Banks’ unwholesome ways

•Banks must be held to account for holding on to federal government money and unilaterally hiking interest rates.

For an industry permanently on the spotlight, two developments –not unrelated – have merely driven home the reality of extant practices that continue to erode trust in the financial services sector.

The first is the whopping sum ofN12 billion said to have been collected as revenue by banks on behalf of the federal government but which they failed to remit. This was the finding by the consultant engaged by the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) to verify and reconcile revenue collections and remittances by 19 collecting banks engaged by the Nigerian Customs Service and Federal Inland Revenue Service. The period is said to cover January 2008 to June 2012.

Now, RMAFC is demanding that the banks promptly remit the amount into the federal government coffers.

The other is the subject of an on-going probe by the Consumers Protection Council. It involves alleged N1.8 billion excess charges on the account of the Bauchi State government by one of the banks. The CPC is said to have stepped into the matter following a petition to the council; that was after the Central Bank of Nigeria (CBN) reportedly declined further adjudication on the case earlier brought to it by the state government.

In the petition, the state government alleged that the bank, without any prior information, charged 21 per cent interest rate per annum on two loans of N10 billion and N3 billion, which the bank granted it on January 22, 2009 and June 15, 2011 respectively both at the rate of 13 per cent interest per annum, and that this has resulted in excess interest charges on its account, amounting to the sum of N1,864,188,594.78 as at February 2014.”

The state government further alleged  inconsistencies in the application of interest rate with the rate going up as high as 54.46 per cent in some cases.

Both cases, obviously exemplify some of the more brazen abnormalities in the banking system for which Nigerians are now only too familiar. To start with, only in the most permissive, laisez-faire environment that the banking sector has become can the idea of an agent withholding revenues collected on behalf of its principal for months, if not years, can be contemplated. Worse is that a process so basic or elementary, and yet so fundamental to the revenue collection process, would take several years to accomplish.

The same – unfortunately – is no less true of the dispute between the Bauchi State Government and one of the banks over interest charges. This time, a bank is accused of changing the applicable interest rates at will, leaving the customer terribly short-changed.

The RMAFC should proceed forthwith to get the offending banks to remit the funds – we daresay with appropriate penalities-  without further delay. As for the matter before the CPC, we consider it as deserving of serious investigations to be undertaken – and this expeditiously.  It goes without saying that Nigerians are entitled to know how the matters are resolved given the public interest nature of the cases.  The whole affairs reek of fraud and impunity.

Both developments obviously underscore the need for further sanitisation of the financial system. Here, the challenge would seem essentially one of restoring integrity and best practices into the system without which the factor of trust will continue to be a mirage. The issue is simple. If the financial services industry cannot be trusted to play strictly by the rules, wherein lies the future for the overall economy?

The need to embrace global best practices is even more imperative now with the coming of the Treasury Single Account. We expect the federal government to enforce the deadline scrupulously as the issues of transparency which made it imperative can no longer wait.