CBN awards N9.5bn contract to bankrupt firm

Dermalog, the company which the Central Bank of Nigeria (CBN) gave the nod to install a biometric payment system for Nigerian banks is bankrupt, investigations have revealed.

The German firm went into voluntary liquidation in 2012 and was technically broke at home (in Europe) at the material time that it got the contract in Nigeria. Bundesdruckerei bought up Dermalog for US$5.8 million, which amounted to 22. 3 per cent of its private placement in stocks and sent the German firm riding in what is called the plus/minus line. Dermalog is a small privately-owned company in Germany with a total of 60-70 employees. Recently, it advertised positions for 32 engineers for employment openings.

The development has prompted industry watchers to believe that Dermalog was building a new workforce to enable it execute the Nigerian contract. This is contrary to what CBN Governor, Lamido Sanusi Lamido, told Nigerians last November when the firm was shortlisted to provide a unique customer identification system for the apex bank and the Bankers Committee. 'The process itself took time and was extremely competitive as those who went through it will testify,' Sanusi said during the contract signing ceremony, adding, 'Up to the last point, I did not know who was going to emerge. We had serious competition among two very good companies.” Dermalog describes itself as 'the world's leading manufacturer of automated fingerprint identification system (AFIS)'. This is, however, not true as the firm's total revenue in both AFIS and in hardware in 2012 were a positive 10 per cent, up from US$26 million in 2011. What this means is that the CBN/Bankers' Committee contract, which represents a 100 per cent increase in the firm's total revenue in 2012, actually amounted to handing Dermalog a lifeline and raises the question over whether a company that is close to bankruptcy is capable of handling a contract of such magnitude. The CBN spends close to N192 billion a year in managing the naira, which would be reduced considerably when the Nigerian economy transits from a cash-based economy to electronic means of payment. The CBN spokesman, Ugochukwu Okoroafor, however, in an interview with THISDAY denied that the German company was bankrupt at the time the contract was signed, arguing that some diplomatic staff of the German Embassy in Nigeria were in attendance when the contract was eventually sealed. He added that the German government indeed owns 20 per cent equity in the company. He also forwarded the 2013 business tax registration certificate of Dermalog from the Revenue Office of Hamburg 'which only serves as evidence of registration as a taxpayer (entrepreneur).' President Goodluck Jonathan has said it was unwieldy, costly and unsustainable for the country to 'operate multiple discordant databases and infrastructure'. He spoke in the State House when he formally launched the national identity number (NIN) under the National Identity Management Commission (NIMC) in October 2013. 'Government cannot afford the continued proliferation of data capture activities,' the president added. The implication of this is that the CBN contract to Dermalog 2013 was in direct contradiction of the presidential directive for harmonisation and integration of biometric capture activities only weeks later in November. The action of the CBN governor indeed prompted negative reactions by participants at a private sector forum in Lagos in December 2013. Captains of industries in the country at the forum involving the Nigerian American Chambers of Commerce did not only upbraid Sanusi's unprofessional conduct regarding biometric infrastructure acquisition for banks in the country, but equally issued a communiqué asking the Bureau of Public Procurement (BPP) not to approve any government agency expenditure involving biometric systems which was not a part and parcel of the mainstream infrastructure being managed by NIMC. However, Okoroafor said at the weekend, that the project was the collective decision of the CBN and the Bankers' Committee 'to support one of the fastest growing economies of the world.'