Fears Over CBN’s Request For Domiciliary Account Details

Fears Over CBN’s Request For Domiciliary Account Details 

The chief executive and managing director of Financial Derivaties
Company Limited , Bismarck Rewane, has expressed fears that a
Central Bank of Nigeria (CBN)’s directive on domiciliary accounts
could turn out to be a tool for taxation or witch-hunting,
Speaking at the monthly Executive Breakfast meeting at the
Lagos Business School , Rewane described the directive by the
apex bank that banks give information on domiciliary account
holders and balances as a breach of confidentiality.
According to him, the CBN, believing that domiciliary transactions
are used for round tripping by banks, had directed that banks
submit details of domiciliary account holders, including name,
account number and balances as at January 29, 2015.
It also required banks to present total balance of all domiciliary
accounts as at the same date, list of corporate domiciliary
account holders and their balances, list of individual domiciliary
account holders and their balances, list of public sector
institutions domiciliary account holders and their balances as well
as the mode of lodgement to the account transactions (either
cash or by wire transfer). Domiciliary deposits were equivalent to
21 per cent of the N17 trillion or $19.5 billion deposits in the
Nigerian banking system as at half year 2014, according to data
from an investment firm, Renaissance Capital.
Stating that the apex bank had given the directives based on its
concerns about the high level of domiciliary balances at an
average of 1 per cent per annum, Rewane noted that the move
will spur a rush of transfers to overseas banks, even as he
expressed fear that the CBN will now seek for information on
naira accounts. He also postulated that the apex bank will
increase net open position of banks from the present level of 0.5
per cent to 1 per cent, even as the naira is expected to trade at
N195 and N210 to the dollar at the interbank and parallel
markets respectively.
The CBN had, last week Friday, held a special intervention selling
more foriegn exchange (FOREX) to banks and bureax de change
(BDCs) as part of measures to increase liquidity in the system.
However, this did little to lift he value of the naira as the
currency closed last week at N193 to the dollar at the interbank
end of the market. Dealers said currency users were holding on
to cheap dollars bought at the almost-daily central bank
interventions, because they believed the naira would continue to
weaken as falling oil prices hurt Nigeria’s economy.
According to an analyst at the FBN Capital, Bunmi Asaolu, “until
investors can see and believe that the naira is stable, their
confidence will remain low.” He noted in an emailed note to
Leadership that “there is a limit to what the CBN and the
Monetary Policy Committee (MPC) can do to defend the naira
without a massive erosion in the reserves.”
The external reserves had been on the decline since last year
and is currently down to $33.872 billion as at February 5, 2015,
according to latest figures by the CBN. The CBN has been
battling to defend the naira currency as the 50 per cent sell-off
in crude oil prices last year left the economy which gets 70 per
cent of its income and 95 per cent of FOREX from oil sales, and
is still struggling to adjust.