CBN Dormant Account Policy Causes Panic in the Banking System

The proposed plan by the Central Bank of Nigeria (CBN) to mop up funds from dormant accounts has raised concerns from banks and their customers. While this proposal is not new, stakeholders are worried that it could have unintended consequences on the banking sector. The case of a deceased man, Oluwanisola Yekini, and his polygamous family is an example of the complications that could arise from this proposal. Yekini’s bank account has been dormant since he died in 2020, and his family has been quarrelling over who should get the money in the account.

The eldest son believes that the funds in the account should automatically belong to him and has held onto his father’s death certificate, which is one of the required documents to access the account. On the other hand, his step-siblings know the account number and are seeking an equal share of the funds. However, neither party knows who their late father’s next of kin is, or the amount of money in the said bank account, as he died intestate.

Informed about the CBN’s proposal, Taiwo Yekini, one of the deceased’s sons, felt that it was not a bad idea if their father’s money ends up with the government. He said, “I don’t mind if the CBN takes over the funds, but who knows we may have resolved our problems before then.”

The CBN has released an exposure draft guideline proposing that banks and other financial institutions transfer funds in accounts that have been dormant for up to ten years into a trust fund account. The circular accompanying the exposure draft, which was signed by the Director of the Financial Policy and Regulation Department of the apex bank, Chibuzor Efobi, stated that the proposed guidelines were in response to requests from banks and other stakeholders for the CBN to clarify the procedures for the management of dormant and inactive accounts by banks in the country. Inputs on the draft guidelines should be sent within three weeks.

The draft guidelines stipulate that banks and other financial institutions transfer all unclaimed funds into an Unclaimed Balances Trust Fund pool account domiciled at the CBN. The balances would be invested in government securities like Treasury Bills and would be returned to beneficiaries not later than ten days of notice. The eligible accounts and financial assets include current, savings, and term deposits in local currency; domiciliary accounts; deposits towards the purchase of shares and mutual investments; prepaid card accounts and wallets; proceeds of uncleared and unpresented financial instruments belonging to customers or non-customers of FIs; unclaimed salaries and wages, commissions, and bonuses.

However, government-owned accounts, accounts subject to litigation, accounts under investigation by a regulatory authority or law enforcement agency, and encumbered accounts are exempted from the proposed unclaimed fund trust fund.

This is not the first time that the state is attempting to take over unclaimed funds. In the signed Finance Act 2020, the Federal Government revealed plans to borrow unclaimed dividends and funds in dormant account balances from banks. This led to an outcry against the move, and a non-governmental organization, Socio-Economic Rights and Accountability Project, filed a lawsuit against the Federal Government.

The Finance Act of 2020, which also set up the Unclaimed Dividends Trust Fund, got reactions from capital market stakeholders who felt that the government was aiming to reap where it had not sown and insisted that unclaimed dividends should be returned to the companies that generated the dividends in the first place.

The shareholders argued that it was overreaching and unacceptable for the government to seek to expropriate the unclaimed dividends under the subterfuge of any revenue. They noted that companies and individuals had a right to private property and assets, which unclaimed dividends funds fell into.

Reacting to the latest move by the CBN, the Chairman of the Bank Customers Association of Nigeria, Dr Uju Ogubunka, said that it was not okay for the central banker to take over individual funds under any guise.

He said, “CBN cannot appropriate people’s money just like that. I don’t think it is the right thing to do. Maybe, what is right is for CBN to seek individual approval from those people that have those accounts.

“Some of these accounts that you may regard as dormant are not necessarily dormant. They may be just accounts opened for the education of a growing child. Someone deposits money into an account and leaves it there until the child gets to a certain age, where there is a need to use it for that purpose.

“There are other accounts that may be dormant, but the owners are alive and well. Maybe, they travelled out of the country or just have not had the need to use the account. It is their money, and they should be able to have access to it whenever they want to.”

Ogubunka argued that the CBN should not be in a hurry to take over the funds in dormant accounts, adding that the owners of such accounts should be given enough time to claim their funds.

He suggested that the CBN should engage the owners of such accounts, either directly or through their banks, to find out why the accounts are dormant and explore ways of reactivating them.

The bank customer association chairman said, “I think the CBN should engage with the owners of these accounts and find out why the accounts are dormant. Is it because they are not being used, or because the owners are not aware of the accounts or how to access them?

“If it is the latter, then the CBN should work with the banks to educate the owners on how to access their accounts. If it is the former, then the CBN can explore ways of reactivating the accounts, such as offering incentives to the owners to encourage them to use their accounts.”

He advised the CBN to be cautious in its approach to the issue of dormant accounts, as any wrong move could have far-reaching consequences on the banking sector and the economy at large.

In conclusion, the proposal by the Central Bank of Nigeria to mop up funds from dormant accounts has generated mixed reactions from stakeholders. While some have expressed support for the proposal, others have raised concerns about its potential unintended consequences. As the apex bank calls for inputs from stakeholders, it remains to be seen how the issue will be resolved, and whether or not the CBN will go ahead with its plan to transfer funds from dormant accounts to a trust fund account.