The recent collection by the Central Bank of Nigeria (CBN) of details of domiciliary accounts of corporate and individual customers of banks is causing anxiety in the industry, BusinessDay investigations have shown.
Domiciliary accounts are accounts maintained and operated in foreign currencies other than the Nigerian naira and the deposits, according to data from investment firm, Renaissance Capital (Rencap) were said to be equivalent to 21 percent of total deposits of N17 trillion in the Nigerian banking system as at half year 2014 or $19.5 billion.
Both the operators and customers are agitated over the request, which included the list of all dom account holders stating name, account number and balances as at 29th January 2015; total balances, list of corporate domiciliary account holders and their balances, list of individual domiciliary account holders and their balances.
It also included the list of public sector institutions domiciliary account holders and their balances, and mode of lodgement to the account for each of the above transactions under the same period, either cash or by wire transfer.
According to a chief executive of a tier two bank, “The development has put us in a tight corner, as some of our customers are demanding to know why, and others are threatening to close their accounts and move their funds abroard.”
Another banker, who also pleaded for anonymity said, “We will lose business, should these customers make good their threats to move their funds abroad.” Friday Ameh, an energy analyst and a customer of one of the banks said, “Despite the assurances by the CBN, most customers are anxious and are planning to move their funds abroad or keep them in their houses. Since it is more profitable to have a person’s cash in foreign currencies, the best thing will be to look for any other options other than still maintaining the accounts.”
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However, the CBN had said that it would neither restrict access and application of funds held in domiciliary accounts in Nigeria, nor engage in capital controls. But sources said CBN is disturbed by recent developments in the foreign exchange market, resulting in the widening gap between the official exchange rate of N168/$ and interbank rate at N201.71/$ and N211/$ at the parallel market as at Friday.
But others said that the penchant for demand for foreign currencies, occasioned by the continued depreciation of the naira means that some of the account holders are using it for round-tripping.
According to an official of the CBN, speaking on condition anonymity to BusinessDay, “The CBN will not go into any form of capital controls or go into funds held in domiciliary accounts, but wants to ensure that all loopholes are sealed.”
Bismarck Rewane, chief executive officer, Financial Derivatives Company, in his current Lagos Business School Breakfast meeting note said, the Apex bank may be concerned about the high level of domiciliary balances at an average of 1 percent per annum.
Rewane believes that “domiciliary transactions are used for round-tripping, while acknowledging that it is “a breach of confidentiality.” This “Will fuel a rush of transfers to overseas banks, a fear that the CBN will now seek for information on naira accounts and could become a tool for taxation or witch-hunting,” he said.
Johnson Chukwu, chief executive, Cowry Asset Management limited, said that under normal circumstances, such information is given out by the banks on the order of a court.
Chukwu advised the CBN to come out with a clearly defined and consistent policy that should engender confidence in the banking public, adding that the development is capable of discouraging people from keeping their accounts and consequently impacting negatively on the financial inclusion campaign of the CBN.
Godwin Emefiele, the CBN governor, had for the upteenth time, said last Thursday,that there is no cause for alarm and insisted that the naira is appropriately priced but would not leave the currency to trade freely at the open market, inview of the import dependent nature of the economy.
The CBN, he said, will continue with the managed float regime, while it will continue with its monitoring to ensure that exchange rate will not spiral out of control.
John Omachonu
