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Nigerian bank customers as beast of burden

By Henry Boyo

REGRETTABLY, both the Central Bank of Nigeria and, the Money Deposit Banks, seem to perceive customer deposits, as a burden which must be taxed, rather than the actual base on which their lending capacity and ultimate profitability, is primarily predicated.CBN, Expert says retention of MPR at 13.5% in ordercbn

For example, with the subsisting mandatory Cash Reserve Ratio of 22.5 per cent for banks, a customer’s deposit of N1000 will create, at least, additional N4000 liquidity for a bank to lend out with interest and profit from.

“The irony is that as the cost of adopting information technology steadily declines with mass applications, it is worrying that arbitrary and “excessive bank charges” on customer deposits, still subsist, even when significant cost savings evolve, from the related reduction in cash handling and operational floor space, plus, the popular adoption, also, of a less expensive contract Labour Force, with improved, smart banking transactions Apps and composite infrastructure. Inexplicably, however, the REGULATOR appears complicit and HELPLESS to protect customer deposits.”

CBN urges fintechs, payment service providers to stick to standards(Opens in a new browser tab)

Invariably, on account of several, CBN approved oppressive charges, customers have become clearly unhappy with sporadic debits from their deposits. The social media is already, evidently, also replete with reports from, very angry bank customers, who consider these deductions as a rip-off, of their hard earned incomes.

Inexplicably, however, CBN, as Prime Regulator of the Banking sector, has kept aloof and remained mute to the cries of tens of millions of bank customers for justice. Possibly, all bank account holders, are increasingly riled by the unceasing nibbling, off, their accounts by financial rodents, who pose deceptively as veritable custodians of public funds.

Curiously, despite the perceived excesses of banks in this arrangement, CBN, as regulator, is apparently not yet done in its quest to compulsorily mediate a fraction of every kobo we all earn, into the coffers of Commercial Banks and Government’s revenue Agencies.

The list of subsisting bank charges, include ATM Card maintenance charge, which attracts over N50 monthly from tens of millions of customers nationwide; other charges include Account Maintenance fees, which vary with volume of transactions, while an SMS notification fee of about N200/month, with multiple Token maintenance fees are charged on all customer accounts. Furthermore, earlier in January 2016, CBN directed banks to also “deduct N50 stamp duty on every deposit of N1000 and above, in order to boost government’s revenue drive.”

Similarly, after three ATM transactions with another bank, over N60 will be, mandatorily, deducted, without notice! Consequently, in addition to the outrageous interest charges on their traditional mainstay of loans, banks may also earn well over N600bn annually from these odd mix of controversial charges on deposits. Incidentally, the application of the trillions of Naira, reportedly consolidated from Stamp Duty deductions, since 2016 still remain controversial, while the consolidated value seem to also elude annual appropriation!!

Nevertheless, in a seeming determination to express its presumed right to do as it pleases with the lodgments of every customer, the Central Bank issued a fresh circular on Wednesday September 18, 2019, to all Money Deposit Banks. In the directive, under reference, “henceforth  3 per cent processing fees would now be also paid for withdrawals and 2 per cent for deposits above N500,000 on individual accounts. The CBN also confirmed that these penalty charges are in addition to already existing charges on withdrawals, and further noted that the policy is aimed, at promoting CBN’s Cashless Policy.”

Furthermore, according to the same circular, “Lagos, Ogun, Kano, Abia, Anambra, and Rivers States, plus the Federal Capital Territory have been designated as testing grounds for the application of the latest charges. In addition, CBN also gave approval for banks to unbundle, merchant settlement amounts and charge applicable taxes and duties on individual transactions as stipulated by the regulator; the latest review in September 2019, reduced the Merchant Service Charge (MSC) from 0.75 per cent capped at N1,200 to 0.50 per cent capped at N1,000. The nationwide implementation of the Cashless Policy, which is expected to promote a cashless economy and enhance the collection of government revenues, is now projected to ultimately, take effect from March 31, 2020.”

In retrospect, a Senate resolution which called on “CBN to suspend the ATM Card maintenance charges” in 2017, seems to have been brazenly ignored, while banks still derive substantial income from the several charges levied on loans, money transfers, foreign trade, bonds, guarantees, etc. Consequently, the latest call, in September 2019, by the House of Representatives for CBN to suspend the implementation of the latest charges imposed on customer accounts, may just also be hot air, as was the earlier case in 2017!

CBN Cashless Policy: traders, residents express concern(Opens in a new browser tab)

Instructively, in more disciplined economies, where the Customer is conversely, the King, even, static current account balances of customers are not steadily eroded by predatory bank charges. In fact, no distinction is made between lodgments, in current or savings account, as Banks in such, stable economies, recognise that it is a favour for them to have their customers’ ‘interest free’ funds to trade with to enhance their own corporate income with interest bearing loans.

Nevertheless, according to CBN, the latest charges are expected to drive the implementation of CBN’s Cashless Policy, which is designed to also promote more financial inclusion with the adoption of prompt and speedy e-payment systems. Clearly, with the subsisting mix of charges, expansion in financial inclusion will earn the banks trillions more Naira annually, even if customers still remain united in condemning their perceived oppression.

However, if such oppression continues, customers may choose to keep their funds away from banks, not minding the related security implications of such decision. Conversely, customers may also consider the threat of hackers and increasing fraud related incidents, which may discourage some customers from readily embracing the CBN’s Cashless Project.

Notably, however, despite the significant revenue from very high interest rates on the primary banking business of lending money to customers, the additional income from a padded list of bank charges alone, may exceed N500bn annually to Money Deposit Banks; even this figure may actually remain less than 1 percent of the total value of all transactions settled through the banks in the same period.

For example, the available data on E-payment channels in Nigeria’s Banking Sector suggests that, the Sector recorded about 5.3bn volume of transactions valued at  N340 Trillion in just the third quarter of 2018  alone. Consequently, a consolidation of the myriad oppressive bank charges, including stamp duty on all customer accounts may probably exceed 1 percent of the total value of transactions, i.e. well over N12trn annually!!!

Conversely, however, some critics would consider that CBN’s quest for cashless economy is probably presently misguided, particularly, as the higher velocity of circulation of cash will spur higher inflation rates to challenge CBN’s ability to establish Price Stability.

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