Nigerian government attempts seizure of customers ‘account without BVN

Picture credit:MoreNaija

At the instance of Nigeria’s Attorney General, a High Court sitting in Abuja last week gave an interim order to Nigerian Deposit Money Banks (DMBs) to freeze all operations on customers’ account without Bank Verification Number(BVN) and assume such monies in the account without BVN as forfeited to the Federal Government of Nigeria.

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The Nigerian government through its legal action will classify customers ‘account without BVN after a 14-day news media publication notice by Nigerian Deposit Money Banks (DMBs) as abandoned. There are precedent that gives Nigerian government the right (bona vacantia principle) to have Deposit Money Banks (DMBs) to close and to transfer any abandoned money in (such) account without BVN to the state.

However, for an emerging market such action of the Nigerian Federal government can have great implications if hastily executed, particularly as pertains to policies like National Financial Inclusion Strategy (NFIS).

The intent of a Bank Verification Number(BVN), as conveyed by the Central Bank of Nigeria (CBN) and the Bankers’ Committee was to solve the absence of a unique identifier in Nigeria’s financial service, a means to Know Your Customer(KYC) while minimizing fraud and money laundering in the financial system. The BVN enrolment process, beginning in 2014, remains open until December 31, 2017 for Other Financial Institutions including Microfinance Banks.

According to news report, the Central Bank (CBN) has issued less than 31 million BVNs; however, the Nigeria Inter-Bank Settlement System (NIBSS) states a total of 45.85 million bank accounts are currently without BVNs, compared to 15.72 million active accounts not linked to BVN as of February 2017.

Some of the accounts not linked to BVN were opened by Nigerians in Diaspora. Efforts made by Nigerian banks and the CBN at getting Nigerian diaspora members enrolled for BVN was far from satisfactory. In many cases, it required long travel hours and needless expenses on Nigerian diaspora, which makes the cost outweigh the benefits.

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Another well-known fact to Nigerian bankers is that many bank accounts without BVN were opened impulsively by Nigerian customers who were swayed by promises during banks’ savings mobilization drive. Some of these customers’ accounts only activity was at the point of opening. Equally, we can infer from research (Global Findex 2014) that banks’ distance and length of travel for customers to enroll for BVN might attribute to the large number of bank accounts without BVNs. Importantly, these issues tie-up with financial inclusion.

My suggestion to the Federal Government of Nigeria (FGN) is to institute Unclaimed Intangible Property Program as done in other countries like United States, Canadian provinces (Alberta, British Columbia and Quebec) and Kenya. Nigeria needs to establish a transparent institutional arrangement to hold unclaimed property in trust for rightful owners who might have, for whatever reason, abandoned intangible properties (like money in the bank, unclaimed dividend, unclaimed insurance policy benefits, or gift cards) for an extended period. I understand the government intend to reinvest such money for social good, but by using fiat the Attorney General’s action might have put a spanner in the works of Nigeria’s financial inclusion. A better way would be providing policy guidance to Nigerian financial institutions on how to handle unclaimed money in bank accounts, as well as a clear procedure for rightful owners or families of a deceased on how to claim ownership of these funds at any time.

Every country that has embraced Unclaimed Intangible Property Program has utilized technology for search and discovery. This helps keep up customers’ trust in the financial system, as well as maintain their confidence in varied financial products. These countries hold themselves responsible to find the rightful owner through websites, newspaper ads and booths at events like state fairs.

We cannot ignore how prohibitive cost of distance limits Nigerian customers from using their bank account, as well as enrolling in the BVN. By this attempt at seizing customers ‘money from account without BVN, the Nigerian government might destroy its transparency and progress towards creating a favorable environment for financial inclusion. With arrangement like using agent banking networks alongside other digital financial actors such as 3rd party identity verification providers, the Nigerian Federal Government and CBN can improve BVN enrolment with Nigerian across the world.

Conclusively, the fallout from bank accounts without BVNs should stir the Federal Government of Nigeria to explore a public policy or an escheatment law that creates its version of an Unclaimed Intangible Property Program.