To a very smart and shrewd business operator, issuing fines is not a problem, it is about locating possible loopholes to be explored; and whether the profits realizable is higher than the penalty to be paid for breaching a rule. So far rewards outweigh punishment, the motivation to break a law is very high. What policy makers failed to realize is that wherever there is an option of fine for an infraction, it is no longer about outright prevention or about upholding the spirit and the letter of a policy. So it is, as we witness every now and again, in the financial sector in Nigeria.
As proven over time, imposing fines on Nigerian banks for going against set guidelines doesn’t mean they will not commit another. The Central Bank of Nigeria (CBN) is not wont of imposing sanctions on Nigerian banks. A trip to few years back, CBN has placed such sanctions as anti-money laundering findings, risks assessment infractions, late compliance with CBN directives, contravention of CBN foreign exchange policies, non-compliance with complaints resolution directives, contravention of CBN foreign exchange policies, late resolution of customer complaints, cyber security breaches, any many more. In 2022 alone, the CBN sanctioned some banks for failing to comply with cash distribution guidelines as well as non-compliance with anti-money laundering (AML) and combating financing of terrorism (CFT), among other infractions. Just last year 2024 (in the first half of the year), ten stock exchange quoted institutions were sanctioned for violations of foreign exchange guidelines and other regulatory offences by SEC and CBN – and fines worth N1.502 billion was imposed. All these imposition of sanctions and fines have never deter the financial institutions from committing another infractions.
Despite the rounds of fines and sanctions mentioned above, nine Nigerian banks got another ₦1.35 billion fine this January 2025 for not heeding repeated warnings to ensure cash was available in their ATM machines during the 2024 yuletide – a period for high cash demands. These banks – Fidelity Bank, First Bank, Globus Bank, Keystone Bank, Providus Bank, Sterling Bank, Union Bank, United Bank for Africa, and Zenith Bank – were found to have flouted the repeated warnings.
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The question is, ‘Why is it difficult for the financial institutions to adhere to compliance standards?’ The focus of this piece isn’t about the banks but about the CBN itself whose guidelines are easily flouted by the financial institutions it superintends. What inspires the banks and energizes them to easily disregard the regulatory authority’s policy statements? To solve the riddle about incessant disregard or flouting of CBN Guidelines, methinks one needs to examine how effective the sanctions or fines are in taming the banks (achievements of sanctions); and also those who care enough should take a look into that time when banking and finance transmute to money trading institutions in Nigeria. World over, it is the responsibility of banks to ensure the growth of locally manufactured goods by effectively financing the real sector (where the MSMEs hold sway). But Nigeria’s financial institution will not do this because the CBN could not see the need to enforce the effective financing of the local production. Rather, the financial institutions would prefer financing short term trading and importation of finished inanities. From the finance of short term trading, the banks graduated into using depositors’ funds to trade directly. This behavior has become entrenched over the years that the crop of today’s bankers know nothing other than making margins.
So, is there real banking and finance in Nigeria or the entire population is saddled with mere trading companies that are camouflaging as banks and financial institutions? For the CBN to superintend the degeneration (over the years) to the extent where the banking public had lost faith in the sector means the CBN itself needs touch-lighting and a total overhaul. In my column piece titled “Now That CBN’s Incongruous New Naira Policy Has Paraslysed Micro And Small Businesses” and published February 2023, I called on the CBN about the need to act magically and surgically to put an immediate and decisive end to the ‘impending anarchy’ that will be caused by the very high possibility of Point of Sales operators to milk the cash trading window being created by the CBN. At what point did the Point of Sale (PoS) machine operators become cash dispensing agents? The cashless policy that was introduced in 2012 had a goal to reduce the use of cash in transactions, promote digital payments, among others. That on one hand, the introduction of PoS machines, going by the statement given by CBN that time, was to reduce the amount of cash in circulation, encourage digital payments, help in driving financial inclusion, and help in developing a cashless economy. The Central Bank of Nigeria needs to come forward and tell Nigerians when the identified roles for PoS machines changed to become ATM machines that are to be dispensing cash to the extent of cornering cash that ought to return to the bank faults. If Nigeria has a national assembly that is good and alive to their responsibilities (and they need to prove they are really good and alive to their responsibilities), the national assembly ought to have grilled the concerning the policy summersaults, for putting Nigerians through untoward financial services and for turning banking and finance on its head in Nigeria. Are there real banks in Nigeria or the entire country is littered with money-leaking agents?
What’s motivating cash hoarding and who are those personnel being vicariously handed opportunities to trade cash as a commodity? Should a central bank be above board in its regulatory responsibilities or make itself a mere acquiescing agent to shylock money traders? The ongoing economic reforms need to go a bit further if Nigeria is to really become an economy to be desired by locals and foreigners alike.
Ola Emmanuel is a business planning consultant