EFFECT OF DORMANT ACCOUNTS AND UNCLAIMED FINANCIAL INSTRUMENTS ON FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

Abstract

Dormant Accounts and unclaimed financial instruments have been a challenge in the Nigerian banking sector. These unclaimed funds are of concern to both the banking sector and the Nigerian government, as they represent a source of illegitimate revenue for banks and a potential source of financial fraud and money laundering. This study therefore, examined the effect of dormant accounts and unclaimed financial instruments on the financial performance of deposit money banks (DMBs) in Nigeria. The study applied survey research design to obtain primary information from senior officers of DMBs in Nigeria.  The population comprised all the 22 DMBs operating in Nigeria and regulated by the Central Bank of Nigeria (CBN) as at December 31, 2020. The study adopted a two-stage sampling technique. The first stage was the purposive selection of 13 DMBs listed on the floor of Nigerian Exchange while the second stage was the convenience selection of 391 senior bank staff of the selected banks. The study applied ordered logistic regression and robust OLS for the estimation of the individual and overall performance metrics. The results indicated that for the overall bank performance, unclaimed financial instruments have a significant effect on bank financial performance (p-value of 0.000), while dormant accounts have an insignificant effect on overall bank financial performance (P-Value of 0.244). Based on these findings, the study concluded that while dormant accounts are responsible for the increase in earnings, it does not affect the overall financial performance of banks. On the other hand, unclaimed financial instruments are largely employed by Nigerian DMBs in raising their financial performance. This study thus recommends among others that regulatory authorities should put in place adequate measures to ensure that deposit money banks in Nigeria comply fully with the provisions of the Finance Act, 2020 for transfer of unclaimed cash deposits to the Unclaimed Fund Trust Fund. Furthermore, Deposit money banks in Nigeria should establish effective processes and systems to identify and track unclaimed financial instruments.