•CBN Governor Yemi Cardoso
Top hierarchy in banks’ management are currently having sleepless nights as the deadline to move dormant and inactive accounts to the Central Bank of Nigeria (CBN) is gradually approaching.
Investigation by our correspondent revealed that close to N10 trillion will be moved to the CBN from September 30 to October 15, 2024, in compliance with the directive, reports Daily Independent.
Bank executives are worried that moving such a huge amount from the banks will affect their operations.
Reports have shown over the years that fraudulent activities are carried out by banks’ staff, taking advantage of dormant and inactive accounts.
An inactive or dormant account is a bank account that has had no activity on it for 12 months. Banks convert accounts with no activity for a long period into inoperative or dormant accounts to curtail the risk of fraud. By segregating the accounts, banks bring to their workers’ attention the risk involved in these accounts and call for their due diligence.
About five weeks ago, the Central Bank of Nigeria directed all banks and other financial institutions to transfer all dormant accounts, unclaimed balances and other financial assets to its dedicated account.
A circular signed by its acting Director of Financial Policy and Banking Regulation Department, John Onojah, said all dormant accounts and unclaimed balances with banks for at least 10 years, will be warehoused in a dedicated account known as the Unclaimed Balances Trust Fund Pool Account.
The apex bank added that the funds from dormant accounts, and unclaimed balances will be invested in Nigerian Treasury Bills and other government securities.
The CBN, however, said the new guidelines, which is a review of the guidelines issued in October 2015, exempted dormant accounts, and unclaimed balances under litigation and investigation.
The guideline reads, “CBN shall treat unclaimed balances (dormant accounts and financial assets) as follows:
“Open and maintain the ‘UBTF Pool Account’, maintain records of the beneficiaries of the unclaimed balances warehoused in the UBTF Pool Account.
“Invest the funds in Nigerian treasury bills (NTBs) and other securities as may be approved by the ‘Unclaimed Balances Management Committee”.
According to EnterpriseNGR, a professional policy and advocacy group, Nigeria’s financial institutions total assets rose to N121.8 trillion in 2023 despite tough economic conditions.
Banks’ total assets rose by 56 percent in 2023, equivalent to almost half of the country’s national gross domestic product.
“Nigerian banks and other financial services accounted for 4.6 percent of GDP which translates to financial institutions accounting for approximately N5 for every N100 generated nationally in 2023, up from about N4 in 2022,” the report said.
According to the State of Enterprise (SOE) 2024 Report, which seeks to highlight the key importance of Financial & Professional Services (FPS) sectors in the economy, it delves into nine sub-sectors such as banking and insurance.
Total assets of the Nigerian banking industry increased from N71. 59 trillion to N107. 27 trillion between November 2022 and November 2023 while total deposits also climbed from N44. 49 trillion to N64.1 trillion.
As at December 2023, total deposits in the banking sector increased to N115 trillion, about 63 percent growth from N70 trillion recorded in the comparable period of 2022.
According to the Nigeria Inter-Bank Settlement System (NIBSS), the number of active bank accounts in Nigeria jumped to 219.6 million in March 2024, marking a significant increase when compared with the previous data released.
Earlier this year, NIBSS released the number of account numbers for 2022, which showed that there were 151 million active bank accounts in the country at the end of that year. Fast forward to March 2024, the latest figure indicates that bank accounts have increased by 68.6 million in the last 15 months.
The data also show that at the end of 2023, active bank accounts stood at 202.6 million, meaning that about 17 million new accounts have been opened across the banks between January and March, this year.
According to NIBSS, the number of inactive or dormant bank accounts in the country stood at 19.8 million. This is, however, a significant decline compared with 2022 figure the number of inactive accounts was put at 72.8 million.
Similarly, the NIBSS data show that the number of bank accounts that have been closed stood at 22.5 million.
Significantly, the CBN said it will manage these funds in trust, refunding the principal and any accrued interest to beneficiaries within 10 working days of receiving a reclaim request from the financial institution.
“These eligible accounts include current, savings, term deposits in local currency, domiciliary accounts, deposits for shares and mutual investments, prepaid card accounts and wallets, government-owned accounts, and others as specified in the Guidelines by the CBN.”
The CBN also noted that financial institutions were required to notify customers immediately and every quarter when their accounts become inactive or dormant.
The FAQ document readS, “The CBN shall establish a dedicated office for this purpose. The office will be supervised by a management committee.
“The interest payable shall be at a rate to be determined by the CBN from time to time. For non-interest banks, the profit and loss on the unclaimed balances shall be determined by the CBN from time to time.
“The CBN will refund the principal and any interest on the invested funds to the beneficiaries within 10 working days of receiving a reclaim request from the FI.”
According to the new guidelines, the CBN will create and manage a dedicated account called the ‘Unclaimed Balances Trust Fund Pool Account’ to warehouse unclaimed balances.
The guidelines specify that eligible accounts for dormant status include current, savings, term deposits in local currency, domiciliary accounts, deposits for shares and mutual investments, prepaid card accounts and wallets, and government-owned accounts.
Reactivating a dormant account involves account owners completing a reactivation form at their respective financial institutions, providing evidence of ownership and valid identification.
However, some accounts are exempt from being considered dormant, such as accounts subject to litigation, judgment debts under active court cases, accounts under regulatory investigation, and encumbered accounts like collaterals and liens.
Financial experts, who reacted to the development, said the move by the CBN is a noble one that will restore the dignity of the banking sector in the country.
Ano Anyanwu, a banker and former Deputy Managing Director of MainStreet Bank, said the banks have been making efforts on their own to reduce the number of inactive and dormant accounts by reaching out to owners of such accounts to reactivate their accounts by lowering stipulated requirements for them.
He said, “The move is a good one but I can say here that banks too are making efforts to reduce the number of dormant accounts in their books. As for the large sums of money involved in this regard, banks will not be happy but they have no choice but to comply with the CBN directive”.
Stephen Iloba, a financial analyst, said, “This move is coming at a time when fraud associated with dormant and inactive accounts is on the rise. I know that banks may not be happy with the decision but this is good for the sector.
To Cyril Ampka, an economist, said, “The end is near for incessant fraudulent activities”.
