The Central Bank of Nigeria (CBN) has announced a significant shift in the management of unclaimed balances and funds in dormant accounts. In a recent circular signed by the acting Director of Financial Policy and Banking Regulation Department, John Onojah, the apex bank directed all banks and other financial institutions to transfer funds in accounts that have been inactive for ten years or more to a dedicated trust fund account held by the CBN.
This move, outlined in a revised version of the 2015 guidelines on dormant accounts, aims to achieve several key objectives:
- Reuniting Owners with Lost Funds: The CBN emphasizes its commitment to identifying dormant accounts and unclaimed balances with the ultimate goal of reuniting them with their rightful owners.
- Standardization and Transparency: The new guidelines establish a standardized process for managing dormant accounts and unclaimed balances across all financial institutions. This ensures transparency and consistency in handling these funds.
- Safeguarding Unclaimed Assets: By transferring the funds to a central trust fund, the CBN aims to safeguard these unclaimed assets and ensure their proper management.
- Potential Investment Opportunities: The CBN has indicated that the funds in the trust fund may be invested in Nigerian Treasury Bills and other government securities. This could potentially generate returns that can be used to benefit the rightful owners when they come forward to claim their funds.
What Happens to Dormant Accounts?
Under the new guidelines, an account is considered dormant if there has been no activity (deposits, withdrawals, inquiries, etc.) for a period of ten years or more. Exempted from this directive are accounts currently under litigation or investigation.
Once identified, banks will be required to transfer the balance of these dormant accounts to the CBN’s Unclaimed Balances Trust Fund Pool Account. Importantly, this does not extinguish the ownership rights of the original account holder. The rightful owners can still reclaim their funds by following a designated procedure which will be outlined by the CBN.
Benefits for Account Holders and the Financial System
The CBN’s initiative offers several advantages:
- Account Holders: Although it may take some effort, account holders with dormant accounts still have the opportunity to reclaim their funds. The CBN will likely establish a system for account holders to easily check if their accounts are listed as dormant and initiate the claim process.
- Financial Institutions: Dormant accounts can tie up resources and complicate record-keeping for banks. By transferring these accounts to a central trust fund, banks can streamline their operations and free up resources for active accounts.
- Financial System Transparency: The standardization of dormant account management fosters greater transparency within the financial system. It ensures consistent treatment of unclaimed funds across all institutions.
Potential Concerns and Considerations
While the CBN’s directive offers clear benefits, some potential concerns and considerations remain:
- Public Awareness: A crucial aspect of this initiative hinges on effective public awareness. The CBN needs to ensure that information regarding the transfer of dormant accounts and the claim process reaches the public effectively. This can be achieved through media campaigns, collaboration with financial institutions, and public announcements.
- Claim Process Efficiency: The claim process for dormant account funds needs to be efficient and user-friendly. A clear and accessible claims procedure will be essential to ensure that rightful owners can reclaim their funds with minimal hassle.
- Investment Risks: Although the CBN intends to invest the funds in low-risk instruments like government securities, there’s always a chance of unforeseen fluctuations. Transparency on investment strategies and potential returns will be important.
The Road Ahead
The CBN’s directive on dormant accounts marks a significant step towards improving the management of unclaimed funds in the Nigerian financial system. By establishing a centralized trust fund and standardizing the handling of dormant accounts, the CBN aims to ensure the safekeeping of these funds and facilitate their return to their rightful owners. The success of this initiative will depend heavily on effective public communication, a streamlined claims process, and responsible investment strategies.
This directive also opens doors for further discussion and potential improvements. For instance, exploring ways to shorten the dormancy period for certain account types or implementing a system for automatic account reactivation upon certain triggers could be considered in the future.
Overall, the CBN’s move signifies a commitment to responsible financial management and paves the way for a more efficient and transparent system for handling unclaimed balances in Nigeria.
