstanding equity by shareholders (Central Bank of Nigeria and Ministry of Finance Incorporated) amounting to N16.391 billion.

It also include unrecoverable loan from the Federal Ministry of Water Resources amounting to N2.411 billion, non- rendition of 2019 audited financial statements to the Auditor General for the Federation, overdue tenure of external Auditors, non-composition of Governing Board and high turnover of Managing Directors by the bank.

It said further that the practices within the bank violates the provisions of article 8.3.2 of the Regulatory and Supervisory guidelines for development finance institutions in Nigeria 2015 and article 12.3 of the Prudential Guidelines for Licensed Banks in Nigeria 2010.

It stated that “Audit review of reports from Risk Asset Management Department of BOA Ltd. on Non-Performing Loans (NPL) observed that the non- performing loan as at 31 December, 2019 stood at N75,595,161,603.91.”

It said further that the statement of Comprehensive Income of the bank showed a consistent loss of revenue by the bank between year ended 31 December, 2017 and 2019 amounting to about N49.582 billion over the three year period.

It said further that the capital adequacy ratio of the bank is below the regulatory minimum of 10%, which indicates the existence of material uncertainty which casts significant doubt on the Bank’s ability to continue as a going concern.

It said further that despite the approval of the President in 2001, the Ministry of Finance Incorporated paid a total of N27.7 billion in instalment over a period of 14 years, with additional N1.5billion paid in 2018, while Central Bank of Nigeria paid N3.6 billion in  2003 having earlier paid N400 million between April 1980 and October, 1993.

It said that stakeholders in the bank still have about N16.391 billion to be paid as outstanding equity in the bank, adding that the delay in paying the equity has led to inadequate capital base and difficulties in fulfilling its mandate.

On the unrecoverable loan from the Federal ministry of Water resources, the report said between 1981 and 1982, the Federal Executive Council directed the Bank to disburse the sum of N5 million each to the eleven (11)  River Basin Development Authorities totaling N55 million for On-Lending to Farmers in their areas of jurisdiction.

The Ministry also obtained various forms of loans from the bank for various projects including the Kampe and Swash dams and irrigation projects as well as the construction of Middle and Lower Ogun dam and irrigation projects.

The report said the Federal Executive Council set up a Committee comprising officials of the Ministries of Water Resources, Finance and BOA in 1999 to carry out reconciliation, which arrived at the total outstanding balance of N2.411 billion

It said further that the Ministry was granted a waiver of N1,043,806,663.00 in April 2001 and requested to pay the sum of N1,368,000,000.00 (One billion naira, as full and final settlement but the amount has not been settled.

While saying the bank has failed to submit its audited report to the office of the Auditor General as required by law, it also states that the external Auditors appointed by the bank has over stayed in contravention of extant laws, adding that this has the capacity to jeopardize the independence of the auditor’s report.

It said the non- appointment of a board for the bank could lead to lack of strategic direction/guidance for the entity and absence of oversight function, while the high turnover of MD/CEO may result in operational inefficiencies and could also threaten the going concern status of the bank.

It said that between 2010 and 2020, the Bank of Agriculture had five Managing

Director/Chief Executive Officer, adding that among the MD/CEO appointed before 2020, only Mohammed K. Santuraki served a full tenure of four (4) years.

Reporting on the response of the management to the issues raised, the report said the management disclosed that it was taking advantage of the Global Standing Instruction issued by the CBN on non-collateralized loans and hoped to recover all outstanding principal and interest upon defaulting farmers through the deductions.

The bank also said it has waiver concessions on the interest element of the loans to encourage defaulters to pay, while the bank is already prosecuting defaulting clients through various courts.

It also said that there was an ongoing repositioning of the bank through a 1.2 million dollars initial grant from the African Development Bank for

the institutional strengthening and capacity building from African Development Bank, while the Bureau for Public Enterprises is already carrying out a project for restructuring, recapitalization and partial privatization of BOA. (The Nation: Excludes headline)