CBN to confiscate N3trn in accounts without BVN

.         Gives banks June deadline to transfer funds

FELIX OLOYEDE

Liquidity challenge looms in the Nigerian banking sector as the Central Bank of Nigeria (CBN) has concluded plans to removed about N3 trillion that is trapped in accounts that have not been linked to the Bank Verification Numbers (BVN) by June this year, Business Hallmark has reliably gathered.  The apex bank believes some of these abandoned funds may be proceeds of corruption, which needs to be cleared from the banking system.

The Nigerian Inter-Bank Settlement System Plc (NIBSS), which is saddled with the responsibility of coordinating the BVN registration exercise, revealed earlier in the month that it has Bank Verification Numbers (BVN) of 29 million users of deposit money bank (DBM) accounts in the banking system.

Meanwhile, the NIBSS had disclosed in December last year that 46 million bank accounts are still without BVN. Financial expert reasoned that should the CBN removed N3 trillion from banks, this would creative a serious liquidity challenge in the banking system.

Prof. Leo Ukpong, Dean, School of Business, University of Uyo, who is a financial economist, noted that this would have the same effect as a contractionary monetary policy, such as the TSA..

“Even though the owners of this money cannot access it, the banks were counting it as part of their deposits, which they could lend. If the CBN asked banks to transfer these funds into a special accounts domicile with it,  that means the banks would not have access to these funds to lend to the public.

“It is going to cause some crises in the financial system, because if you move such huge amount from the banking system at once, the banks would have to look for money to cover up the loans they have already given out from these deposits in these accounts that were not operational because of BVN. And all banks are in this situation, it is going to cause a serious liquidity crisis in the banking system,” he enunciated.

It was reported recently that three unnamed banks were facing liquidity challenge, occasioned by the Federal Government introduction of Treasury Single Account (TSA), which required banks to transfer government revenue collected through them to a dedicated account with the CBN and the current economic meltdown in the country. But the apex bank has since refuted this report.

Dr Uju Ogubunka, president, Bank Customers Association of Nigeria (BCAN) and former registrar, Chartered Institute of Bankers of Nigeria (CIBN) wondered why the CBN would withdrawal money that belongs to private individuals from banks.

“If the people have not fulfilled the mandate of registering for BVN, what the CBN should do is to create more enlightenment for people to register for BVN,” he argued.

According to him, bank customers believe BVN registration has no terminal date, it is an ongoing project. He urged the banks to send notifications to those who have not registered for BVN and give them long term notice before government can take over balances in their accounts.

“If they withdraw such huge amount from the system, it is going to create a big hole in the capacity of the banks, because some of these deposits are core deposits that banks rely on for their credit,” he further stated.

Mr Kayoed Omoregie, a faculty member, Lagos Business School, told BusinessHallmark that the CBN may be muting the idea to remove deposits in bank accounts which are not linked with BVN, because these accounts are being used to launder money.

“Note also that this initiative of the CBN may also be aimed in part at managing inflation concerns, which is currently at 17.8 percent. This initiative will have the effect of withdrawing about N3 trillion from the narrow money (M1) in circulation currently at about N11 trillion. A reduction to N8 trillion brings it to mid 2016 level and may have a moderating effect on inflation.

“The fear about the impact of this policy on the liquidity pressure for the banks should be put in the context of current lending levels for banks, which has hit historical lows, in the face of high levels of NPL,” he maintained.

Omoregie argued that the withdrawal of N3 trillion is not likely to disastrously affect the current liquidity and bank lending situation. He tasked the CBN and MPC to continue to monitor the impact of this policy on money supply, bank liquidity and lending patterns to the real sector and respond appropriately, using policy instruments at their disposal.

Meanwhile, the total number of bank accounts that have been linked to the unique number, as at the last count by the agency in February, stood at 51.722 million.

Attempt to get response from the CBN did not yield positive result as the spokesman of the apex bank, Mr Isaac Okorafor did not respond to the text sent to him on the issue and calls put to this phone number did not go through.

The apex bank introduce the BVN in February 2015 and set October 31 2015 deadline after which bank customers were not allowed to make withdrawals from the accounts, although it stated that the exercise was ongoing.

It would be recalled that the CBN had in a circular issued in February 2016 mandate banks to classify bank account without BVN as “No Customer Initiated Debit”.

It stated that these accounts would remain dormant until the account holder obtain and attach the BVN to the account.