THE recent directive by the Central Bank of Nigeria mandating deposit money banks to collect and verify customers’ social media handles as part of the ‘Know Your Customer’ procedures adds to the already chaotic situation in the financial sector. It continues a pattern of heaping needless burdens on customers, rather than reform the system for better service efficiency. This regulation is particularly irksome and an intrusion on privacy. It should not stand.

In its recently gazetted legislation titled, ‘Customer Due Diligence Regulations 2023,’ the CBN said the regulation was to prevent financial crimes and terrorism while boosting the precision and thoroughness of customer identification. With the regulation, financial institutions will be required to identify their customers, regardless of whether they are permanent or occasional clients.

This is unconvincing. The demand for social media handles amounts to an intrusion and invasion of privacy. By law, customers already provide the banks with unique Biometric Verification Numbers, the National Identification Numbers, telephone numbers, other biometric data, and emails. These are sufficient identifiers. The new regulation defies logic.

The CBN epitomises the weakness of Nigeria’s institutions. In its core mandates of managing interest rates, exchange rates, and inflation, it has failed disastrously. As the regulator of the financial system and protector of its integrity and of customers, its record is very poor. On the watch of its suspended (and detained) Governor, Godwin Emefiele, the DMBs have been ripping off customers, flouting regulations at will and facilitating money laundering and other abuses.

With the controversial governor shoved aside, the CBN should be focusing on strengthening the macroeconomic system, including the unification of the exchange rates, and the other effects of President Bola Tinubu’s policies.

In May, it raised MPR, the benchmark lending rate, to 18.5 percent. Consequently, borrowing rates for businesses range from 22 percent to 36 percent. The naira exchange rate hovered at between N774 to $1 and N780/$ last week, while inflation was officially put at 22.04 percent in April, a figure many believe to be higher.

Regulation is dangerously weak. Years after the law forbade the operation of any bank account in Nigeria without a BVN, over 45 million accounts were still not linked to any BVN by February last year. The CBN should be briefing Nigerians and the National Assembly on the outcome of its 30-day ultimatum to financial institutions last May to close all suspicious accounts.

From over 134 million active bank accounts in 2022, the Nigerian Inter-Bank Settlement System recorded only 57.39 million customers’ accounts linked to their BVN. While the CBN chases frivolities, many accounts are being operated without it, thereby facilitating money laundering.

It should impose severe sanctions on erring banks and close all such accounts. Tinubu should painstakingly headhunt a competent economist to replace Emefiele, with a mandate to run effective monetary policies, strengthen regulatory capacity and reform CBN’s ponderous bureaucracy.

Under Emefiele, the CBN practically left Nigerians at the mercy of banks that imposed diverse charges on customers. About 13,000 complaints over excess and illegal charges were filed against banks in 2020 leading to the recovery of N60billion by the CBN. Many more billions were lost because many victimised customers do not file formal complaints. Corruption and other unethical conduct, aided by lax oversight and poor supervision by the CBN, pervade the financial sector.

Global anti-money laundering watchdog, the Financial Action Task Force in February included Nigeria and South Africa on its ‘grey list’ of countries that are subject to enhanced monitoring because of deficiencies in their anti-money laundering and countering the financing of terrorism frameworks. Countries on the list suffer an average net loss of 7.68 percent of capital inflow across their borders relative to GDP, according to the International Monetary Fund.

The apex bank should also concentrate on the cashless economy project which has been proceeding at snail speed and was further sabotaged by Emefiele’s chaotic naira re-issuance that discouraged many more persons from the formal financial sector. The World Bank recently emphasised that Nigeria’s digital and financial infrastructure is inadequate to support a swift transition to a cashless regime.

The DMBs lost a total of N1.77billion to fraudulent activities involving the banks’ employees and consumers in 2021, according to official records. The Nigeria Deposit Insurance Corporation cited bank fraud and forgery cases of N120.79billion in 2020, and N204.65 billion in 2019.

With the vulnerabilities exposed in Nigeria’s financial sector, the CBN should invest strongly in ICT to effectively survey the system and checkmate fraud and other illegal practices. The NIBSS said N271.95trillion worth of electronic transactions were recorded on its platform in 2021 compared to N158 trillion in 2020. Recently, police in Lagos arrested two members of a syndicate linked to the hacking of about 1,000 bank accounts in Nigeria, reflecting the rising dangers of IT-enabled fraud.

Amidst all this, the CBN’s aspiration to achieve a financial inclusion rate of 80 percent by 2020 has led to increasing competition in payments from non-bank challengers. Nigeria’s fintech landscape is recognised as one of the most vibrant in Africa, with investments there growing by 197 percent over the past three years. While earnings in the sector have grown by a compounded annual growth rate of approximately 23.5 percent in the past 10 years, actual growth in real terms has been significantly lower at around 12 per cent, with a sizeable portion coming from non-core banking activities such as fixed income and derivative income (swaps, futures, and forward contracts).

The CBN has huge challenges to confront, including ensuring a stable and investor-friendly financial environment, meeting its core mandates, and restoring confidence in the integrity of Nigeria’s financial sector. Its managers should face them squarely. Linking customers’ bank accounts to their social media handles is diversionary, intrusive, and unnecessary. It should drop the idea immediately.

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