EXCLUSIVE: How Sterling Bank opened account, received billions for unregistered firm

Sterling Bank opened an account for Indo Kaduna MRTS JV Nigeria Limited—a joint venture entity set up in 2016 by the Kaduna State Government and some Indian business people—and received billions of naira on its behalf before the company was legally registered.

The development raises concerns about regulatory lapses in Nigeria’s banking sector.

An Independent Corrupt Practices and Other Related Offences Commission (ICPC) investigation uncovered the alleged diversion of N1.37 billion from the N11 billion paid by the Kaduna State Government under the immediate past governor, Nasir El-Rufai.

The payments were made with respect to the state’s now-abandoned light rail project.

The commission found that Mr El-Rufai’s government made payments to Indo Kaduna MRTS JV before it was officially registered as an entity.

This directly contravenes banking regulations that require corporate accounts to be opened only for legally incorporated businesses.

Under the Central Bank of Nigeria’s (CBN) Know Your Customer (KYC) guidelines, financial institutions must verify the legal status of corporate entities before opening accounts for them.

The rules explicitly warn against processing transactions for “brass plate” companies whose controlling figures cannot be identified. Banks are required to confirm a company’s registration number, official corporate name, directors, shareholders, and principal trading address through official documents and searches at the Corporate Affairs Commission (CAC).

“Because of the complexity of their organisations and structures, corporate and legal entities are the most likely vehicles for money laundering, especially those that are private companies fronted by a legitimate trading company. Care should be taken to verify the applicant’s legal existence (i.e., the company) from official documents or sources and to ensure that any person purporting to act on behalf of the applicant is fully authorised.

“The identity of a corporate company comprises its registration number; its registered corporate name and any trading Names used; its registered address and any separate principal trading addresses; its directors; its owners and shareholders; and the nature of the company’s business,” the manual read in parts.

The ICPC alleged that the Kaduna State government made substantial payments to Indo Kaduna MRTS JV before its legal incorporation, which breached public procurement regulations.

It alleged that the entity did not meet the necessary requirements when its account was opened. It was only formally registered with the Corporate Affairs Commission on 10 May 2017, despite Mr El-Rufai approving payments as early as December 2016.

Between December 2016 and January 2017, the then-governor authorised N11.1 billion in payments to the entity, raising questions about Sterling Bank’s due diligence.

Standard procurement procedures require contracts to be awarded to legally recognised businesses, with proper verification of their operational status.

Sterling Bank’s requirements

Sterling Bank’s corporate account requirements, as published in its guidelines, include submitting a certificate of incorporation, a board resolution, a list of directors (Form C07), a shareholding structure (Form C02), tax identification number, bank verification numbers (BVN) of all directors, and corporate references.

Indo Kaduna MRTS JV’s ability to secure an account and process transactions before its legal registration raises concerns about breach of these requirements.

Additionally, the CBN’s KYC framework mandates a risk-based approach to corporate account openings, requiring banks to verify that applicants are not shell companies or vehicles for money laundering.

Financial institutions are also expected to conduct searches at the CAC to ensure that a company is not in the process of being dissolved, struck off, or wound up.

El-Rufai’s Administration’s defence

Reacting to the allegations, former members of the Kaduna State Executive Council (2015–2023) rejected allegations of financial mismanagement in the project, describing the ICPC move to seize N1.3 billion as unjustified.

In a rebuttal, the officials explained that the project was conceived in 2015 as a Public-Private Partnership, with Indian firm Skipper securing the contract. The state committed 15% of the estimated $600–700 million cost while seeking an 85% loan from India’s EXIM Bank. They claimed that a feasibility study conducted by French firm Systra and GTA Engineering cost $2.8 million (N890 million) and was duly approved by the state government.

According to them, the project stalled when the federal government declined to provide a sovereign guarantee, leading to the recall of funds. A forensic audit later confirmed the refunds. However, the ICPC initially alleged N13 billion was missing before forcing Sterling Bank to deposit N1.3 billion—including the feasibility study cost and accrued interest—into an escrow account with the Central Bank of Nigeria.

The former officials accused ICPC of bypassing due process and acting under state government influence to push for an unjustified forfeiture.

They maintained that all transactions were legal, transparent, and properly documented, warning that the commission’s actions could deter foreign investment and undermine trust in legitimate public-private partnerships.

Speaking on the specific allegation of paying money into the account of a yet-to-be-registered company, they argued that there were divergent opinions as to whether they should use a limited liability company registered with the Corporate Affairs Commission or a company established by the 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. Meanwhile, the same joint venture company, Indo Kaduna MRTS-JV Nigeria Limited, was registered in India.

“That was why the Indian NEXIM Bank agreed to transact with the Kaduna State Government. 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,” the statement said.

What it means

Financial analysts have raised concerns about Sterling Bank’s role in facilitating transactions for Indo Kaduna MRTS JV before its legal incorporation, describing it as a clear violation of banking regulations.

Paul Alaje, chief economist and partner at SPM Professionals, said the findings of the ICPC report highlight systemic regulatory failures in Nigeria’s financial sector.

“If the ICPC report is accurate, it is not just disappointing but deeply embarrassing. It shows the inequality of the law—where powerful entities operate above regulations while ordinary businesses are held to strict standards,” Mr Alaje said.

He explained that corporate accounts should only be opened for legally registered businesses with verified documentation.

“Before a corporate account can be opened, a company must be legally incorporated with the Corporate Affairs Commission (CAC). This includes registration, tax compliance, and the submission of key documents such as the Memorandum and Articles of Association. A registered company is issued a certificate, which is the legal proof of its existence,” he said.

Banks must verify a company’s legal status before processing transactions under the Central Bank of Nigeria’s Know Your Customer (KYC) guidelines.

Mr Alaje said that Indo Kaduna MRTS JV’s ability to secure an account and receive payments before its official registration raises concerns about Sterling Bank’s adherence to due diligence procedures.

“Banks must verify incorporation details before opening an account. 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,” he said.

He likened the situation to a “revenant”—a company that was effectively “dead” at the time of the 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 regulatory clarity

Economist Ilias Aliyu emphasised the need for a clear regulatory framework to address inconsistencies in business registration requirements, particularly concerning financial transactions involving unregistered entities.

Mr Aliyu said that while some pre-registered companies exist, the absence of a structured framework has created uncertainty. “We should have a regulatory framework that sets out the basic requirements, but it must not be overly complex,” he said.

He suggested that the framework accommodate different types of entities, including limited companies, non-limited companies, business names, and informal groups, ensuring that all participants operate within a defined legal structure.

He further observed that banks sometimes engage with entities that are not formally registered despite existing regulations. “There is a gap that needs to be covered to prevent such occurrences in the future,” he added.

Efforts to get a response from Sterling Bank were unsuccessful, as attempts to reach bank officials yielded no result. Multiple phone calls and text messages sent to officials of the bank were not attended to.

Dapo Martins, group chief marketing officer of Sterling Financial HoldCo, did not respond to WhatsApp messages and multiple calls.

Jumoke Adekoya of the bank’s marketing communications unit initially responded to a WhatsApp message requesting the purpose of this newspaper’s inquiry. However, upon being informed of the concerns raised, she declined to comment on the issue.

Source: PremiumTimes