Sterling Bank is facing criticism after it was revealed that the financial institution opened an account for Indo Kaduna MRTS JV Nigeria Limited—a joint venture formed by the Kaduna State Government and Indian investors—before the company was legally registered.
We understand that the bank also processed billions of naira in transactions on behalf of the entity, raising concerns about regulatory lapses in Nigeria’s banking sector.
ICPC Investigation Uncovers ₦1.37 Billion Diversion
An Independent Corrupt Practices and Other Related Offences Commission (ICPC) investigation uncovered that ₦1.37 billion was allegedly diverted from the ₦11 billion paid by the Kaduna State Government under the administration of former Governor Nasir El-Rufai for the now-abandoned Kaduna Light Rail project.
According to the ICPC, El-Rufai’s administration approved payments to Indo Kaduna MRTS JV before the company was legally incorporated, which violates banking regulations requiring corporate accounts to be opened only for legally registered businesses.
According to Premium Times, records show that Indo Kaduna MRTS JV was only officially registered with the Corporate Affairs Commission (CAC) on May 10, 2017, months after the former governor authorized N11.1 billion in payments between December 2016 and January 2017.
Sterling Bank’s Alleged Regulatory Violations
Sterling Bank’s decision to open and operate an account for an unregistered entity appears to be in violation of the Central Bank of Nigeria’s (CBN) Know Your Customer (KYC) guidelines. The guidelines mandate that financial institutions:
Verify the legal status of corporate entities before opening accounts.
Confirm corporate registration details through official CAC searches.
Prevent transactions for unverified “brass plate” companies, which may be used for money laundering.
The bank’s own corporate account opening requirements include a certificate of incorporation, board resolution, tax identification number (TIN), bank verification numbers (BVN) of directors, and corporate references. Indo Kaduna MRTS JV’s ability to bypass these requirements before its legal registration raises concerns about due diligence failures.
El-Rufai’s Administration Defends Payments
Former members of the Kaduna State Executive Council (2015–2023) have denied any financial mismanagement in the project. In response to the ICPC’s move to seize N1.3 billion, they described it as unjustified.
According to them, the Kaduna Light Rail project was conceived in 2015 as a Public-Private Partnership (PPP) with Indian firm Skipper securing the contract. The state committed 15% of the estimated $600–700 million project cost, while the remaining 85% was to be secured as a loan from India’s EXIM Bank.
They explained that the project was stalled after the federal government refused to provide a sovereign guarantee, leading to a recall of funds. A forensic audit later confirmed the refunds, but the ICPC initially alleged that N13 billion was missing before ordering Sterling Bank to deposit N1.3 billion—including feasibility study costs and accrued interest—into an escrow account at the Central Bank of Nigeria (CBN).
Defending the decision to make payments before legal registration, the officials argued that they had debated whether to use a limited liability company registered with CAC or an entity established by the Kaduna State House of Assembly.
“It took some time to go with Skippers’ preference for a limited liability company. In any case, opening an account in the name of a company pre-incorporation is not a crime under our laws. It only means that the signatories to the account are personally liable for pre-incorporation activities,” they told Premium Times.
They further claimed that the Indian EXIM Bank had recognized Indo Kaduna MRTS JV in India, which allowed transactions to proceed.
“But for the Sovereign Guarantee that could not be secured from the Federal Government, the Kaduna Light Rail Project would have been completed or be nearing completion,” they added.
Financial Analysts Raise Concerns Over Regulatory Failures
The ICPC’s findings have sparked discussions about systemic lapses in Nigeria’s banking regulations.
Paul Alaje, chief economist at SPM Professionals, described the revelations as deeply troubling, stating that the KYC process should have prevented such an occurrence.
“Before a corporate account can be opened, a company must be legally incorporated with the CAC. This includes tax compliance and submission of key documents such as the Memorandum and Articles of Association. If Indo Kaduna MRTS JV was not legally registered at the time its account was opened and payments were made, then, legally speaking, the company did not exist,” Alaje explained.
He likened the situation to a “revenant”—a company that was non-existent at the time of transactions but later came to life after receiving billions of naira.
“This kind of regulatory lapse should not happen in a properly functioning financial system,” he added.
Call for Stronger Banking Oversight
Economist Ilias Aliyu emphasized the need for a clearer regulatory framework to prevent banks from engaging in transactions with unregistered entities.
“We should have a regulatory framework that sets out basic requirements, but it must not be overly complex,” he said.
Aliyu further noted that financial institutions sometimes process transactions for unregistered entities despite existing regulations, highlighting a loophole in enforcement.
“There is a gap that needs to be covered to prevent such occurrences in the future,” he stated.
Sterling Bank Silent on Allegations
Attempts to obtain a response from Sterling Bank were unsuccessful. Multiple phone calls and messages sent to bank officials went unanswered.
Dapo Martins, group chief marketing officer of Sterling Financial HoldCo, did not respond to WhatsApp messages or calls.
Jumoke Adekoya, from the bank’s marketing communications unit, initially responded to an inquiry but declined to comment after learning the concerns raised.
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