Mythbusters: is Nigeria’s Central Bank trying to “steal” the money in your dormant account?
When Nigeria’s Central Bank directed banks and other financial institutions on Friday to transfer ownership of dormant accounts and unclaimed balances, the immediate reaction from the public was distrust.
On social media, a few prominent handles advised their followers to go to their banks and collect all the money in their dormant accounts before the CBN accessed it. “They want to take all the money. Go and reactivate your accounts now,” one X user wrote.
The myth: The government desperately needs money to fund a massive deficit budget and wants the money in your dormant account. After all, it just slapped a windfall tax on banks’ FX gains.
It’s a fabulous story, but it’s not true.
The facts: The CBN’s recent directive is based on an October 2015 guideline “to curb abuses in the operation of dormant and inactive accounts and set operational standards.”
A revised version of the guidelines released this week seeks to identify dormant accounts and unclaimed balances, hold the funds in the Unclaimed Balances Trust Fund (UBTF) Pool Account, and ultimately standardise the process.
This policy does three critical things. First, the CBN safeguards the unclaimed funds in the dedicated pool account and maintains records of the beneficiaries. Banks are expected to publish dormant account lists six months before being transferred to the CBN. Second, the CBN can invest the funds in treasury bills and other securities to mop up liquidity. Third, it will reduce the fraud risks associated with dormant accounts.
Here’s how to think about it: the CBN manages everything around unclaimed balances, from maintaining records, investing the funds, and, most importantly, establishing standard procedures for reclaiming the funds. Of course, the CBN isn’t doing these out of the goodness of their heart. The goal is to put idle funds to work and channel the profits into strategic public investments like infrastructure and welfare projects.
A transparent process for managing unclaimed funds is a win for banks and the CBN. While it will reduce the size of banks’ balance sheets, the CBN takes some burden off the banks. Customers also get refunded the principal and interest–if any–on the invested funds upon request. This is why the policy makes good sense for everyone.
