Lawyers, Bankers Bicker Over CBN’s Disclosure On $20bn Domiciliary Accounts | Independent Newspapers Limited
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Lawyers, Bankers Bicker Over CBN’s Disclosure On $20bn Domiciliary Accounts

Posted: Mar 11, 2016 at 12:30 am   /   by   /   comments (0)

Bamidele Ogunwusi, Lagos

The disclosure by the nation’s apex bank, the Central Bank of Nigeria (CBN), that about $20 billion was lying ‘idle’ in different domiciliary accounts in Nigeria’s deposit money banks is causing ripples and angst among commercial bankers, account owners and lawyers.
Most respondents on the issue told Independent that such a disclosure was unwarranted and robs banks of the confidential responsibility they owe their customers, while others say the announcement does not in any way breach the duty of confidentiality.
The banker-customer relationship is an agency contract and the element of privacy stems from this contract.
Generally, an agent is under a duty of care and privacy to his principal. The bank’s duty of confidentiality implies a legal obligation to maintain the customer’s information securely. Though the disclosure by the CBN was not in particular details, financial experts say the disclosure hurts as government or the supervisory organ may make policy targetting these set of accounts.
Dr. Joseph Nnana, Deputy Governor, Financial System Surveillance of the CBN, had during a meeting of the Joint Appropriation Committees of the National Assembly with government officials on the 2016 budget raised the alarm that about $20 billion was lying idle in different domiciliary accounts of the Nigerians.
Nnana said: “Distinguished chairman sir, we have $20 billion lying idle in various domiciliary accounts of many customers at the various banks across the country. This is part of the reasons why the naira has continued to slide against the US dollar.”
He alleged that some privileged Nigerians were behind the consistent slide in the value of the naira by embarking on dollar speculation to the detriment of the local currency.
The CBN deputy governor, however, expressed the hope that the passage of the 2016 budget would put a stop to the unrestrained drop in the value of the naira.
He said, “The CBN will embark on aggressive liquidity mop-up to enable the naira regain confidence. The CBN will not sit down and watch the consistent fall of the naira. After the passage of the 2016 budget, the naira will begin to bounce back. Those who speculate on dollars will have their fingers burnt.”
The $20 billion, which is about a N1 trillion higher than the N2.9 trillion in the Treasury Single Accounts of ministries, departments and agencies of the government (MDAs) in the country, according to our respondents, is enough to salvage the current economic situation in the country.
A legal practitioner and public analyst, Dapo Ogunwusi, said the disclosure by the CBN was against banking ethics which surround confidentiality.
His words: “This involves basically the duty of non-disclosure of information concerning the client. Examples are lawyers/clients, doctors/patients and bankers/customers. Even presidents and governors are sworn to protect such rights in their oath of office. The new fad in Nigeria is to lift or ignore the veil of confidentiality in transactions”.
But Tokunbo Mumini, another legal practitioner and Executive Director of Socio-Economic Right Accountability Project (SERAP), said the CBN and the banks are in order and that they are protected to do this by the law of the country.
His words: “The money laundry decree that says if a transaction from one account to the other exceeds $10,000 or the equivalent, the banks should let the appropriate authority know.”
He added that in the present circumstance, there is no breach of confidentiality rule.
“The rule also admits various exemptions. For example what the banks and CBN have done is what we call general disclosure. They did not mention that a particular customer has an ‘X’ amount. I think the law covers them in this circumstance,” he added.
Jiti Ogunye, a Lagos based legal practitioner and human rights activist, said the disclosure is not a breach of the right to privacy because the particulars of those who have the money have not been given. As it is said in common parlance, a clear conscience does not fear any accusation, he noted.
His words: “In any case there is no accusation yet, the fact that you are being told that you have money is not an accusation. To me, this is a commendation. That means you are creditworthy and that means that you can get stuffs done.
“More than that, that disclosure is one of the things that the CBN should be doing when we are talking about transparency and accountability in the management of our fiscal and monetary policies which is within the mandate of the CBN.
“Why would our elite or anybody be permitted by our economic system to stash away foreign currency in our commercial banks in the name of domiciliary account?
“Domiciliary account is for a purpose. It is either you are a business man or you are a company that has recourse to foreign exchange to bring in goods abroad.
“The money is not supposed to stack there and then be used as a reservoir for naira speculation. When you have that kind of money there and they see that naira is falling, they take a little from it and sell it in the market and make more money and so the economy is being ruined and mind you, who are the people stashing away this money?”
He then called on the CBN and Federal Government to come out with how to deal with the money because “our economic state depends on this money. The CBN should do more of such.”
Adding another dimension to the development, Ayo Teriba, an economist, said the CBN may be thinking of converting the ‘idle’ dollars into naira and that converting idle foreign exchange in domiciliary accounts into local currencies has been done in many Latin American countries in the past in the interest of their countries’ economy. These countries are Argentina and Brazil.
Teriba added that anytime the CBN is thinking like that it means they are “feeling pushed towards the wall and the risks is that they will convert those money to naira and that owners will not have access to the hard currency and credits them with naira and seize the foreign currency.
“The fact that they have their eyes on it means that if pushed to the wall, they will convert it”.
Though, he said this will ease their open forex supply burden, it will undermine people’s confidence in keeping money in Nigerian banks.
However, Anor Anyanwu, former Deputy Managing Director of Mainstreet Bank, said even though the CBN might think it has the powers to do so but there is no legal framework to back it up.
“I don’t think they have the legal framework to do that and if they do, they are going to have a lot of losses in their hands. The owners of those money will sue the CBN and in the process there will be credibility problem.
“If they do, they are going to create a lot of credibility problem for Nigeria in the international financial community. The community will think that Nigeria is not serious because you cannot be changing your financial policies at your whims and caprices. Before you open a domiciliary account, there are guidelines to be followed and I am of the opinion that the CBN cannot do that”.
Anyanwu stressed that it is a fallacy that the $20 billion is lying idle because “it is not possible for money in the bank to be lying idle. The CBN doesn’t even know what they are talking about. The banks have already used the money to make foreign currency loans to their customers in oil and gas as well as power”.
Another banker, James Makanju, said the disclosure by the CBN on the ‘idle’ fund is not in the interest of the banking sector, adding that what they have done will hang the credibility of the banking sector in the balance allowing the owners of the ‘idle’ money to move them.
His words: “What the CBN has done is not in the interest of the banks. Most of these people will stop keeping their money with the banks or that they may use various means to take the money out of the system.”
However, Dr. Boniface Chizea, Managing Director, BIC Consultancy, faults the idea that the mere fact that people kept $20 billion in domiciliary accounts should cause a decline in the value of the naira.
He said: “The fact that individuals allegedly have kept $20 billion in domiciliary accounts should not cause a decline in the value of the naira except to the extent that in the process of conversion of naira to dollars they might inadvertently have put pressure on supply resulting in the weakness of naira,” adding that this sort of behaviour bothers on the much complaint about speculative demand, whereby compatriots are expecting a progressive fall in the value of naira and have proceeded to hedge their bet by locking some supplies against future use.”
He also debunked the idea that the dollar deposits are ‘idle’.
“Of course, the deposits should be used by the banks to meet dollar demands to earn some interests and fees from such deposits. And that is the essence of banking. You do not keep deposits from individuals in safe place with the view to just giving it back to them when they come asking for it.
“This will be a throwback to the primitive days of lending when a borrower deposited some item of value to receive some funds only to collect such back when they met the repayment obligation. But I do not see how the central bank can get hold of such deposits.
“What should be done is to ensure that the banks can use such deposits to meet the demands by their customers thereby contributing to a reduction in the demand pressure for dollars currently being experienced,” he pointed out.
According to him, the use of such deposits will be salutary for the development aspirations and prospects of the Nigerian economy, that one of the challenges confronting the economy today is lack of commensurate inflow of foreign exchange from autonomous sources and such channels as domiciliary accounts should be leveraged upon to make to correct this position and begin to change the narrative.