Nigeria’s Transcorp Uncovers Billion Naira Fraud At Nitel
Nitel owner Transcorp announced this week that it had discovered internal fraud on a massive scale. Readers of News Update will not surprised by this revelation as in issue 209 in 2004 former CEO Rein Zwolsman revealed that there was a 30-40% loss of revenues from internal fraud and little that has happened since suggests that an old dog has learned how to behave differently.
The fraud is very simple. Nitel employees allow organisations and individuals to use their phone service for a token sum paid to the company and pocket a bribe for the arrangement. The phone company loses significant billable revenues. The only unusual thing about this former public company is the scale on which this occurs.
Apparently a team of Transcorp accountants performing a routine check on the books of Nitel, discovered the fraud. According to a report in This Day, several organisations and government agencies are said to use Nitel services without paying or paying a token (which translates as a bribe) to some "faceless" people instead of the coffers of the firm.
The Corporate Communications Manager of Transcorp, Dayo Ojo, confirmed to This Day that some loopholes had been discovered in the accounting process of Nitel. He said a preliminary report by a group of accountants who were sent to check the books and accounting processes of Nitel uncovered a lot of leakages through which billions of naira could not be accounted for:” "The carrier had a lot of organisations actually connected to and using its services without paying for the services because the inflow was not commensurate with the services Nitel was rendering to them", he said.
Meanwhile the employees of Nitel (who it should be noted are not all dishonest) have been on strike because they have not been paid their wages recently, although they recently agreed to go back to work. The strike has caused havoc to the country’s communications system as it closed the SAT3 landing station for periods and because the Nitel network is used for interconnection, has on occasions also bought this process to a standstill.
The rather convenient sudden discovery of the fraud means that Transcorp is now saying that it will not put any more money into the company until the matter is resolved. The accountants have been given 30 days within which to come up with a plan or guidelines as to what needs to be done. The more cynical might say that perhaps Transcorp might have spotted this revenue leakage earlier and put in a management capable of dealing with it.
The Group Managing Director and Chief Operating Officer of Transcorp, Tom Iseghohi, said Transcorp had invested over N5 billion in the firm's operational and personnel costs since it took over almost two years ago. Iseghohi stated that contrary to the view in some quarters that Transcorp was taking money out of Nitel, it was actually putting money in it so as to turn the fortunes of company around. There’s no doubt this is the case but any reasonable investor might ask itself what it is getting back on its investment. On current evidence, a significant proportion of its potential return is being distributed to the company’s phone users rather than its shareholder.