D-day for Ndung'u in Parliament over shilling

By MARTIN MUTUA and DAVID OCHAMI

Central Bank Governor Prof Njuguna Ndung'u accused by a Committee of Parliament of failing to halt the dishonorable fall of the shilling, is the subject of debate by MPs today.

So far, the embattled Governor has had one straw to cling onto as the tide of outrage against him in Parliament rises — and that has been the lifeline given him by Members of Parliament from Central Province.

It is also expected that questions will be raised as to who removed some of the documents presented to the House Committee on the shilling’s fall from the volume given to the MPs, and what was the reason for doing so.

The House, outraged by the free-fallof the local currency and eventual rise following intervention by Government, is expected to decide the fate of Ndung’u, whom a South African research team last year ranked as Africa’s worst performing Central Bank Governor.

The debate on Ndung’u, especially coming against revelations of how CBK lent banks billions, which they then went ahead to offer their borrowers at higher interest rates to make a killing in profits, is expected to be characterised by a clash of competing interests among MPs.

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FIREWORKS

Fireworks are expected between those seeking to shield Ndung’u and those seeking to unearth the truth on the shilling’s fall, which precipitated a serious social and economic crisis, so much that some Kenyans are even reported to have committed suicide.

Hours to the confrontation in Parliament over Ndung’u, commercial banks came out fighting to discredit the Sh600 billion the report claims some of their members borrowed, and which cast them and CBK in negative light.

Central Bank of Kenya Governor Njuguna Ndung’u stresses a point during a grilling session by the Parliamentary Finance Committee at Continental House, last year. [PHOTO: JONAH ONYANGO/STANDARD]

But the Kenya Bankers Association (KBA), although arguing their borrowing of money from CBK through the ‘Discount Window’ was "less attractive" because of a "high penalty interest rate and restrictive guidelines", failed to divulge why many of the banks mentioned still went ahead to borrow more money last year than they did in 2010.

The banks also disputed the figures initially given by the committee, and gave their own breakdown, blaming many factors, including the "Arab Spring" for the shilling’s woes, but concluded that they were as clean as white cotton wool in the matter.

According to today’s Parliamentary Order Paper, the debate on Ndung’u will come immediately after Question Time, after three other bills are read for the first time (meaning they will not be debated). They are the Kenya School of Law Bill, Sugar Amendment Bill and the Legal Education Bill.

LOBBYING

Intense lobbying is already in top gear with a section of Central Kenya MPs led by Transport Minister Amos Kimunya seeking to defend Ndung’u by opposing the report.

It is expected that debate on the parliamentary select committee’s report will be concluded today. Among its proposals are removal of Ndung’u and making the appointment of the CBK boss more competitive.

This is the second time a different parliamentary committee is calling for Ndung’u’s removal from office as CBK Governor. Last year, the Finance Committee investigating the controversial sale of the Grand Regency Hotel put Ndung’u and Kimunya on the spot. Kimunya was the Finance minister at the time of the sale.

Today, Ndung’u is being accused by the committee of "economic crimes", for allegedly precipitating the sufferings of Kenyans during the free-fall of the shilling that saw food prices skyrocket and the cost of living soar to unmanageable levels for the poor.

The committee argues that CBK, as the money market regulator, colluded with commercial banks instead of acting to stop the shilling’s slide.

Chaired by Wajir West MP Adan Keynan, the committee argues in its report that CBK allowed commercial banks to use the "Discount Window" to borrow public funds from the CBK at very low interest rates, only to make huge profits on the foreign exchange market.

Keynan caused a stir on Thursday last week when he disclosed that select banks borrowed Sh600 billion from CBK at concessionary rates, and made cumulative profits amounting to Sh29 billion last year.

MISSING PAGES

But debate on the report was suddenly halted after committee member, Rangwe MP Martin Ogindo, brought to the attention of Deputy Speaker Farah Maalim that some incriminating annexes against Ndung’u and CBK had been yanked from report tabled.

Ogindo told the chair that the annexes, which showed how much money was borrowed from CBK’s "Discount Window" and the banks’ foreign currency trade volumes and profits last year, were missing. After consultations, the Deputy Speaker concurred with Ogindo and adjourned debate on the Motion until today, in order to address the discrepancy.

Members pointed a finger at the office of the National Assembly Clerk and demanded an explanation. But on Monday, National Assembly Clerk Patrick Gichohi defended his office, saying it was unfortunate that members had chosen to attack the staff of Parliament on the matter.

"My staff have no recourse even when they are wrongly accused, because they cannot defend themselves on the floor of the House. But what I can tell you is there is no way any of my clerks can pluck out a page of a committee report; that is impossible," he added.

Gichohi said before a committee chairman tables a report, he or she goes through the entire document and signs it, and that the Keynan Committee was no exception.

"I was personally not around that day, but for any clerk to remove even a page it would cost him or her their job," he added. Gichohi said the "mix-up" could probably have occurred during photocopying since the document is bulky.

Kenya Bankers Association Chairman Richard Etemesi said the committee "did not fully investigate" the actual causes of the currency’s depreciation and suggested that it lacked the technical expertise to conduct such an audit.

Etemesi and a team from KBA accused the Committee of reaching wrong conclusions and mischaracterising the money banks, including Standard Chartered, borrowed through CBK’s "Discount Window".

Kenya Commercial Bank Chief Executive Martin Oduor-Otieno flanked Etemesi, who is the CEO of Standard Chartered Bank.

The Standard Chartered boss said banks borrowed from CBK last year as "a facility of last resort" due to "a temporary shortage of cash."

Bank executives

The two senior banking executive did not answer questions pertaining to specific reasons for expanded borrowing from the "Discount Window" by their banks last year, as compared to the previous year. Instead, the statement read by Etemesi provided general reasons why "sound banks" may borrow from CBK.

"Liquidity shortfalls in commercial banks can arise out of large and unanticipated payments of taxes, dividends, some depositors calling for deposits without prior adequate notice or generally liquidity tightness occasioned by tight monetary stance that may not be fully covered by traditional sources of liquidity," argued KBA.

According to Etemesi, the Keynan Committee created the impression that the banks borrowed Sh600 billion in one go yet the money was borrowed overnight and paid back the next day.

"Commercial Banks’ borrowing from the CBK "Discount Window" averaged Sh4.4 billion per day in 2011," according to Etemesi who denied that the borrowed funds were ploughed into the purchase of foreign currency and Government securities.