A Burning Hell of Inflations: By Moses Amadi

     

The World Bank recently reported that inflationary pressure in Nigeria has pushed about seven million Nigerians below the poverty line in 2020 alone. The revelation, which was contained in the bank’s latest report on Nigeria titled, ‘Nigeria Development Update: Resilience through Reforms’, was released about two weeks ago.

The bank’s report also noted the capacity of a high inflation rate, which will worsen poverty and undermine business activities in the country.

The inflation rate is one of the critical macroeconomic indices used to ascertain the health and well-being of an economy.  In a country plagued by insecurity, rising prices and slow economic development, inflationary pressures will remain high. The recent high costs of living in Nigeria no doubt has stretched the people’s patience to the limits.

 
Nigeria’s inflation basket has been captured several times to indicate the rapidly changing consumption patterns of the people. The last revision of the country’s inflation basket was in 2009, which raised concerns about the impact of inflation in policy decision-making.

According to a recent statement released by the National Bureau of Statistics (NBS), Nigeria’s inflation rate stood at 18.12 per cent in April 2021, indicating the first decline in headline inflation in about 20 months. This surely has some effect on the growth and development of the economy. Research has shown that inflation in Nigeria is largely driven by food prices which have increased steadily since the country’s land borders were closed in August 2019. 

Read Also: Rising Inflation and the Threats to Nigeria’s Food Security

The situation is further aggravated by currency pressure, insecurity, and a host of other factors including the country’s debt profile of about $150 billion. Ninety (90) million people in the poverty bracket with seven (7) million added to the bracket, according to the World Bank. This is corroborated by World Poverty Clock which revealed that many Nigerians are living below two dollars a day. The unemployment rate is 33 percent. Youth unemployment and underemployment are about 42 percent and 22 percent, with 15 million children on the streets. We are close to a stage where we would say that we have lost a generation, just like former President of Liberia, Sirleaf Johnson, said of her country.

 What we are facing now are rising prices which deplete income and erode purchasing power. In a recent Channels TV programme, ‘Sunrise’, Nigerians were shown some public markets where tubers of yams were being sold in slices. One wonders the extent to which monetary policy can deal with what the country is facing today. There are issues surrounding money supply in our monetary and fiscal policies, although there is a reduction in interest rates for fixed deposits, treasury bills, and others.

The factors that affect our foreign exchange are exogenous to our system. About 90 percent of forex is dependent on crude oil production, and we have very little control of that. When there is a shortage of forex, importers go to the black market and obtain forex with which they bring in commodities at high costs and pass on to the consumers. Now, people buy dollars and keep them, as the dollar is becoming a product. The price of the dollar will naturally go high, and the same currency is needed to import PMS.

This amounts to systematic exploitation by both the government and a few privileged citizens. With too much money in circulation, what is supposed to be channelled to productive purposes is used for consumption, and this makes prices go up, thereby causing inflation. Beyond monetary policy, which has its limits in tackling inflation, are structural factors.  It is believed that the major driver of inflation in Nigeria, whether historically or in contemporary times, is our food basket. In 2019, it was estimated that food took about 56.6 percent of household expenditure. Experts put the food basket index at 22.72 percent and the core index at 12.74 percent, leaving a gap of 10 percent margin of farm produce. This suggests that once food price is on the increase, inflation will also increase. There is a direct relationship.

 
There are the demand and supply sides of farm produce. On the demand side of agriculture, Nigeria is feeding over 300 million people while its population is about 200 million. Almost the entire West African sub-region is dependent on the Nigerian food market. They are protected by the ECOWAS treaty of free movement of primary produce without paying tax, while paying for the product in naira and not in dollar. Apart from the farm produce, the quantum of finished goods that these countries buy is significant.

 About five years ago, N1 was buying 3 CFA but now N1 is buying about 1.2 CFA. This shows that in the eye of the Francophone countries surrounding Nigeria, the naira has been devalued by over 67 percent. As a result, there is no incentive for them to grow anything anymore. They buy Nigerian produce and bring it back to us three or four months later and sell it at about 100 per cent of the price. Available statistics show inflation figures that indicate a turn in the food inflation rate from about 22.93 percent in March, 22.7 percent in April, to 22.28 percent in May. We are seeing a reflection of that downward movement in headline inflation from 18.17 percent, 18.12 percent to 17.93 percent. These are principally driven by the decline in the food basket.

We have gone this path before, as models of inflation have evolved. Headline inflation was 15.9 percent in 2017. Food inflation was 23 percent, while we have 22.9 percent now. There are other structural factors. The shortage of power and the damage it does to the economy through tariff hikes and other input costs are devastating. About 30 percent of input cost is attributed to power. Transport, which constitutes about 20 percent of input cost, is dependent on the rising price of PMS. There are also the Covid-19 pandemic and the pervasive impact of insecurity on all factors of production.
 

It is reported that some lands provided by both the federal and state ministries of agriculture are very expensive compared to those of other land speculators. Besides, many farmers are denied access to their farms and they have no means of repaying their loans. Farming is under siege. Farmers/herders’ crisis is worsened by the government’s determination to reopen grazing routes. These factors and other bad economic policies have driven over 100 million Nigerians into poverty, with over 80 million captured below the poverty line.

There are critical steps in the area of reforms to be taken if the country must deal decisively with inflation. It is a good economic situation to have high demand. When supply meets demand, it increases wealth. What needs to be done is calibrate the system to meet the demands of other countries, especially in the sub-region.

There are expected measures to reduce domestic costs. It is good to know that in the new Finance Act of 2020, duties on tractors were reduced from 35 percent to 10 percent. The levy on motor vehicles for transportation of persons was also brought down from 25 percent to 5 percent. But the government needs to do more to move from relief-focused poverty alleviation to development-focused poverty alleviation. China did it in 1982 and today, they are better for it.

The medium and small-scale industries should be supported to reduce urban inflation, which is most times higher than rural inflation. In addressing money supply issues, forex funding (not cheap forex) should be encouraged so that access to funding will be at a relatively cheaper rate. This is capable of stemming the upsurge in the volume of imported raw materials and improving the consumption of locally manufactured items in line with the policy of backward integration.

Attention should shift towards diversifying the agricultural mix and boosting food production. Farmers can be given direction on the contemporary ways of farming. This can be done by extension workers who may be local residents that understand the culture, attitude of the people, or history of farming in that area.

 On a broader scale, farm estates should be encouraged by adopting mechanisation and improved technology used to produce high-yield seeds that can enhance productivity. Vertical farming can be promoted, as it utilises little space for maximum yield per hectare.

The federal government does not own specific lands within the sub-national space. What is needed is the synchronisation of policies between the federal, state, and local governments. The sub-nationals should be involved in this as a deliberate policy of state because, by constitutional provision, they are the custodians of the land. The local government has been out of the loop in the agricultural value chain. They are the closest to the people, and there are about 450 local government areas that are rural-based. Whatever structure we have, without the functionality of the local government, we will still be grasping at non-issues.

The current inflationary pressure can only produce inverted economic results, and if left unchecked, could undermine national economic diversification and competitive domestic production.

BANKS’ ASSETS DECLARATION AND CORRUPTION WAR: By MOSES AMADI

Recently, Chairman of the Economic and Financial Crimes Commission (EFCC), Abdurasheed Bawa, made a declaration that the Bank Employees Assets Declaration Act of 1986 would be resuscitated to block loopholes created by bankers to sanitise the country’s financial system.

Bawa made this disclosure shortly after a closed door meeting with President Muhammadu Buhari, with June 1, 2021, as the deadline for bank employees to submit their asset declaration forms in compliance with the Act.

According to Bawa, the decision was taken due to the role bankers are expected to play in the fight against corruption, as the EFCC is mandated to ensure compliance to the Act. Section 1 of the Bank Employees Declaration of Assets Act 1986 makes it mandatory for every employee of the bank to make full disclosure of assets upon employment on an annual basis. The law under Section 7 Sub-Section 1 stipulates that it shall be an offence for an employee of a bank to own assets in excess of their legitimate and probable income.

After the deadline as stipulated by the EFCC Chairman, there are consequences that will arise as a result of non-declaration of assets by bank employees. For instance, there is a spelt out penalty of 10 years imprisonment upon conviction as well as forfeiture of assets beyond and above legitimate income and probable earnings of such bank employees.

This piece of legislation has been in existence since 1986 under the military, effective in September of that year. For a long time, this part of the constitution was rendered ineffective by those who ordinarily should implement it. But with the appointment of Bawa, the revival of this Act has become a part of the corruption fight against illicit financial flows and money laundering.

Bankers have always been aware of this legislation but the level of compliance has not been encouraging. In the 80s, bankers were handed such forms which they completed and submitted. But as it’s always the case in the country, the implementation of that provision of the law was more or less abandoned, and it was no longer considered as a fundamental part of the banking profession. Consequently, there were failed banks and the government had to constitute failed bank tribunal.

Stakeholders blame the failure of authorities including the CBN, Chartered Institute of Bankers of Nigeria (CIBN) and Bankers Committee for certain abnormalities in the industry. According to them, these regulators rely on the banks they are supposed to supervise, to supply them information. For instance, they argue that the failed banks episode happened barely some months after the regulators had given those banks clean bills of health. This suggests that the information supplied by the banks may have been doctored. In addition, some banks declared huge profits, and in no time, went under.

Nigeria has been battling with cases of corruption and money laundering, with bankers and bank officials accused of being accomplices. Some monies have remained redundant in many accounts due to death of the owners of the accounts which some bank officials convert to theirs while leaving families of the account owners in penury.

This is in spite of the fact that the banking sector is no stranger to self-regulation, given its tempting, delicate and fragile operating system. As a matter of fact, the CIBN Act of 2007 has been regulating the banking system. It has a code of conduct to which bankers agreed with the CBN. There is a disciplinary tribunal that has the power of the High Court which ensures that reported infractions, unethical conduct and indiscipline are brought before the tribunal, and sanctions recommended for formal prosecution. But one of the challenges has been weak reporting system by bankers, leading to the inability of CIBN to take appropriate actions.

The spirit behind the Act of 1986 is to make clear, the financial standing of bank employees at the time of employment, and after years of service, in a bid to ascertain that their legitimate earnings are commensurate with their current lifestyles. This is coming on the heels of allegations that some bankers are direct beneficiaries of fraudulent transactions that are carried out in the bank.

What is common knowledge is the asset declaration by public officers including civil servants, politically exposed persons and those who work in the Ministries, Departments and Agencies (MDAs). They are required to declare their assets every four years. For political officeholders, upon their election or appointment before they assume office, they are supposed to declare their assets at the point of entry and also at the point of exit. This declaration is done on oath. In other words, there is execution and attestation before a High Court or some other superior officer of the law. The Nigeria Customs Service (NCS), Nigeria Immigration Service (NIS), among others, are already covered by the Code of Conduct Act with regard to the declaration of their assets.

As it stands, financial experts believe that the impression created by the directive to bankers to comply with the pre-existing piece of legislation amounts to stigmatization, and also isolates bank employees which puts them in the limelight. In other words, there is the belief that the revisiting of the Act of 1986 encourages the policy of isolation which is causing apprehension in the industry. There are concerns that the Act may cause enrolment into the banking profession to further go down as a result of stigmatisation.

However, some stakeholders caution against the drama about stigmatization, arguing that a lot of bankers, from the highest cadre to the lowest level, are living above their means. According to them, an average banker even from their early point of calling, cuts corners by conniving with customers that want to beat the system. They insist that for every major corruption, there is a banker that has facilitated the transaction. For instance, they allege that bankers assist customers to spread and deposit money in different tranches to various bank branches so that they won’t raise red flag by going beyond the regulatory limit of the Nigerian Financial Intelligence Unit (NFIU).

It is laudable that the EFCC is trying to use the Act for good reasons. But the worry is that the banks essentially are not oned by government per se although the government has shares in them. Banks are largely private-driven.

More importantly, there are existing laws that can check illicit enrichment. Article 20 of the UN Convention Against Corruption is explicit on this. Section 7 of the EFCC Act empowers EFCC to investigate persons whose lifestyles are not commensurate with their means of income. It is believed in certain quarters that the assets of this country have been plundered the most by politically exposed persons, many of whom remain untouchable. As such, EFCC has been accused of not being fair and even-handed in its mandate on tackling public sector corruption including false declaration.

The spirit behind the 1986 Act is the acknowledgement that bankers have fiduciary responsibility which is sacrosanct. If by 1986 we could have an Act, then it means it is a recognition of that responsibility which bankers have. Banking is very central to everything that we do, which explains why bankers are required by law to declare their assets on a yearly basis  -  more regularly than politically exposed persons and other public servants.

The banking profession wears a special toga, as it touches on virtually every facet of our national life. If the banking sector is sanitized, it will have a ripple effect on all other sectors of the economy. All these measures are taken to strengthen the fight against corruption, and not to stigmatize the banking profession or portray it as the scapegoat within the system. Besides, the banking career is not a roguish profession. Some bankers are in the forefront of exposing some of the mega corruption issues that we have seen the EFCC making headway.

Part of the essence of this law by the EFCC is to ensure that the country is free from financial crimes, and also to block the loopholes being exploited by unscrupulous players in the sector to undermine the national economy through money laundering and illicit financial flows.

However, EFCC should not appear as if it practising implementation by isolation. The fight against financial crimes should be holistic. There are provisions of the law for every category of professionals in the country. The emphasis should be the extent these laws have been activated in the fight against corruption. Financial infraction is a national problem, and so, it requires a national architecture to deal with the challenge irrespective of sector.

While it is hoped that the Act of 1986 is a sincere attempt at sanitizing the system, there should be a platform created to report thresholds of deposits on a daily basis, and the regulators should be able to access it to know the declarations made. This makes for easy reference to what has been declared as legitimate income to check those living above their means.

The Act may not be for corruption purposes or looting alone. It could be equally useful to track tax payments, source of money and other considerations including the adoption of Unexplained Wealth Order and whistle-blowing as canvassed in some quarters. When these measures come into force, any person including private individuals who are not required by law to declare their assets, will be prime targets. Once anyone is seen to have acquired wealth or shown sign of ostentatious living that is not necessarily explained from their legitimate earnings, they can be reported to the appropriate quarters.

To achieve this, the EFCC should involve experts to help in the review of asset declarations to see whether they are reckless or determine evidence of deliberate false declaration, and propose what action can be taken.

Some people may under-declare while some others may over-declare depending on what they do. EFCC seems not to have the required resources, capacity, competence, expertise and manpower to collect and review all the forms declared by bankers and other individuals, and then detect lapses that will lead to further investigation.

This shortcoming obviously has consequences. Many politically exposed persons have been made to declare assets at the time they were assuming office. But afterwards, nothing is heard, as there seems to be no strong connection between EFCC and the Code of Conduct Bureau. This gap can be bridged by activating the Unexplained Wealth Order.

Whistle-blowers can be individuals within the community, organization, among others. The information provided by whistle-blowers can be put into proper use by the EFCC or any other agency of government involved in dealing with money laundering or issues relating to financial crimes. But it will be counterproductive to use the investigation as an object of witch-hunt against perceived opponents or those considered to be ‘special interests.’

 

 

IMPLICATIONS OF CBN POLICIES ON LOAN DEFAULTERS: BY MOSES AMADI

Individuals and corporate organisations that are in the habit of borrowing loans from banks with no intention of repayment, may start thinking twice. Such borrowing pattern may have come to an end following the agreement reached between the Central Bank of Nigeria (CBN) and banks. This new understanding will ensure that loan defaulters’ monies are drawn to off-set their debts in any given bank or banks.

However, loan default is a global challenge that has become a recurring decimal in many countries including Nigeria, the contractual relationship between the banker and the customer notwithstanding.

In Nigeria, the point has been made that bad debts in the financial institutions are a contributory factor to bank failures. This has been the situation over the years as a cursory reference to the totality of bad debts amounting to over N5trn of toxic assets that have been taken over by the Asset Management Company of Nigeria (AMCON), glaringly shows the effect of bad debts on the financial system in general.

Statistics show that by 2007, non-performing loans were less than 5 per cent. In 2010, they were less than 10 per cent, and later came down to 3 per cent by 2013 because AMCON bought a lot of the toxic assets off the banks. But the volume of non-performing loans spiked in 2016 rising up to about 13 per cent.

Bank distress in Nigeria started with bad loans; bankers who lent to their relations and friends who in turn, didn’t pay back the loans. And when that happened, it had ripple effects which affected many banks and created a lot of issues in the banking system. In most cases, the loans were given out on the basis of who knew who. Essentially, banks were failing initially largely due to insider trading, poor management, no adequate sensitization, weak monitoring system, lack of adequate knowledge by practitioners and the technicalities of banking, among others.

The indicator to use to have a sense of loan default by borrowers in the Nigerian financial system is the quantum of non-performing loans in the banking industry today. Over time, that has been on the high side. According to financial experts, the Central Bank of Nigeria (CBN) has a threshold of 5 per cent, meaning that non-performing loans in the banking sector should not be higher than 5 per cent for the interest of financial system stability. There were times it was as high as 15-16 per cent.

According to reports, the trajectory of the banking system started from about 1894 and passed through phases that culminated into a certain period in which there appeared to be no strong regulation. That was the laisser faire kind of system from 1890s to 1950s before the CBN Act and the First Banking Act were enacted. These Acts brought about strictly regulatory regime which lasted until about 1986 when the Structural Adjustment Programme (SAP) came into place. After 1986, the sector became deregulated substantially until the consolidation era.

Over time, the CBN has been introducing one measure or the other which status report or ordinary banking practice should normally have taken care of. But status enquiry has limitations in the sense that banks have a duty of confidentiality to their customers. So, there is a limit to what a bank can disclose.

Basically, the banker-customer relationship is a contractual one, and so, the rules that govern the management of the customer’s account are based on contract. Legal minds cite that the law is very clear that a banker has no right to transfer any sum of money from one account to the other. The right of set-off has to be enshrined in the contract. So, when you open a new account, one of the forms the bank will give you is the one that allows the bank the right to set off.

There are prudential guidelines that compel banks to manage their credit and ensure a good and robust system of credit administration; a system that ensures that only those that deserve the loans get them.

One of such measures was the introduction of the Credit Risk Management System that is meant to centralize credit information of all borrowers. In other words, it is known as the “Credit Bureau,” and it helps to reduce the level of non-performing loans by checking people of bad character who want to obtain loans. The effectiveness of this measure is enhanced by harmonising the different silos of identity management including Bank Verification Number (BVN), National Identification Management Commission (NIMC), Federal Road Safety Commission (FRSC), Nigeria Immigration Service (NIS), telecoms, among others.

With proper identity management system, the financial sector will be able to follow up on people who have shady characters and nip financial crimes in the bud before they mess up the banking system.

In practical terms, if a borrower wants to have access to a loan in Bank A for example, Bank A is expected to do a background check and status report on the borrower. In the case of serial defaulters or predatory debtors, the bank is at liberty to exercise the right of set-off particularly when the loan agreement is breached. The aim of this policy is to reduce cases of non-performing loans while also creating a watch list of chronic loan defaulters.

Worse still, some borrowers take advantage of the fact that our legal proceedings take a lot of time. That is why some financial experts are advocating for the setting up of special courts for banking-related issues as it is done in Pakistan and India which have debt recovery tribunals.

To reinforce the already existing system, the CBN has come up with the Global Standing Instruction (GSI), which adopts global approach in terms of dealing with recalcitrant debtors. The application of this initiative will among other things, check loan defaulters who go somewhere else to procure loans.

This policy will make loan defaulters honour their obligations to their financial institutions, thus preventing them from having access to more bank facilities. It is a directive issued by the CBN to allow banks to debit accounts of loan defaulters in other banks where their accounts are domiciled.

This is more like an expansion of the banker’s right of set-off. There are conditions by which those rights can be applied including serving a notice to that customer before the bank can set off their account. That right of set-off is just within a particular bank but GSI has now made it global. In effect, it is capable of entrenching the culture of responsible behaviour on the part of borrowers, and helping banks to also carry out good credit appraisal.

However, GSI has some implementation challenges. With respect to existing loan defaulters, unless the banks are able to coerce them to sign some kind of consent form, then this policy will not work with them. The legality or otherwise of the GSI to be able to reach an account that is jointly held for either a member of a family, will still have to be interrogated because that account has its own mandate instructions.

But this policy or directive may have anticipated this because the provisions are designed with respect to new loans such that when customers want to access new loans, they are given instruments or warrants to sign, authorizing the banks to carry out their inter-bank transfers. But that only addresses the problem as to the future and not the present loan defaulters.

In September 2019, the first GSI circular or information was released and the banks were given samples of how to draft or craft loan conditions going forward. This means that non-performing loans prior to September 2019 may not be cured with the GSI.

But even with respect to the future or would-be defaulters, this directive is not a statutory provision or law emanating from the National Assembly. It’s also contestable whether the CBN and the Bankers Committee that conceived of this idea can by way of policy directive, interfere with individual contracts between customers and the banks.

The practice of reaching agencies is not well defined in Nigeria, and their prominence and effectiveness has not been tested in the financial sector. Here, we are going to run into problems. If a bank customer is a signatory to a family account, the bank would like to reach that family account to verify a private debt. If a customer holds an account in trust for an organization, the bank wants to reach that account to satisfy a personal debt. If a customer belongs to an association or a group where he is a co-signatory and his name appears because his BVN is linked to that account, the bank wants to reach that account to confirm a private debt. In any case, under GSI, not only the loan defaulter will be arrested, his wife and children will also be taken into custody. These could raise issues.

Basically GSI affects personal accounts including savings and current accounts, or joint accounts probably between a husband and wife, and three trust accounts for the children. The GSI circular states that, if for example, you have defaulted to the tune of N100,000 including the principal and the interest and excluding penal charges, and you refuse to pay, the GSI can be triggered by the creditor. If you have N20,000 in your account with the bank, it will be taken. In your own account and your wife’s account, if there is N50,000, for instance, it will be taken, making N70,000. The remaining N30,000, will be withdrawn from your children’s account who are still minors if you are the sole signatory.

This new regime may give banks the opportunity to be defiant and not cooperative in addressing the claims of customers with the hindsight that they have a GSI that enables them to reach out to sister banks to effectively deal with such customers. These could raise serious issues that will be contested in the courts.

GSI is a specific reference to individual or personal accounts, and does not address the issue of corporate borrowing. In other words, this policy, as it were, applies to both personal and individual accounts whereas corporate borrowers who are more in number in terms of quantum as well in defaulting to repay back their loans ordinarily are more of the culprits.

The bulk of the defaulting loans posing serious danger to the banking system is in the corporate sector. Experience has also shown that the problems with these accounts are usually with respect to documentation. Some of these loans are disbursed without proper documentation and securitization. So, the banks find it difficult to follow the security that otherwise would have been in place in addressing and recovering their monies.

If we are really interested in addressing the problem of loan default and financial scams involving banks, and therefore, build a sound banking system, implementing competency framework is very important. This entails training and retraining, certifying and professionalizing the banking practice and ensuring that anyone who is practising banking is properly certificated.

Records show that about 80 per cent of loans go bad because of the way they are approved and the drawdown made. Borrowers should be made to understand the terms and conditions of GSI mandate that they are about to execute. The creditor bank is expected to explain to the borrower those terms. It is only when the borrower has understood those terms that he executes, and once he executes, that becomes binding on him.

 

 

Dormant Accounts: Creating Boundaries Against Exploitation by Banks: By Moses Amadi

 

A few days ago, the Central Bank of Nigeria (CBN) obtained an interim order from the Federal High Court, Abuja Division to freeze eleven bank accounts of five companies and one individual for 45 days. The order empowers the apex financial regulatory body to conduct investigations into suspicious activities including money laundering and illegal forex transactions.

This is coming at a time when the call is getting louder about the need for relevant authorities to beam their searchlight on banks that toy with bank deposits of deceased customers. This can signal the start of an investigation into their activities, and also serves as a reminder of the cultural morality that compels us to respect the dead. And when the inevitable occurs, it alters, creating maddening circles of confusion and misery in the family of the deceased.

The initial response upon death presents uncertainty, flagrant and audacious disruption of order typified by the stress of access and needless hassles in trying to recover the deceased person’s investments either in banks, shares, among others.

What cannot be ignored is that in Nigeria, there are massive funds trapped in bank accounts belonging to deceased persons or people who have become incapacitated, and therefore, cannot by themselves, access their bank deposits or stocks. It is more worrisome when such investments cannot be claimed by beneficiaries either because they don’t know that the account holder had such investments or the procedures for accessing them are very cumbersome.

According to financial experts, there are three events that automatically terminate the operation of an account with the bank, namely, death, bankruptcy, and insanity. Named beneficiaries or unnamed beneficiaries who make claims on behalf of persons affected by these three conditions, must be armed with either a Will or Letter of Administration. Wills have been subject to lengthy disputations by family members, whether wealthy or otherwise. Because of this fear, the person dies intestate (without a Will).

The magnitude of this problem can be categorised as social, ethical, legal as well as regulatory. There are also religious and cultural issues surrounding the Will system. The majority of Nigerians don’t have Wills either because they don’t have enough money to will or they don’t believe in the Will system. Some believe that a Will exposes them to their next of kin, who may want to kill them to acquire their assets. These go to show that people are secretive and not willing to disclose their accounts, and so, no proper documentation is kept.

Processing Letter of Administration for exchange is a tedious task. The letter is not easy to procure given the probate system we operate which creates problems for those who may have been struggling for years to obtain such a letter. Some abandon it because of frustration. The process should be made a lot simpler to help those who may not be able to afford the huge statutory fees or unable to endure the administrative bottlenecks. The bottom line is the need for the monies in the accounts of deceased persons to be utilised for the purposes of the estate or the beneficiaries.

However, as far as regulations are concerned, the relationship is between the bank and the customer, and not any other third party. But upon death, the next of kin is contacted under some legal instructions or regulatory requirements. This poses its own problems. This scenario plays out when the deceased, who hitherto may have used their sibling as next of kin, forgot to change such a name after marriage to either the name of his wife or children if they are of age.

Legal experts hold the following views about next of kin: that s/he may not necessarily be the beneficiary of the account; that s/he does not, by so named, become a beneficial interest or holder of that account but can be contacted in certain situations with no beneficial interest so conferred on. For instance, next of kin can be contacted during medical emergencies when the account holder may not be able to take certain decisions for himself. Also, the next of kin may be able to give consent on the account holder’s behalf.

Nevertheless, there are instances when the rights and obligations of the next of kin may be confusing. There are bank account opening documents where next of kin is presented as having the right to access deposits or any other assets of a deceased person. Sometimes, the interpretation depends on the definition, rights and obligations assigned to the next of kin in that account opening document that was signed off by the deceased customer. It is important for banks to state clearly who the beneficiary or beneficiaries should be in account opening documents.

Unless the bank has express information about the death of a customer, it becomes difficult to deal with. Banks are careful in paying beneficiaries because that customer believed to be dead may well be alive and may not have intended that anyone should know they have such an account. In some cases, the bank may know that its customer is dead and still goes ahead to require proof of death, and sometimes, death certificates are not issued to bereaved families. Such situations have constituted a problem in dealing with deposits of the deceased. In all this, the bank has a confidential duty to protect the information relating to an account.

We must begin to fix how the bank should become aware of a customer’s death. There is a duty on the bereaved to notify the bank of its customer’s death. This can be done either through an express or constructive notice which also informs the bank about its responsibilities towards the beneficiaries. Without such information, the bank may not reconcile the account belonging to a deceased person. It is about balancing the legal difficulties that could be faced by a population that is bedeviled by insufficient knowledge and poverty, and the need to maintain banking privacy.

Banks operate under certain set rules and regulations, given their oath of secrecy and ethical responsibilities of confidentiality. There are regulations, that from time to time, require banks to contact account holders to find out why their accounts are inactive or dormant. And in the absence of any response, the beneficiary or next of kin is contacted. This is in accordance with banking regulations which stipulate that any account that does not record any transaction   –  debit or credit  –  for about six months, becomes inactive. Beyond six months to after one year, the account becomes dormant, and no withdrawals are made except certain documentation is done. But a lot of banks never go by such rules.

Many banks believe there is no incentive in looking for customers   –   dead or alive  –  especially customers with small balances. In fact, some banks dismiss any member of staff who informs family members of a deceased customer to commence processes of accessing the account. Sometimes, when small accounts of the deceased are aggregated, the amount becomes huge, but some banks invest it in the interbank market, money market, and some other financial transactions. They make income and profit from it. Many banks rather prefer to contact only big customers whose accounts are inactive with the hope of getting more funds.

Read Also: Bank Employees’ Assets Declaration and the War Against Corruption

Investigations reveal that some banks cleverly push dead customers’ deposits to dormant accounts to avoid interest payments. During the last bank consolidation exercise, some of such deposits were said to have been converted in order to meet the N25b minimum paid-up capital. The transactions were reversed after consolidation partly because there was no real inflow of funds into the banks. The after-effect is the seeming distress in the system.

There is a need for amendment of some of the extant laws governing this subject matter. Judicial intervention that can establish a commercial court is necessary to deal with some of the issues. People should be encouraged to have joint accounts to avoid the rigors of having to obtain Letters of Administration or Wills. In this case, whoever survives the other, automatically gets paid the contents of the account except there is a contrary instruction.

It’s important to strengthen regulations to compel banks to be transparent about their information in dealing with, and reporting issues of deceased customers and resolving them. Returns should be rendered to the CBN which will now have the responsibility of asking questions periodically about the status of the returns of the deceased customer’s account with a given bank.

Part of the regulations also has to indicate that every bank customer should update their account information regularly. It is commendable that complaints of heirs to the deceased are initiated in the Consumer Protection Department.

2020 APPROPRIATION BILL: HIGHLIGHTS AND EFFECTIVE IMPLEMENTATION: By MOSES AMADI

Recently, President Muhammadu Buhari signed into law the Appropriation Bill for 2020 effectively returning the budgeting cycle from January to December. The predictable cycle is in conformity with the provisions of Sections 80, 81 and 82 of the Constitution which maintain that budget cycle should commence from January to December.

This puts in context the difference between a fiscal year and calendar year of budget spending. What has been the common practice in Nigeria over the years is what could be described as calendar year of spending an income. Fiscal year is appropriately defined with specific goals for each quarter of that year. With the 2020 Appropriation,there will be 12 months financial year, and that translates to a fiscal year.

In the past 20 years, the December-January budget cycle has only been achieved twice namely in 2001 and 2007 respectively. The passage of the 2020 Appropriation enjoyed the collaboration between the executive and the legislature amidst the crystallising perception of the National Assembly as a rubber stamp.

What is at play here is the political will and general consensusby both arms of government in terms of serving national interest as reflected in the quick passage of the budget tagged “The Budget of Sustaining Growth and Job Creation.” This is an attempt at boosting job creation and diversifying the economy by strengthening non-oil sectors including agriculture, solid minerals, manufacturing, among others. These are areas that will boost activities of the Small and Medium Enterprises (SMEs).A recent report from SMEDAN classifies SMEs as the engine room of any nation as they generate about 80%-90% of all the employments in the country.

The 2020 budget is not a document on its own. For effectiveness, it is operating with other documents. Enabling environment seems to have beencreated to fast-track the amendment of these bills to allow for smooth running of the budget. It is one thing to have a budget, it is another to garner the revenue needed to fund it. What can be loosely referred to as complementary bills that will run concurrently with the budget are the Finance Bill and the Public Procurement Act. There are relevant aspects of the Finance Bill that can contribute in financing the budget.

The Finance Bill appears to sustain the critical sector of the country’s business enterprises by giving them the necessary support to be up and running. This suggests government’s readiness to look at alternative means of income beyond oil and gas because non-oil exports will boost the country’s revenue.

In the Finance Bill, agricultural production and processing which before now enjoyed about five years tax holiday, has received an increase of ten years. The objective is to encourage secondary production and value addition.

Arecent report by the National Bureau of Statistics (NBS) on merchandise trading is another diversification exercise to shore up revenue. Figures show that in 2018, the bulk of exports from Nigeria to Ghana was a significant quarterly N900 billion value of exports from floating production platforms.This means that even beyond agriculture, Nigeria is positioning itself as a major reference point in producing floating platforms. The local content policy was responsible for building this capacity. It shows the unlocking of another potential.

There is a provision in the Finance Bill for a rebate for SMEs. Companies with less than N25m turnover have been exempted from paying tax. Going by statistics, there are about 22 million registered SMEs in Nigeria. That translates into more retained earnings or spending in the marketplace that expands the GDP base. Companies that have run their businesses at such threshold will also be reinvesting. That means businessexpansion. Medium level companies with turnover of between N25m and N100m also have their nominal 30% company income tax reduced to 20%.

Another component of the Finance Bill is the Value Added Tax (VAT) whose percentage has been increased from 5% to 7.5% even in the face of complaints of possible inflationary pressure. In the meantime, the federal government gets 15% of the receipts from VAT.

Some MDAs are complaining about how issues surrounding procurement have been a major hindrance to the execution of projects. Public Procurement Act reform will correct some of thelapses in procurement. Part of the Procurement Act stipulates thatall contract considerations should be completed within three weeks. That’s a major departure from the three months’ timeline that is being observed now.

This is particularly fundamental because mobilisation fee for contractors will witness less bureaucracy.The end result is available funds in the hands of the contractor who is able to employ more people at take-off. What this entails is quick delivery of service with its impact on the bottom line for the company alongside increase in productivity which is a basis for GDP measurement.

With the lifespan of the Economic Recovery and Growth Plan (ERGP) coming to an end by 2020, advocacy for a new national development plan for 2020 Appropriation has heightened despite indications that an organic budget billwill be forwarded to the National Assembly tolegitimise the budget cycle. When the bill becomes an Act, it will make provision for a permanent template of relationship between the National Assembly and the executive. Planning becomes easy as each budget cycle willitemise processes, functions, activities and targets. Besides, it will give the executive the leeway to plan a four-year budget cycle, and how to activate it in each fiscal year.

However, the objective of this budgeting system will not be fully realised if revenue-generating agencies are not sanitised and strengthened to operate efficiently.The National Assembly should strengthen their oversight instruments to make sure that revenue-earning agencies perform well in actualising their revenue targets.

It is important to evaluate the capacity of revenue agencies in shoring up revenue. Tax agencies in the states should connect with the federal level through the Joint Tax Board even though analogue process has made tax evasion easy. And even when tax collected is remitted, a portion is retained by the agencies. E-taxation system and unbundling the complex nature of conspiracy within the taxation system, should be encouraged.

Available records show that in 2018, the Customs Service generated over N1.32trn but it is doubtful whether this can be sustained given lack of adequate facilities. There is a need for seaports to be covered by non-altruistic equipment that will ensure 100% examination, as against physical examination which is largely in operation at the moment. Other seaports in the country including those in Calabar, Port Harcourt, Warri, among others, should be opened up. It is discouraging to know that it takes about 30 days for goods within Tin Can Port to be moved out of the facility. Developing these ports, means more revenues will be generated.

What follows is monitoring and coordinationto implement the contents of the budget to make it a robust fiscal year. The publicity given to budget presentation should also be granted to budget evaluation. This will raise certain concerns about budget performance of the previous year and lessons learnt.

The Fiscal Responsibility Act of 2007 mandates the Minister of Finance through the Budget Office to monitor and report on the attainment of the implementation of the budget and report back to the Fiscal Responsibility Commission and the Joint Committee on Finance of the National Assembly, on quarterly basis.

The purpose of the report is to have an assessment in ensuringthat the budget trickles down for the benefit of Nigerians. One of the ways to achieve this goal is to make certain that the sub-nationalsalign with the federal government in implementing this budget cycle. What this portends is a consolidation of fiscal activities at these levels with the potential of impacting both the public sector and the private sector.