Central Bank of Liberia Increased Board Fees by 109% ( $778K) IN 2016; Anti-Poor Policy?


By J. Yanqui Zaza

What is the rationale or economic benefit for an entity to increase the compensation of a five-man Board of Directors by 109% (totaling US$774,480) in 2016, from US$368,961 in 2015?

In addition, CBL increased the salary and benefits of staff 49% (US$13,398,790 total) in 2016 from US$ 9,511,715 in 2015. Some proponents say that good pay or excessive salary does not only attract competent employees to underdeveloped community or increase productivity.

It also discourages employees, especially government employees, from demanding bribes from taxpayers in exchange, for example, awarding fraudulent concessionary agreements.

Critics of excessive salary payment say society overstate the benefits of paying too much wages. For example, addressing the topic “Incentives for retaining and motivating health workers in Pacific and Asian Countries,” Ms. Lyn N. Henderson and Mr. Jim Tulloch reported that money was not the only factor.

Drawing from a vast literature of work, they concluded that educating more health workers, supervision and management were also important factors. Is more money the remedy to reducing bribe offering in exchange of favors?

Transparency International disagreed, and reported that moneymaking taxpayers are the perpetrators who usually initiate bribe offerings. For example, in the Global Witness bribery case involving the iron ore mountain Wologizi in Liberia, Global Witness accused profiteers’ agent for offering bribes to government officials.

Besides the issues of bribes and enticing employees, can a company increase its productivity by paying excessive wages? If so, why do Japanese companies produce quality products for reasonable wages, but American products are inferior even though chief executives receive excessive compensation?

For the moment, let us look at the Central Bank of Liberia’s Audited Financial Statements along with the 2016 Annual Report (un-Audited) to determine if the theory of excessive salary holds true.

The amounts are in Liberian dollars.

Source: Classification 12/31/2016 12/31/2015 12/31/2012 12/31/2011
GOL Loan Interest Income 256,547,000 234,949,000 159,563,000 191,919,000
GOL Loan Change in A/C 1,278,478,000 306,545,000 296,364,000 288,851,000
Comm. & Fees Fees 274,931,000 214,814,000 194,906,000 235,344,000
Placement & staff Interest Income 179,470,000 216,723,000 52,086,000 28,912,000
Foreign deposits Int. Income 70,196,000 61,542,000 51,017,000 50,177,000
TOTAL REV. 2,107,841,000 974,478,000
12/31/2016 12/31/2015 12/31/2012 12/31/2011
Staff Costs (Primarily Salaries) 1,427,877,000 970,195,000 598,075,000 470,073,000
Board Fees (Five Members) 78,997,000 37,634,000 27,187,000 40,075,000
Other Exp. 1,519,088,000 2,030,936,000 330,010,000 209,775,000
Profit/(loss) (2,253,781,000) (4,378,439,000) (1,029,530,000) (216,189,000)

Staff: LD 1,427,877,000 in 2016 (US $ 13M), and LD 970,195,000 in 2015 (US $ 9M).

Board fees: LD 78,997,000 in 2016 ($ 788k), and LD 37,634,000 in 2015 (US $ 369K).

  • Directors reported LD 799.86 million as interest income (equivalent to US $7 million) on page # 71 of Un-audited Annual Report, but reported LD 505,000,000 as interest income, equivalent to US $4.9 million on page # 11 of the Audited Financial Statement. (See below Item # 1);
  • Directors did not provide relevant information of the revenue LD 1,278,478,000 (i.e., equivalent to US $12.5M) generated from Government Loan as per page # 11 of the Audited Financial Statement. (See below item # 2)
  • Directors did not provide schedule for the comprehensive income LD 2,999,020,000 (i.e., equivalent to US $ 29M) as per page # 11 of the Audited Financial Statements. (See item # 3);
  • CBL overstated its loan to the government as per page # 48 of the CBL Audited Financial Statement. (See item # 4).
  • Liberian exchange rate depreciated: LD 88 in 2015 to LD 102 in 2016, page # 43 of unaudited Annual Report of the CBL;
  • Interest income decreased: LD 513,000,000 (i.e. $5M) in 2015 to LD 505,000,000 (i.e. US $ 4M) in 2016, page # 11 of the Audited Financial Statement of the CBL;
  • Directors deducted LD 1,554,428,000) (US $ 15,239,490) from government revenue because they failed to supervise the overdraft program of First International Bank of Liberia Limited (FIBLL) as per page # 51 of the Audited Financial statements. (See item # 5).
  • Directors did not include information about the liabilities related to the US $24m of Government Treasury Bills sold in 2016 as per page # 27 of the Un-audited Annual Report of CBL.

Do these actions and, or inactions support the excessive benefits? I don’t think so. However, President Weah can use the issue of nonperformance to roll back these kinds of excessive payments.

This recommendation, which is in line with President George Weah’s pledge to reduce his salary by twenty-five percent, is necessary if Liberia wants to end the practice of the money culture before it becomes a way of life.

An unknown Chinese commented on attitude, according to Robert C. Johnson. The unknown Chinese stated: “…Be careful of your habits, for your habits become your character. Be careful of your character, for your character becomes your destiny.”

In Liberia today,  political positions sought by most applicants are offices that come with high salary offices as well as free gasoline, scratch cards for telephone calls, etc.

In rural Liberia, school-aged children prefer digging gold, diamonds or felling trees for quick money rather than going to school and, or helping parents. Nonetheless, people can change if leaders institute appropriate measures or policies.

And if our Pro-Poor government wants to institute effective policies, then it has to recalibrate its relationship with profiteers who prefer corrupt bureaucrats who will offer them hefty bribes in exchange for fraudulent agreements.

(1) The Board stated on page # 71 of the Un-audited Report that CBL generated LD 1,902.2 million in 2016. “The increase in gross income in 2016 was mainly due to the increase in interest income earned on the CBL’s deposit at the Federal Reserve Bank of New York (FRBNY).” (2) “(DR.) Accounts Receivable $5,000 (CR.)

Bad Debts Recovered $5,000 Next, the journal entry to record the cash receipt is as follows: (DR.) Cash $5,000 (CR.) Accounts Receivable $5,000.” (3) “…And if they do trade internationally, often their trading partners use U.S. dollars.

So, they operate internationally and still have no currency exposure…” “… Although, transactions are carried out in both currencies, the majority of the Bank’s transactions are currently denominated in United States Dollars (US$).

Accordingly, the Central Bank considers the United States Dollars as its functional currency for the purpose of IFRS.”  (4) “…

In December 2016, the IMF gave a loan to CBL as fiscal agent of GOL in the amount of SDR 27.69 million (US$37.1 million). 12.9 million SDR (US$17.3 million) of this Extended Credit Facility (ECF) loan was provided to GOL as direct budget support…” (5) (https://cbl.org.lr/doc/StatementCBLBoard_ForensicInvestigation-FIBLL.pdf).

Note, the bad debt deduction was not reflected within the 2016 income statement.

Audited Financial Statements:

2015: (https://cbl.org.lr/doc/financial%20statement.pdf)

2016: (https://www.cbl.org.lr/doc/f_statement_2016.pdf)

2012: (https://www.cbl.org.lr/doc/NotesFS2012.pdf)

Annual Report (Unaudited)

2016: (https://cbl.org.lr/doc/2016%20Annual%20Report%20f

2016: (https://cbl.org.lr/doc/StatementCBLBoard_ForensicInvestigation-FIBLL.pdf).


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