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Published On: Mon, Nov 13th, 2017

(Editorial) CBN’s BVN distraction and matters arising

Nigeria’s fiscal and monetary authorities have a frustrating way of responding to the seizure of private assets; they typically gloat with glazed eyes over private citizen’s money ready to pounce on the cash like a pack of hyenas starved witless. The recent order by the Central Bank of Nigeria that customer accounts that are not linked to a bank verification number (BVN) be seized and passed on to the CBN is a call for fiscal fascism. While this newspaper cannot in clear conscience condone the hording of the spoils of corruption by commercial banks it also cannot sensibly accept the brusque and dubious seizure of customer’s monies by an overextending central bank.

The convenient excuse that accounts that are not linked to BVN’S are likely conduits of corruption is vacuous at the very least and capricious at the worst.  Investigations suggest that quite a number of these accounts are owned by customers who have died and whose family members are in the process of transferring ownership to designated survivors. A large number of the accounts belong to individuals who died intestate (meaning without a will) but who have established next of kin. To deny these family members the benefits of access to such dormant accounts based on the technicality of non-linkage to a BVN number while such accounts are undergoing legal regularization is willfully dishonourable and shamefully dishonest.

Besides dormant accounts that are being reactivated by families of deceased persons, there are accounts that have been tied to Nigerians in the diaspora who left the country for the proverbial ‘golden goose’ and are yet to return. Some of these accounts still hold small balances of a few thousand naira, seizing such accounts punishes people who have left the country struggled to eke a living in their respective abodes and remit huge sums back to the country. In 2015 alone Nigerians sent back a thumping $21billion or over 60 per cent of the nation’s recent official foreign exchange reserves. Rewarding these citizens for their industry by confiscating their local accounts seems desperately ill-advised.

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We advised that the best way to go about the BVN issue is to make it a routine part of bank account operations such that those accounts without BVN numbers would be allowed to take lodgments but would not be qualified for payments. This would allow Nigerians in the diaspora to continue to make payments to the accounts which they can operate normally once they return to Nigeria and regularize the account status by way of obtaining a BVN. Appropriating honest and hardworking citizen’s sweat in a misguided attempt at recovering looted funds is unconscionable.  There are already laws that require banks to inform the government of unusually large lodgments, existing laws concerning money laundering simply need to be applied more rigorously. Taking the easy and least preferred way to check the movement of stolen public funds by way of hijacking accounts without BVN’s is lazy, apparently  illegal and definitely downright unreasonable.

The fact that that 46 million bank customer accounts out of a total estimated 70.2 million accounts or 66 per cent are without BVN clearly shows that several Nigerians have not been able to process BVN’s for a patchwork of reasons. The total amount involved is a stunning estimated N3 trillion or 37 per cent of the total 2018 federal fiscal budget. Removing this staggering amount from the commercial banking system in one fell swoop would not only result in a skyrocketing of domestic interest rates but also lead to several of the banks going belly up as their liquidity (the amount of deposit liabilities available to meet asset creation) swirls down a very dark hole very close to where the devil himself resides.

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Pulling N3trillion from banks will effectively cripple the manufacturing and commercial sectors of the economy, worsen domestic unemployment and unravel the inflation gains of the Central Bank over the last three quarters. Inflation which has dropped to 15.98 (edging closer to the government’s economic recovery and growth plan (ERGP) target of 15.74 per cent for 2017) would rebound a supply side shocks push prices upwards. To make matters worse falling commercial and industrial production will reduce import tax revenues; slash corporate income tax earnings and virtually snuff life out of personal income tax payments as workers lose their jobs like lemmings jumping into an ocean.

This would equally mean that the federal fiscal deficit would widen and the government would have to scramble for loans (either domestic or foreign) to cover the gap. The government’s 2018 budget deficit implies a deficit of 1.77 per cent of gross domestic product (GDP), but this should be paid little attention as a more likely figure would be 2.5 per cent next year. Both the fiscal and monetary authorities need to urgently review their positions concerning accounts unattached to BVN’s and find better administrative ways to ensure compliance, especially ways that would not expropriate private wealth and at the same time disrupt financial system stability. Business Hallmark is of the opinion that it takes a fool to decapitate himself to cure a nagging headache.

The CBN has some of the finest economic minds in the country, and all it needs to do is to use that firepower.

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