ABT NEWS (www.abtnews.net) — In an era where gaining access to business liquidity in Nigeria is akin to squeezing water from a stone, commercial banks across the country have come under heavy fire for institutionalized practices that systematically starve businesses and individuals of their own capital.
Chief Chigbo Uzokwelu, Chairman of IATAFRICA INTERNATIONAL (www.iatafrica.com), an organization dedicated to expanding business operations and trade across Africa and beyond, has issued a sharp condemnation of Nigerian commercial banking operations, accusing institutions of running predatory mechanics that jeopardize enterprise survival and wealth creation.
1. The Dormancy Trap: Immobilizing Capital While Profiting Off Inactive Debits
At the core of the issue is how Nigerian financial institutions manipulate account status classifications to freeze customer funds. According to Chief Uzokwelu, banks routinely slap “dormant” status onto bank accounts if no outward debit transactions occur within a few months, even when the account continuously receives incoming credit deposits.
Once flagged as dormant:
- Access Restricted: Account holders , whether corporate entities or private individuals, are then outrightly barred from withdrawing or transferring their funds.
- Operational Paralysis: Businesses find their supply chains disrupted, payroll stalled, and contract executions halted due to sudden liquidity lockups.
- Interest-Free Capital Exploitation: While depositors are locked out, banks continue to trade, invest, and earn returns on these frozen balances without paying a dime in interest or compensation to the legitimate account owners.
To exacerbate the problem, when affected customers request account reactivation, banks subject them to administrative friction. Depositors are forced to navigate bureaucratic hurdles, submitting endless, repetitive documentation, much of which was already provided during initial Account Opening / Know Your Customer (KYC) onboarding. Every day added to the reactivation process is another day the bank freely trades with customer capital.
2. The Double-Penalty Paradox: Caught Between Inactivity and Interest Forfeiture
Chief Uzokwelu highlighted a striking contradiction in how banks treat Nigerian depositors:
“The same banks that penalize businesses and individuals for not making debit transactions by locking their accounts into dormancy will turn around and penalize customers who make more than three debit transactions in a month by forfeiting all accrued interest on their savings deposits, no matter how enormous the account balance is.”
This creates a systemic trap for Nigerian depositors:
- Debit too little: Your account is declared dormant, your funds are frozen, and your business operations are paralyzed.
- Debit more than three times: You are stripped of the accrued interest on your hard-earned savings, effectively giving the bank free use of your capital.
There is hardly any other recognized financial jurisdiction globally where commercial banks are allowed to inflict such dual penalties on retail and corporate depositors with impunity.
3. The Legal Framework: How Nigerian Law Protects Financial Consumers
Nigerian banking consumers are not without legal recourse. Several statutory frameworks and regulatory mandates explicitly forbid unconscionable, predatory, or misleading banking practices:
┌──────────────────────────────────────────────┐
│ NIGERIAN CONSUMER LEGAL PROTECTION FRAMEWORK │
└──────────────────────┬───────────────────────┘
│
┌────────────────────────────────┼────────────────────────────────┐
▼ ▼ ▼
┌──────────────┐ ┌──────────────┐ ┌──────────────┐
│ CBN ACT & │ │ CBN CONSUMER │ │ FCCPA 2018 │
│ BOFIA 2020 │ │ PROTECTION │ │ (SECS. 104, │
│ (SEC. 65(1)) │ │ REGS. 2019 │ │ 105, 114) │
└───────┬──────┘ └───────┬──────┘ └───────┬──────┘
│ │ │
└────────────────────────────────┼────────────────────────────────┘
▼
┌──────────────────────────────────────────────┐
│ • Prohibition of Unfair Contract Terms │
│ • Right to Redress & Unhindered Access │
│ • Fiduciary Banker-Customer Duty of Care │
└──────────────────────────────────────────────┘
A. CBN Consumer Protection Regulations (2019)
Issued under the CBN Act 2007 and BOFIA, these regulations establish binding standards on fair treatment of financial consumers:
- Section 3.1.1 & 3.1.2 (Fair Treatment): Mandates that financial institutions treat consumers equitably without bias and provide equal access to basic services.
- Section 3.2.4 (Barriers to Service): Explicitly prohibits institutions from imposing unreasonable barriers or delays when customers access their funds or request service adjustments.
- Section 3.3.2 & 3.3.3 (Unfair Contract Terms): Declares that unfair contract terms used by banks are null and void. Terms that allow unilateral, arbitrary restrictions on accounts or conflict with consumer rights have no legal binding force.
B. Federal Competition and Consumer Protection Act (FCCPA, 2018)
- Sections 104 & 105 (Overriding Supremacy): The FCCPA guarantees consumer rights across all economic sectors in Nigeria, overriding conflicting provisions in other sector-specific laws.
- Judicial Precedent: Nigerian courts (e.g., Federal High Court rulings in consumer banking disputes) have affirmed that the Federal Competition and Consumer Protection Commission (FCCPC) holds jurisdiction to protect bank customers against unconscionable terms, oppressive account restrictions, and predatory fee extraction.
C. The CBN Bank Customer Bill of Rights
- Right to Redress & Value for Money: Customers possess an enforceable right to receive prompt, fair service, transparent communication, and protection against unauthorized withholding of funds.
- Common Law Duty of Care (Foley v. Hill): Under the established banker-customer relationship, a bank holds customer deposits as a debtor/debtor-creditor relationship bound by a contractual duty to honor customer instructions. Arbitrary refusal to allow withdrawals when funds are unencumbered constitutes breach of contract and conversion.
4. Economic Impact: Stifling Wealth Creation in Nigeria
In an economic environment marked by inflation and tight monetary conditions, business liquidity is essential for survival. When commercial banks artificially lock up corporate working capital under the guise of “dormancy,” the ripple effects harm the macroeconomy:
- SME Failure: Small and Medium Enterprises (SMEs) face cash-flow insolvency when operational accounts are unexpectedly frozen.
- Capital Flight & Reduced Investment: Investors hesitate to commit funds into an ecosystem where cash can be locked behind administrative red tape without immediate legal recourse.
- Erosion of Public Trust: Arbitrary forfeiture of savings interest undermines national savings culture and discourages formal financial inclusion.
5. Call to Action: Regulators Must Act, Depositors Must Sue
Chief Chigbo Uzokwelu has issued an urgent call to statutory authorities and the Nigerian business community:
- Central Bank of Nigeria (CBN) & Financial Ombudsmen: The apex bank and consumer advocacy bodies must exercise stricter oversight, fine recalcitrant commercial banks, and overhaul rules that allow banks to trade interest-free on customer money under the cloak of account dormancy.
- Federal Competition and Consumer Protection Commission (FCCPC): Intervene aggressively to dismantle unfair contract terms embedded in bank account opening forms.
- Litigation by Businesses and Individuals: Affected depositors should not quietly endure losses. Corporate entities and individuals are urged to challenge predatory banking practices in court, seeking restitution, accrued interest, and general damages for breach of contract and business disruption.
“It is time for Nigerian financial consumers to take a firm stand. Our national wealth creation depends on a banking sector that serves enterprise, not one that prey on it.”
Chief Chigbo Uzokwelu, Chairman, IATAFRICA INTERNATIONAL.
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