Non-Interest Banking: CBN Orders Timely Disposal of Non Permissible Income


James Emejo in Abuja

The Central Bank of Nigeria (CBN) has issued guidelines to the Advisory Committees of Experts (ACE) of non-interest banks (NIB) in supervising and monitoring the disposal of Non-permissible Income (NPI) by the institutions.

The CBN explained that the move was part of efforts aimed at standardising the treatment and disposal of NPI by the NIB.
The apex bank, in the framework noted that the NPI was not an object of ownership of the NIB and does not confer any ownership rights on it.

The CBN in a circular addressed to all non-interest financial institutions (NIFIs) on the disposal of NPI, signed by its Director, Financial Policy and Regulations Department, Mr. Chibuzor Efobi, stated that the NPI shall be put in a dedicated NPI account and shall not be commingled with the funds of the NIB.

The apex bank added that the NIBs were under obligation to dispose of any NPI that accrues to it, pointing out that disposing the NPI to a charitable cause is regarded as proper disposal on certain conditions.
According to the guidelines, a proper disposal would entail that the NIB does not stand to benefit from the charitable cause in any way, even if by goodwill.

Also, the banks must ensure that the charitable cause does not give benefit to any shareholder, director, ACE member or management staff of the NIB.

The CBN specifically pointed out that disposal to the charity should not be constituted nor included as part of the Corporate Social Responsibility of the NIB.

It stated that the disposal of the NPI directly by the NIB or through a third party was acceptable, provided it fulfils the conditions mentioned.

The CBN added that whether the disposal was directly by the NIB or through a third party, the ACE should review the disposal ex-ante and ex-post to ascertain that the conditions mentioned.

Also, the CBN stressed that the ACE should ensure that the NIB does not delay the disposal of the NPI without justifiable cause, as any unjustifiable delay shall be tantamount to the NIB deriving benefit from the prohibited NPI.

The apex bank stated: “In line with the CBN Guidelines on Governance of Advisory Committees of Experts (ACE) for Institutions Offering Non-Interest Financial Services, it is part of the duties and responsibilities of the ACE to supervise and monitor the disposal of Non-Permissible Income (NPI) by the institution.

“Non-Permissible Income is any income that accrues to the institution in a Shari’ah non-compliant manner, such as interest income, penalties for delayed payment of debt obligations, or any income declared by the ACE of the institution as impermissible according to the Shari’ah.”

In 2015, the Lord Mayor of London, Alderman Alan Yarrow, during a visit to Nigeria, had said the United Kingdom was ready to offer expertise towards the development of non interest financing otherwise known as Islamic finance in the country.

He said given that there were 88 million muslims with 39 per cent adult population which remained unbanked in the country, Islamic finance presented an alternative investment and business finance model for development of critical infrastructure as well as suitable for both Muslims and non-Muslims alike.