AS the Central Bank of Nigeria (CBN) reviews its guidelines on the management of dormant funds that banks have been feeding fat on, analysts have been weighing the implications this might have on both the fiscal and monetary sides, and to query the sincerity of the apex bank to truly manage the funds.

In a circular dated April 6, the CBN had announced the release of an exposure draft on the ‘Guidelines for the Management of Dormant Accounts.’

The apex bank uses the exposure draft to gather comments from banks and other stakeholders before coming up with resolutions on how dormant accounts should be managed.

The CBN had done the same thing on February 16, 2015 when it issued an exposure draft to banks, explaining that the move was to curb abuses in the operation of dormant and inactive accounts, and to set operational guidelines.

While referencing the exposure draft of February 16, 2015, the apex bank, on October 7 of the same year, set guidelines on how dormant account balances should be managed.

Part of its resolutions was that once accounts became dormant, banks should, on a quarterly basis, report to the Banking Supervision section of Other Financial Institutions Supervision Department of the CBN.

In January 2021, the Federal government expressed its intention to borrow N895 billion from dormant account balances and unclaimed dividends. This was greeted with disdain by many Nigerians, industry players and several institutions.

Questioning the motive, the Socio-Economic Rights and Accountability Project (SERAP) sued the Federal government on the matter.

In suit number FHC/ABJ/CS/31/2021 filed March 12, 2021, SERAP sought “an order of perpetual injunction restraining and stopping President Muhammadu Buhari from demanding, taking over, borrowing, and collecting Nigerians’ money in the form of their unclaimed dividends and funds in dormant accounts, or transferring and moving the money into a trust fund known as Unclaimed Funds Trust Fund.”

The CBN is, however, at it again to rejig the guideline with the intention to take over the management of dormant funds, and with the view of lending it to the federal government, whose debt portfolio is worrisome at N46.25 trillion.

CBN’s renewed interest

On Thursday, April 6, the CBN issued an exposure draft, stating that the guideline was coming in response to requests from banks, and other stakeholders for it to further clarify the procedures for the management of dormant and inactive accounts.

Section 72 (11) of the Banks and Other Financial Institutions Act 2020 (BOFIA) empowers the apex bank to issue guidelines for the administration of unclaimed funds in banks, specialised banks and other financial institutions in the country.

The CBN stated, “This Guideline is, therefore, issued as an exposure draft pursuant to the powers conferred on the CBN Governor by the CBN Act 2007 and BOFIA 2020, and supersedes the 2015 Guidelines on the Management of Dormant Accounts and Other Unclaimed Balances by Banks and Other Financial Institutions in Nigeria.”

With the new guidelines, CBN will open and maintain an account, ‘Unclaimed Balances Trust Fund Pool Account,’ for the purpose of warehousing unclaimed balances in eligible accounts.

In addition, the apex bank will establish a management committee to oversee the operation of the UBTF pool account.

According to the CBN, a dormant account is a bank account that has remained inactive for a period of, at least, one year, while an inactive account means an account that has no customer-initiated transaction for a period of six months to 11 months.

How an account can become dormant

An account can become dormant for a number of reasons, experts told The ICIR.

This arises where account holders are dead, and the next-of-kin are yet to make claim to the accounts; have relocated abroad; or are yet to link their bank verification numbers (BVN) or national identification numbers (NIN) with the accounts, and such other issues.

According to the CBN, the guideline would affect dormant accounts that have remained with the financial institutions for a period of 10 years and more.

Such accounts include current, savings and term deposits in local currency; domiciliary accounts; prepaid card accounts and wallets; unclaimed salaries and wages, commissions and bonuses; and a judgment debt for which the judgment creditor has not claimed the amount of judgment award.

The CBN said it would be holding the funds in all the accounts involved in trust for the beneficial owners.

It, however, exempted dormant accounts/financial assets that are government-owned accounts; accounts that are subject of litigation; accounts under investigation by a regulatory authority or law enforcement agency; and encumbered accounts, including, but not limited to, collaterals and liens.

According to the CBN, contravention of the provision of the guideline by any financial institution would attract a penalty of not less than N2 million, warning that failure to comply with its directive in respect of any infraction would attract a further penalty of N200,000 daily until the directive is complied with, or as may be determined by the apex bank.

Stakeholders weigh implications

Some financial analysts, however, believe CBN’s intention to mop up dormant funds in banks, estimated to have accumulated to over N20 trillion, will not only worsen the Federal government’s debt portfolio, it will also put the country’s financial institutions under pressure.

A top official with the Zenith Bank Plc told The ICIR that the banks are not perturbed yet since this was not the first time the apex bank would be issuing guidelines on the management of dormant accounts.

The official, who wanted anonymity, said that as this guideline is still in a draft stage, banks have not started to notify their customers of CBN’s plan on dormant accounts.

“It is too early to start informing our customers. It is when the policy comes into effect that the bank will inform its customers or next-of-kin before it hands over the money to the CBN,” he said, adding that it might take up to three months or more before the guidelines could come into effect.

What the CBN wants to do is exactly what the Securities and Exchange Commission (SEC) has done with unclaimed dividends by channelling the funds into Unclaimed Funds Trust Fund, the chief executive officer (CEO) of Highcap Securities Limited, David Adonri, told The ICIR.

“When the federal government was thinking of how to resolve the unclaimed dividends issue, some of us did a global research and discovered that it actually goes beyond unclaimed dividends to other unclaimed monies – dormant accounts, unclaimed money from court litigation, arising from court judgment, especially when the litigants are no longer alive to claim such money,” Adonri explained.

He argued that the federal government had over-borrowed and needed to look for other venues to raise funds and reduce its debt exposure.

Adonri, saying the CBN move might not be ill-intended, however, feared removing the funds from the grips of the banks could strain their operations as those financial institutions had been feeding fat on the idle funds for a long time.

“It is unlikely the CBN will make good use of the funds for societal good, anyway. Generally, we expect that the private sector will be the engine room for the development of the country as the majority of the credit available in the country ought to flow to the private sector. Unfortunately, we have a government that wants to do everything,” he posited.

A lecturer at the Department of Finance, University of Lagos, Abu Noruwa, was of the opinion that the guideline would actually trigger the reactivation of dormant accounts.

But the apex bank, he said, may not be sincere in refunding the money to the owners when needed, even though it fixed a 10-day period to process the withdrawal.

“When I was doing my research work on banking operations and laws related to banking, I was amazed when I got to so many banks, meeting with managing directors, and asking them questions.

“Where banks make their money is in the next-of-kin thing. No customer tells their next-of-kin what they have in their account because of fear they could be killed and their money taken over,” Noruwa added.

An investment and portfolio analyst, Abel Ezekiel, feared many people might lose their money when CBN eventually takes over the management of dormant funds.

He said, “Government agencies are not to be trusted when it comes to discipline and carrying out their functions.

“I can recall what happened to my sister, who travelled abroad and later came back. When she approached her bank to gain access to her funds, she was told that her money had been transferred to the bank’s head office.”

According to Ezekiel, based on the antecedents of regulators, the beneficiaries may not get back their funds when they need it.

He argued, “A case in point is the currency redesign. Did we achieve the objective? We did not! CBN is managing macroeconomic policy, is our currency getting stronger? Is the apex bank managing the market for foreign exchange well? So, what makes CBN think that this will work?

“An institution that is known for policy somersaults in managing the micro and macro economy can’t be trusted.”

He was certain some weak and vulnerable banks would be affected by the CBN decision, pointing out that most banks run on huge operational costs.

“For instance, some banks now close around 2pm and some have even shut down some of their branches due to operational cost. Those banks need every kobo they can lay their hands on.”