FG takeover of N1trn in BVN-less accounts ‘could cause liquidity stress for banks’

An estimated N1 trillion naira in bank accounts without Bank Verification Number (BVN) could be forfeited to the Federal Government by October 31.

However, experts in the banking sector say this could lead to a repeat of the credit and liquidity squeeze that rocked the banking sector as a result of the takeoff of Treasury Single Account (TSA) shortly after President Muhammadu Buhari assumed power.

On October 17, Justice Nnamdi Dimgba of the Federal High Court, Abuja, granted an ex parte application filed by Abubakar Malami, the Attorney General of the Federation, seeking to forfeit all balances in bank accounts without BVN if the owners do not come forward to claim them by October 31.

Justice Dimgba also ordered the 19 affected Deposit Money Banks (DMBs) to disclose the owners and the financial content of each of the accounts.

Malami had claimed that the move is aimed at checking corruption and enthroning transparency in the financial system.

But, according to a report by The Guardian, “no less than N600bn, and an alleged undisclosed N400bn by ‘smarter banks’ mostly belonging to politically exposed persons, may be sterilsied in the exercise, if followed duly and diligently by authorities.”

The report added that this development will return banks to the path of renewed hunt for liquidity to cover up daily operational demands.

It could further lead to “raising fixed deposit and interbank lending rates, aggravated cost of funds for customers and resort to frequent visits to the discount window, especially as Nigerian banks have the penchant for trading with free and cheap monies”.

Various financial institutions, including the Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC), refused to comment on the matter as the deadline for the enforcement of the court judgement fast approaches.

Femi Ademola, a financial analyst, agrees that the move will lead to a cleaner financial system, but it will scramble the money market matrix, at least for a few days.

He however said banks are quite smart and may find a way to legally wriggle out of the supposed tight corner.

“I can also tell you that the operators are smarter than the regulators, so they may still find a way out of this despite the order,” Ademola said.

He explained that the development could multiply the woes of accounts that are lined in the unending processes of obtaining Letters of Administration.

Similarly, Magnus Kpakol, Economic Adviser to former President Olusegun Obasanjo, commended the move by the AGF.

Kpakol maintained that if there is significant value in any account outside the BVN scheme, it is the owner that made it suspicious and should be the one to blame.

“The move is in the right direction especially for the purposes of ongoing fight against corruption. The only thing I ask is time to accommodate those with genuine reason,” Kpakol said.

However,  Ebun-Olu Adegboruwa, a Lagos-based human rights lawyer, noted that the BVN is just a policy of the CBN and not a law.

He argued that it was improper for a court to issue such an order based on a mere policy.

“I am well concerned about how we deploy interim orders for permanent purposes, such as to forfeit valuable assets, without any fair hearing from the person(s) concerned,” Adegboruwa said.

“I think it is improper to obtain interim order to freeze bank accounts of estates that are in dispute between the eneficiaries of estates of deceased persons that are still being contested; of profits of companies that are still subject to litigation or other disputes, just to mention a few examples of the arbitrariness of these orders.

“There is nothing in Section 3 of the Money Laundering (Prohibition) Act 2011, that makes BVN a condition precedent for operating a bank account in Nigeria.



    “What the law requires is verifiable identity of the customer such as name, address, photographs and identity cards.

    “The BVN is a policy decision of the CBN, and so a court of law should not base its orders on executive policies that are not backed by law.

    “How proper is it, for a court to seek to determine the rights of parties in their absence, in view of the clear provisions of section 36(1) of the 1999 Constitution and Article 7 of the African Charter,” he asked,

    Adegboruwa noted that “while it is in order to trace, isolate and forfeit monies suspected to be proceeds of crime, seeking to forfeit all monies in all banks in Nigeria on the ground of absence of BVN is manifestly illegal”.

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