Reps Move To Repeal BOFIA Act

A piece of legislation to repeal the Banks and other Financial Institutions Act and re-enact a new law is underway in the House of Representatives.
The reenactment would bar the Central Bank of Nigeria, CBN from fixing interest rates. It also wants the President to proscribe trade unions that would picket banks for improved workers’ welfare.

The Bill which was exclusively obtained by LEADERSHIP SUNDAY, is sponsored by Hon. Betty Apiafi(Rivers/PDP). It seeks a repeal and reenactment of amendments of 1997, 1998, 1999 and 2002 of the BOFIA Act. The reenacted version would impose stringent clauses on the financial sector.

The new piece of legislation states in section 21(1) that: every bank shall display at its offices its lending and deposit interest rates and shall render to the Bank(CBN) information on such rates as may be specified, from time to time, by the Bank”.

The CBN continues to fix lending rates of banks without recourse to the affected banks. Barely a few days ago, the CBN Governor Sanusi Lamido Sanusi fixed new lending rates of banks at 12 percent. The new rate which is a throw back on the gloomy past has continued to generate a heated debate in financial circles.

On the rights of banks in Nigeria to embark on industrial strikes for better working conditions, the legislators may be seeking an outright deregistration of trade unions by the Presidency.

A marginal note in the proposed bill, titled: “Power of the President to Proscribe Trade Union”, states that “If the President is satisfied that any trade union, the members of which are employed in a bank, has been engaged in acts calculated to disrupt the economy of Nigeria, he may, by order, published in the Gazette, proscribe that union, which shall, as from the date of the order, cease to exist”.

The new legislation also seeks to compel every bank in Nigeria to establish a Reserve Fund.
The reserve fund is expected to guide against insolvency and distress of banks.

According to the Bill, “Every bank shall maintain a reserve fund and shall, out of its net profits for each year(after the provision made for taxation) and before any dividend is declared, where the amount of the reserve fund is less than the paid up share capital, transfer to the reserve fund a sum not less than the paid-up share capital, a sum not less than thirty-percent of the net profits; or equal to or in excess of the paid-up share capital, transfer to the reserve fund a sum not less than fifteen percent of the profit”.

The bill also seeks to bar any bank from appointing as a Managing Director anybody who has shares in another company or bank or is even engaged in any other business.
“No bank shall be managed by a person who is a director of any other company not being a subsidiary of the bank; or engaged in any other business or vocation”.
Directors of banks are also expected to “sign a code of conduct in such form or manner as the Bank (CBN) may from time to time, prescribe”.