To BVN or Not to BVN?

Oct 30, 2017|Ebehi Iyoha

Last week, a Justice of the Federal High Court in Abuja reportedly granted an interim order requiring all commercial banks to disclose to the Central Bank of Nigeria (CBN) details of any accounts not yet linked to a Bank Verification Number (BVN). An important part of this order is that money in these accounts will be permanently forfeited to the Federal Government. 

Interestingly, this news has been polarising. On the one hand, some Nigerians are wary of what appears to be an attempt at government expropriation. The original policy only stipulated that holders of accounts unlinked to a BVN after the deadline would be unable to make withdrawals; completely losing all funds in an account after a mere 14-day notice appears to be a step too far.

However, others argue that this is a step in the right direction. After all, BVN registration should be simple: you go to a bank where you have an account, fill out a form, get your photograph and fingerprints taken, and receive your BVN within 24 hours. Because the BVN is unique to an individual, people with multiple accounts only need to go through the registration process once and link the same BVN to all their accounts in other banks.

For such an easy process, the benefits are significant: easier detection and prevention of identity theft, fraud, and money laundering. Yet, by February this year, of the 98 million bank accounts in the country (of which 67 million were active), only about 52 million had been linked to a BVN. And between February and October, the number of unique BVNs issued rose from 27 million to 31 million. Therefore, it is not hard to see why some would consider the threat of forfeiture a reasonable approach to get people to finally comply. Besides, if you have nothing to hide, why not register?


Unbanking the Unbanked

An aspect of this debate that is often overlooked is financial inclusion. In 2008, about 53% of Nigerian adults were financially excluded, meaning that they did not have access to bank accounts, mobile money, formal credit, etc. To combat this, the CBN launched the National Financial Inclusion Strategy in 2012, to "bank the unbanked" by making financial services more accessible to underserved segments of the population.

In light of the fact that many Nigerians do not possess a valid form of identification, a key component of CBN's strategy has been to lower the ID requirements for opening a bank account. For example, Tier I "low value" accounts can be opened with a passport photograph and basic customer information such as name, date of birth and address; this information does not need to be verified against any other sources. While this type of account is limited in the value of possible deposits and account balances, it provides access to people who would otherwise be deterred by their lack of formal ID.

In theory, lack of ID should also not be a deterrent to getting a BVN because the registration process does not require additional identity verification beyond the information used to set up the bank account. However, linking multiple accounts can be much more challenging because all accounts must have the same identifying information such as name and date of birth. When an account cannot be linked due to any discrepancies (such as misspellings or using a maiden name), changes can only be made by providing some form of official documentation.

It is not hard to imagine that this is a significant challenge for people who were only able to get a bank account because of the relaxed ID requirements. This group of people are also more likely to be semi-literate and therefore, were more likely to have made mistakes when filling out their initial enrolment forms. Denying them access to their money is already a burden, and outright forfeiture would be unjust. Furthermore, the interim order stipulates that banks inform customers of potentially affected accounts by advertising in a widely circulated national newspaper: an absurdly limited way of reaching socioeconomically disadvantaged groups.

At the moment, the best workaround appears to be to close any unlinked accounts and open new ones with an already issued-BVN. This should be possible based on a directive from the CBN allowing customers with unlinked accounts to close them. However, it is not clear how easy this would be in practice. More importantly, frustrations with BVN registration may cause these customers to retreat from the formal financial sector once more.


The Diaspora Dilemma

Another set of people that garner more attention but perhaps less sympathy are Nigerians in the diaspora. For account holders living abroad, BVN registration would initially have required them to return to the country, which for many people, would have been impractical and prohibitively costly. 

However, in 2015, the CBN offered the option to enrol at centres run by two companies: VFS Global and OIS Services, or at foreign branches of Nigerian banks. Although the enrolment locations were selected based on the large Nigerian populations in those cities, many Nigerians would still need to travel long distances, even across country borders, to get their enrolment done.

For a Nigerian living in South Korea or Japan, the closest enrolment centre would be in Mainland China; for those in Latin America, their best bet would be to go to Brazil, US or Canada. Making the trip just to register would require a roundtrip flight and a visa, and time taken off work or school. To make matters worse, BVN registration at these centres is not free, and often costs an amount close to the equivalent of 30 British Pounds.

While many believe that the average Nigerian abroad is more financially well off than her counterparts in the country, it is worth pointing out that those who are unable to enrol because they cannot afford the associated costs can ill-afford to have their money within Nigeria seized by the government. 


Collateral Damage

One could still argue that there are non-compliant account-holders with far more nefarious motives. After all, fraudsters operating multiple accounts under false identities would prefer to remain undetected. Therefore, any exceptions granted to the diaspora or any other group would probably be exploited by criminals trying to avoid detection.

This is certainly worth taking into account. But such a perspective misses a fundamental truth about the BVN policy: that it is a tool in the government's financial crime-fighting efforts, not a substitute for it. Given that over half of all accounts are compliant, the CBN and EFCC should already be able to detect questionable activity by focusing only on the subset of unlinked accounts. And though it may be easier to seize people's assets than to investigate millions of accounts, the forfeiture order is a shortcut that could unfairly penalise many innocent people for the sins of a few. 


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