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The Central Bank of Nigeria (CBN) has issued a new regulatory framework that will enable it take custody of about N3trillion in dormant or inactive accounts in deposit money banks and other financial institutions. The amount will be warehoused in a CBN-managed Trust Fund and the proceeds invested in Treasury Bills and other government securities.
The taking over of the inactive accounts has, however, elicited diverse reactions among Nigerians. Dormant accounts refer to eligible account balances in the financial institutions that have remained with the bank for about a period of one year, or 10 years and beyond in other financial institutions. An account can be declared dormant if a customer does not deposit or withdraw money from a bank account for one year. But the account holders can still reclaim funds from the dormant accounts by contacting the bank, and the unclaimed funds will be returned to the beneficiaries not later than ten days of notice.
According to the Nigeria Inter-Bank Settlement System (NIBSS), as at December 2021, dormant and inactive accounts stood at 57.9 million. Within the period, the number of bank accounts in the country stood at 191.4 million, out of which active bank accounts were 133.5 million, owned by 122.3 million active bank customers.
In line with the provisions of Section 72(11) of the Banks and Other Financial Institutions Act 2020(BOFIA), the CBN is empowered to issue guidelines for the administration of unclaimed funds in banks and other financial institutions. In the new guidelines signed by the Director, Financial Policy and Regulation Department, Mr. Chibuzo Efobi, the CBN says the new regulatory framework, is in response to request from banks, and other stakeholders for the apex bank to clarify the procedures for the management of dormant and inactive accounts by the banks.
According to the draft statement from the CBN, commercial banks and other financial institutions should transfer all unclaimed funds to the Trust Fund domiciled in the CBN. The dormant and inactive accounts affected include current and savings accounts, tenure deposits in local currency, domiciliary accounts, deposits made towards purchase of shares and mutual investments, prepaid card accounts and wallets, proceeds of unclaimed and unrepresented financial instruments belonging to customers or non-customers of financial institutions, as well as unclaimed salaries and wages, commissions and bonuses.
Others are proceeds of local and/or foreign currency drafts not presented for payment by beneficiaries, funds received from a correspondent bank without sufficient details as to the rightful beneficiaries and/or a recall of funds made to the remitting bank to which the Nigerian banker’s account has not been debited and a judgment debt for which the judgment creditor has not been claimed. The decision to mop up all dormant and inactive accounts, the CBN says, is in the overall interest of the economy, adding that it will curb the abuses in the operations of dormant accounts and set new operational standards, strengthen the oversight functions of the apex bank in the management of dormant and unclaimed balances.
While the CBN plan will help to ‘identify dormant accounts and unclaimed balances and financial assets with a view to reuniting with their beneficial owners, standardise the management of the dormant accounts’, there are concerns that the dormant accounts and unclaimed balances may be mismanaged. However, the CBN must be transparent managing the funds from the dormant accounts. In 2020, the federal government planned to borrow N895 billion from dormant accounts and unclaimed dividends.
However, the plan was rejected by Nigerians. The Socioeconomic Rights and Accountability Project (SERAP) instituted a case against the government. SERAP had argued that the federal government should not be allowed to borrow from unclaimed dividends and funds in dormant accounts owned by Nigerians, stating that such action would negatively affect the citizens’ right to adequate standard of living and access to clean water, quality healthcare services and education. The court agreed with SERAP and entered judgment against the federal government.
The Securities and Exchange Commission (SEC) and other stakeholders faulted the plan by the federal government to take over the management of unclaimed dividends and deposits in dormant accounts. Last year, the House of Representatives commenced investigation into over N1.3trillion unclaimed funds in commercials banks.
Part XII of the Finance Act 2020 of the Companies and Allied Matters Act (CAMA) allows the federal government to borrow from unclaimed dividends and dormant accounts in any bank in the country, however, such a move must be seamlessly and transparently done.
In fact, borrowing from the funds amounts to expropriation that is bound to hurt the poor and vulnerable Nigerians. It could worsen the national debt, which has reached to an unsustainable level. Therefore, we advise the CBN to consider the far-reaching implications of the plan before its implementation.
