Obazee Tells FRC to Order CBN to Withdraw 2025 Audited Accounts

 

President Bola Tinubu's Special Investigator, Jim Obazee, has faulted the integrity of the 2025 audited financial statements of the Central Bank of Nigeria (CBN), calling on the Financial Reporting Council of Nigeria (FRC) to order the apex bank to withdraw and reissue the accounts.

Obazee, who spoke at the commissioning of the new headquarters of the FRC in Lagos, told the Executive Secretary of the Council, Rabiu Olowo, that the CBN's 2025 financial statements contained several issues requiring urgent regulatory attention.

He also urged the FRC to obtain and review the financial statements of the Nigerian National Petroleum Company Limited (NNPCL) over the controversial N210 trillion figure that has generated concerns at the National Assembly.

"I didn't see the grey hair on your head. The grey hair will have to start now. You have named the hotbed after me, which is inspections and investigation," Obazee said while addressing Olowo.

He said the FRC should obtain the NNPCL documents if they had not already been submitted to the Council by the National Assembly or the company.

"I don't know, sir, whether you have seen the documents that the National Assembly have been talking about — the 210 trillion NNPC. If you have not seen it, ordinarily the NNPC, and the National Assembly should send you those documents.

"They should send you those documents. If they don't, please request for them and review them so you can give Nigerians closure," he said.

Obazee, who pioneered the FRC, said the Council had an important responsibility to scrutinise financial statements issued by major public institutions and ensure compliance with applicable financial reporting standards.

He said the same scrutiny should be applied to the CBN's 2025 financial statements, urging the FRC to obtain both the summary and full audited accounts of the apex bank.

"Secondly, I don't know whether you have seen the CBN account for 2025, the fully audited account. Please, if you have not seen it, look for it. Ask them to bring you the summary and the full account because they urgently need to withdraw that financial statement and re-issue it.

"It's a whole lot of work that is there. I'll discuss everything with you and show you all of them," Obazee said.

He then raised several concerns about the accounting treatment and disclosures in the CBN's 2025 financial statements.

According to him, the CBN's accounting basis for 2025 differed from that used in preparing the 2024 financial statements, resulting in a disclosure that the figures were not comparable.

Obazee questioned the quantitative opening adjustments arising from the change in accounting basis, the decision to retain comparative figures without restatement and the consolidation adjustments applied to subsidiaries.

He also questioned what the CBN's 2025 profit and equity would have been if the same accounting basis used for the 2024 figures had been maintained.

He said comparative financial information was important in enabling the Federal Government, National Assembly, regulators, auditors and other stakeholders to properly assess changes in the financial position and performance of the apex bank.

Obazee also raised concerns over the CBN's treatment of foreign exchange gains and losses and the Derivative and Foreign Exchange Revaluation Account, which he said stood at about N13.7 trillion.

He said there appeared to be inconsistencies in the way foreign exchange differences were described and accounted for in different parts of the financial statements.

The former FRC boss further questioned the CBN's treatment of liquidity management costs which, according to the accounting policy, could be deferred and amortised over a period of up to four years.

He argued that the policy raised questions about the timing of income recognition and the possibility of earnings management.

Obazee said the FRC should scrutinise the economic substance of the deferred amounts, the amount capitalised in 2025, the approval process and the effect on the CBN's reported profit if the expenditure had been recognised immediately.

He also questioned an approximately N2.98 trillion overdraft facility granted by the CBN to the Federal Government in 2025.

According to him, the financial statements disclosed no corresponding interest income on the facility, raising questions about the accounting treatment of the transaction.

He said the issue required further examination in the context of Section 38 of the Central Bank of Nigeria Act, 2007, which provides for temporary advances to the Federal Government.

Obazee also questioned the independence of the CBN's joint auditors, KPMG and Ernst & Young, saying the two audit firms each received N50 million for non-audit services relating to internal control over financial reporting.

He questioned whether the arrangement could create concerns about auditor independence, particularly where the same firms were also providing assurance over the bank's internal controls.

"Will CBN accept this kind of Financial Statements from any of the Deposit Money Banks? Will the joint auditors have issued a different opinion and/or allowed this kind of financial statement from any of their clients other than the CBN?" he asked.

Obazee further questioned whether the CBN should be permitted to develop accounting policies for itself and subsequently alter the basis on which its financial statements were prepared.

He recommended that the FRC obtain and review the full CBN accounts and, if its concerns were established, recommend that the financial statements be withdrawn and restated.

He also urged the Council to strengthen its inspection and investigation activities, saying financial reporting by some government institutions left much to be desired.

Obazee said the CBN's 2025 financial statements could also serve as a case study for Nigerian universities and professional accounting organisations in teaching issues relating to financial reporting, corporate governance, earnings management and auditor independence.

The former FRC boss also urged the National Assembly to make use of its constitutional powers to investigate issues arising from the financial statements.

Speaking at the event, Lagos State Governor, Babajide Sanwo-Olu, said regulatory institutions must evolve alongside the economy and respond effectively to emerging challenges.

Sanwo-Olu said the new FRC headquarters should provide the platform for the Council to improve its efficiency, deepen engagement with businesses and professional bodies, strengthen regulatory capacity and respond more effectively to developments in the economy.

According to him, businesses need confidence in the rules under which they operate, while shareholders need assurance that their interests are protected.

The governor said the public also needed to be assured that institutions responsible for safeguarding the integrity of the country's economic system were performing their duties effectively.

"This is where the Financial Reporting Council plays such an important role. By promoting credible financial reporting, sound corporate governance and greater transparency, the Council helps to reduce uncertainty in the marketplace. This makes investment easier, leading to significant socio-economic consequences," Sanwo-Olu said.

The governor also commended the role played by Obazee in strengthening financial reporting regulation in Nigeria, describing the issues raised by him concerning the NNPCL and CBN as clear marching orders for the FRC.

The event also featured the naming of the FRC's Inspections and Investigation Room after Obazee in recognition of his contribution to the development of financial reporting and regulatory oversight in Nigeria.

Obazee served as the last Executive Secretary/Chief Executive Officer of the Nigerian Accounting Standards Board and subsequently became the pioneer Executive Secretary/Chief Executive Officer of the Financial Reporting Council of Nigeria.