CBN Should Allow Companies Operate Savings Accounts—Obadan

By Modupe Gbadeyanka

The Central Bank of Nigeria (CBN) has been advised to review its policy prohibiting corporate organisations, including those in the Micro, Small and Medium Enterprises (MSMEs) sector, from operating a savings account.

A member on the board of the CBN, Professor Mike Obadan, while speaking at the Monetary Policy Committee (MPC) last month, argued that this policy is counterproductive and not good for the economy.

In his submission, the respected economist said this policy favours the banks more and prevents companies from saving for the rainy days.

Mr Obadan said though the CBN had good intentions with this policy, the unintended adverse effects are larger than the benefits to the banks.

He noted that the CBN can bar large firms, private educational institutions, foundations and small associations with huge amounts of surplus funds from operating savings accounts because they have more negotiating power and easier access to other savings instruments than the vulnerable MSMEs.

“There is [the] need to review this policy to allow corporate MSMEs to operate savings accounts just as the DMBs save money even through investment in government securities.

“To the extent that the savings account is one of the financial products of the DMBs, MSMEs have a right to put some money in savings deposits for the rainy day. Importantly, savings deposits will help them to withstand shocks to which they are highly vulnerable by putting their small balances in savings accounts to earn interests which contribute to their sustenance,” he said.

He added that if MSMEs are allowed to operate savings accounts, they “will be able to avoid double jeopardy which they suffer at present; not only do they lose interest income, they are now exposed to all sorts of charges on the current accounts which they operate.”

According to him, “The abolition of corporate savings deposit accounts could undermine the attainment of the objective of reducing the size of the informal sector as some informal sector operators could be discouraged from assuming the character of formal sector operators.”