Investment banker and development economist Nnaemeka Obiaraeri has urged the Central Bank of Nigeria (CBN) to strengthen its Consumer Protection Department to ensure banks are held accountable for the loss of customers’ funds.
Obiaraeri’s statement comes in the wake of the CBN’s new directive to banks mandating them to deny certain banking services and additional credit facilities to large borrowers with non-performing loans.
He stressed that while the apex bank is right to hold borrowers accountable, it must also ensure that banks do not exploit systemic loopholes.
He urged the CBN to fully exercise its authority as the “banker to the banks” to protect depositors with the same rigour used to pursue debtors.
Appearing on the TVC News Breakfast show on Monday, Obiaraeri explained that commercial banks are exploiting vulnerabilities within what he described as a “decayed” financial policy system.
He further noted that banks often use the judicial process to avoid returning customers’ funds, frequently instigating prolonged litigation to frustrate recovery efforts.
Obiaraeri said, “While the CBN is trying to ensure that neither banks nor customers play games with the system, it should also enforce its powers as banker to the banks.
“As a consultant, I know of many cases where the CBN intervened and investigated under its Consumer Protection Department, advising banks to return most of the money taken from customers. Some of these cases have lingered for months and even years.”
He added, “Commercial banks are taking advantage of the decayed system we have. They often go to court and initiate one form of litigation or another. While the case remains in court, they continue to play games with customers. I think the CBN should strengthen its Consumer Protection Department and staff it with no fewer than 300 people.”
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The financial expert offered solutions to what he described as weaknesses in the financial system, emphasising that the CBN has an equal obligation to protect consumers’ interests as it does to regulate commercial banks.
He noted that stronger intervention by the CBN in consumer-bank disputes would help ensure faster resolution.
Among the key proposals he highlighted was rapid regulatory intervention, calling for a shift from open-ended disputes to fixed timelines. He suggested that once the CBN intervenes in a dispute between a customer and a bank, a final resolution should be reached within two weeks, eliminating the “bureaucratic stalemate” that currently leaves customers stranded for months or years.
He also proposed what he described as the “nuclear option,” arguing that the CBN should exercise its statutory power to remove the board and management of any bank found to be “gaming the system,” treating such behaviour not just as a financial infraction but as a failure of corporate governance.
To prevent banks from holding on to disputed funds during prolonged legal battles, he suggested a “pay-first” model in which, once the CBN rules in favour of a customer, the funds should be mandatorily deducted from the bank’s account held with the apex bank.
According to him, the funds would then be reserved at the CBN, ensuring the bank cannot profit from the disputed capital while the case is ongoing.
Obiaraeri proposed that the CBN should shift from being a passive observer to a strict enforcer. He argued that if the apex bank has the power to pursue and “handcuff” defaulting loan customers, it must use that same “banker-to-banker” authority to enforce discipline on commercial banks.
He further noted that the integrity of the banking sector is directly linked to national productivity. According to him, manufacturers and private businesses cannot thrive if banks fail to play their intermediation role effectively.
He added that for the $1 trillion economy target of Bola Tinubu to be realised, the banking system must evolve from what he described as a “predatory” model to a “facilitatory” one that supports business productivity and job creation.
