The banking system in Nigeria has in nearly a decade been revolutionized and has since then joined the committee of other nations in rendering acceptable services and products to customers. It is also true to say the industry effectively earned the trust of their loyal customers as a result of the capitalization of 2009 as well as various mergers and acquisition that took place in 2011/2012.

The confidence financial institutions enjoyed over the past couple of years can also be attributed to the strong control and compliance the Central Bank Of Nigeria (CBN) wielded over commercial banks in order to ensure the safety of customers deposits and investment. This is true in regards to the harmonization of bank charges the CBN effectively imposed on banks in 2012.

Prior to the harmonization of bank charges, between 2011 downwards, commercial banks had the responsibility of initiating and deducting charges at will from customers account, this especially created a loophole for obnoxious and roguish deductions. Customers were placed at a disadvantage because of various charges commercial banks introduced such as monthly account maintenance fees, SMS alert charges as high as ten naira per alert, requests such as reference letter, bank statements, verification of signature and other such requests were charged at the various bank’s discretion thereby creating a room for overcharging the process.

In the face of the above circumstance customers bitterly complained about the charges and a lot of partitions were written against some commercial banks to the CBN which gave rise to the apex bank intervening.

How the CBN Intervened On Bank Charges In 2012

Following the outcry of bank customers, the CBN rolled out some policies to checkmate charges on customers account. Some of the policies are:

1. Harmonization of bank charges, which means that bank charges will now be set by the central bank.
2. Review of CoT which stipulated that it should stand at N3.00 per mile for 2013, N2.00 per mile for 2014, and N1.00 per mile in 2015, meaning that when 2016 dawns, CoT will be zero naira.
3. All dispensed and online banking errors must be resolved within 48hours
4. SMS alert became N4.00 across all banks
5. Elimination of N100.00 interbank ATM withdrawal
6. Elimination of monthly account maintenance charges.

The above are just a summary of some of the laudable policies that once again returned confidence to commercial banks in Nigeria. Customers became aware of what they are to be charged across all banks as a result of the laudable policies by the CBN in 2012.

The End Of CoT Marked Another Era Of Inflated Bank Charges

With the CoT regime billed to end in 2016, it appeared as though customers can now transact without charges, at least that was the original plan as per the policy of 2012, but soon enough the CBN dived into what could be described as a step forward and two step backward. The CBN indirectly reintroduced a negotiable Commission on Turnover (CoT) as a current account maintenance fee across all commercial banks.

According to a circular sent by the CBN on Wednesday, January 20th, banks are to charge nothing more than N1 per every N1,000 as CoT for every current account transaction, “in respect of all customer-induced debit transactions.”

The reintroduction of the CoT adds to the unclear monetary strategy of the CBN following the earlier imposition of a compulsory stamp duty of N50 on all non-self-current account transactions. Last year, the CBN announced, in a circular titled “Implementation of Revised Guide to Bank Charges –Commission on Turnover,” that a zero-commission on turnover would commence in January 2016 stating, affirmatively, that there was no going back on the implementation of the policy. However, it appears the CBN failed to take into consideration how much banks could lose from the implementation of this policy.

Despite strong protest by banks following this decision, the CBN remained adamant on the zero CoT policy which would see banks lose about N100 billion (out of N550 billion) in annual revenue. The reintroduction of the CoT as current account maintenance shows a confused CBN which probably needs a minister that can foretell the future in its policy implementation.

The CBN further complicated the issue by insinuating a “negotiable charge’” thereby handing commercial banks once again the right to fix bank charges, taking customers back to the era of obnoxious and roguish deductions. Commercial banks are profit oriented institutions, just like every other business, they are constantly looking for loopholes in the system to explore in order to maximize profit, and this they have always done to the letter.

Bank Customers React

Fresh off from the imposition of N50 stamp duties by the federal government on credit transactions up to N1,000 from third parties, the stage is now set for chaos. To add salt to injury, commercial banks simultaneously capitalized on their newly bestowed authority for “negotiable charges” cashing in on it leading to excess charges on customers account.

Earlier this month, bank customers staged a “no banking day protest” to register their displeasure towards excess bank charges by commercial banks. The protest was led by Consumer Advocacy Foundation of Nigeria (CAFON) under the leadership of Mikail who spoke in support of the protest against Excessive Bank Charges. Mikail said that the Central Bank of Nigeria (CBN) directed all commercial banks to charge customers N50 on deposits from N1, 000 and above, as part of Nigeria’s stamp duties law on financial transactions.

“Apart from this, there are other silent charges administered by Nigerian banks” he said.

He said there was need to alert the Federal Government on these excessive charges by Nigerians banks.

Mikail suggested that government should come up with a good economic blue print on how to restructure the economy.

He described the charges as another way of imposing extra tax on the masses, adding that the policy would discourage people from banking.

Mikail said that at present, “Nigeria is largely under-banked especially in rural areas’’.

“So, this type of policy will worsen the situation; in particular for traders doing business in the rural areas.

“It will have negative effects on the cashless monetary policy that is already in place as it is also another way of imposing extra tax on the masses.

“It would discourage people from keeping money in the banks as Nigeria is largely under-banked, especially the rural areas.

‘So, this type of policy will worsen the situation, in particular for traders doing business in the rural areas

“It will have negative effect on the cashless monetary policy that is already in place.

“The CBN should jettison this method of taxation and come up with a monetary policy that will strengthen the naira to grow the economy, instead of putting another tax burden on the people.

He said that in order to put the CBN and banks on the right track, I plead with all banks users not to carry out any banking transactions on March 1, 2016.

“All bank users should not visit banks to transact any business; we should not use our ATM from 12 am to 12 midnight on March 1.

Although the impact of the protest is yet to be seen, but the fact remains we are yet to see the end of this.

The Way Forward

Recounting the ramifications surrounding the present challenge of excess bank charges, this can be attributed to a matter of making binding and sustainable policies by the apex bank. The CBN needs to understand one fact, that the moment they hand commercial banks the right to fix bank charges through “negotiable charges” as they call it, the right is bound to be abused as a result of the insatiable desire for more profits by commercial banks even if it is at the expense of their most beloved customers.

The CBN need to act decisively by taking over their responsibility of micro-managing the administration of all bank charges as done previously, as we all know that as it stands now the integrity of our commercial banks cannot be trusted and as such lack the moral right to handle “negotiable bank charges” as they will always cash in on it to reap customers off their hard earned money.

Rather than making new policies that are not sustainable, the CBN should up their game in following due diligence in the process of implementing existing laws and policies, considering the fact that the blue print set by the same apex bank which restored sanity in the system was abandoned.

http://www.financialwatchngr.com/2016/03/11/cbn-complicated-bank-charges-unstable-polices/

maximunimpact:
The banking system in Nigeria has in nearly a decade been revolutionized and has since then joined the committee of other nations in rendering acceptable services and products to customers. It is also true to say the industry effectively earned the trust of their loyal customers as a result of the capitalization of 2009 as well as various mergers and acquisition that took place in 2011/2012.

The confidence financial institutions enjoyed over the past couple of years can also be attributed to the strong control and compliance the Central Bank Of Nigeria (CBN) wielded over commercial banks in order to ensure the safety of customers deposits and investment. This is true in regards to the harmonization of bank charges the CBN effectively imposed on banks in 2012.

Prior to the harmonization of bank charges, between 2011 downwards, commercial banks had the responsibility of initiating and deducting charges at will from customers account, this especially created a loophole for obnoxious and roguish deductions. Customers were placed at a disadvantage because of various charges commercial banks introduced such as monthly account maintenance fees, SMS alert charges as high as ten naira per alert, requests such as reference letter, bank statements, verification of signature and other such requests were charged at the various bank’s discretion thereby creating a room for overcharging the process.

In the face of the above circumstance customers bitterly complained about the charges and a lot of partitions were written against some commercial banks to the CBN which gave rise to the apex bank intervening.

How the CBN Intervened On Bank Charges In 2012

Following the outcry of bank customers, the CBN rolled out some policies to checkmate charges on customers account. Some of the policies are:

1. Harmonization of bank charges, which means that bank charges will now be set by the central bank.
2. Review of CoT which stipulated that it should stand at N3.00 per mile for 2013, N2.00 per mile for 2014, and N1.00 per mile in 2015, meaning that when 2016 dawns, CoT will be zero naira.
3. All dispensed and online banking errors must be resolved within 48hours
4. SMS alert became N4.00 across all banks
5. Elimination of N100.00 interbank ATM withdrawal
6. Elimination of monthly account maintenance charges.

The above are just a summary of some of the laudable policies that once again returned confidence to commercial banks in Nigeria. Customers became aware of what they are to be charged across all banks as a result of the laudable policies by the CBN in 2012.

The End Of CoT Marked Another Era Of Inflated Bank Charges

With the CoT regime billed to end in 2016, it appeared as though customers can now transact without charges, at least that was the original plan as per the policy of 2012, but soon enough the CBN dived into what could be described as a step forward and two step backward. The CBN indirectly reintroduced a negotiable Commission on Turnover (CoT) as a current account maintenance fee across all commercial banks.

According to a circular sent by the CBN on Wednesday, January 20th, banks are to charge nothing more than N1 per every N1,000 as CoT for every current account transaction, “in respect of all customer-induced debit transactions.”

The reintroduction of the CoT adds to the unclear monetary strategy of the CBN following the earlier imposition of a compulsory stamp duty of N50 on all non-self-current account transactions. Last year, the CBN announced, in a circular titled “Implementation of Revised Guide to Bank Charges –Commission on Turnover,” that a zero-commission on turnover would commence in January 2016 stating, affirmatively, that there was no going back on the implementation of the policy. However, it appears the CBN failed to take into consideration how much banks could lose from the implementation of this policy.

Despite strong protest by banks following this decision, the CBN remained adamant on the zero CoT policy which would see banks lose about N100 billion (out of N550 billion) in annual revenue. The reintroduction of the CoT as current account maintenance shows a confused CBN which probably needs a minister that can foretell the future in its policy implementation.

The CBN further complicated the issue by insinuating a “negotiable charge’” thereby handing commercial banks once again the right to fix bank charges, taking customers back to the era of obnoxious and roguish deductions. Commercial banks are profit oriented institutions, just like every other business, they are constantly looking for loopholes in the system to explore in order to maximize profit, and this they have always done to the letter.

Bank Customers React

Fresh off from the imposition of N50 stamp duties by the federal government on credit transactions up to N1,000 from third parties, the stage is now set for chaos. To add salt to injury, commercial banks simultaneously capitalized on their newly bestowed authority for “negotiable charges” cashing in on it leading to excess charges on customers account.

Earlier this month, bank customers staged a “no banking day protest” to register their displeasure towards excess bank charges by commercial banks. The protest was led by Consumer Advocacy Foundation of Nigeria (CAFON) under the leadership of Mikail who spoke in support of the protest against Excessive Bank Charges. Mikail said that the Central Bank of Nigeria (CBN) directed all commercial banks to charge customers N50 on deposits from N1, 000 and above, as part of Nigeria’s stamp duties law on financial transactions.

“Apart from this, there are other silent charges administered by Nigerian banks” he said.

He said there was need to alert the Federal Government on these excessive charges by Nigerians banks.

Mikail suggested that government should come up with a good economic blue print on how to restructure the economy.

He described the charges as another way of imposing extra tax on the masses, adding that the policy would discourage people from banking.

Mikail said that at present, “Nigeria is largely under-banked especially in rural areas’’.

“So, this type of policy will worsen the situation; in particular for traders doing business in the rural areas.

“It will have negative effects on the cashless monetary policy that is already in place as it is also another way of imposing extra tax on the masses.

“It would discourage people from keeping money in the banks as Nigeria is largely under-banked, especially the rural areas.

‘So, this type of policy will worsen the situation, in particular for traders doing business in the rural areas

“It will have negative effect on the cashless monetary policy that is already in place.

“The CBN should jettison this method of taxation and come up with a monetary policy that will strengthen the naira to grow the economy, instead of putting another tax burden on the people.

He said that in order to put the CBN and banks on the right track, I plead with all banks users not to carry out any banking transactions on March 1, 2016.

“All bank users should not visit banks to transact any business; we should not use our ATM from 12 am to 12 midnight on March 1.

Although the impact of the protest is yet to be seen, but the fact remains we are yet to see the end of this.

The Way Forward

Recounting the ramifications surrounding the present challenge of excess bank charges, this can be attributed to a matter of making binding and sustainable policies by the apex bank. The CBN needs to understand one fact, that the moment they hand commercial banks the right to fix bank charges through “negotiable charges” as they call it, the right is bound to be abused as a result of the insatiable desire for more profits by commercial banks even if it is at the expense of their most beloved customers.

The CBN need to act decisively by taking over their responsibility of micro-managing the administration of all bank charges as done previously, as we all know that as it stands now the integrity of our commercial banks cannot be trusted and as such lack the moral right to handle “negotiable bank charges” as they will always cash in on it to reap customers off their hard earned money.

Rather than making new policies that are not sustainable, the CBN should up their game in following due diligence in the process of implementing existing laws and policies, considering the fact that the blue print set by the same apex bank which restored sanity in the system was abandoned.

http://www.financialwatchngr.com/2016/03/11/cbn-complicated-bank-charges-unstable-polices/

An extremely lopsided and imbalanced reportage which only pushes its own views which, sure may reflect the views of the customer, but fails to also present the opinions of the operators who may have had reasons for utilizing the concessions granted them by the regulator to charge COT.

These COT policy reversals we've experienced are fallout of policies instituted and subsequently removed by different CBN heads.

On one hand, you have a CBN governor heavily influenced by religion attempting to replicate Islamic-styled banking in the industry. What does he do? He introduces gradual removal of COT and anything related to interests, blocking most of the income streams of the banks. Hence the common question: how are the banks expected to run their operations, meet up with expenses and other obligations?
The industry is not yet matured to the point of relying on retail credits for income. What is the proportion of the banking populace who are truly credit worthy? When customers talk about savings, how many of them truly save for the banks to utilize the float on such savings?

Enter another CBN governor who came in directly from heading a bank having co-found that bank from scratch. He knew the operating environment created by his predecessor was extremely unhealthy and would spell doom for most banks. Hence the amendment of some policies (reintroduced ATM charges applying only to customers who used other bank's machines, account maintenance charges, etc). These incomes are what keep the banks running and motivate them to improve on their services. I recall the situation of things during the heat of Sanusi's reign. In some banks I observed that if their offsite ATMs broke down, there was no urgency to have them fixed, after all there was absolutely no income but rather loss (rent, diesel and connectivity charges) to be incurred. So why bother? I made bold to state that even as a bank MD, Sanusi may have not known the cost of acquiring an ATM not to talk of installing and running it.

A lot of weird things went on during Sanusi's tenure that made me wonder how he rose to become a bank MD (at least I know how he got to be CBN governor) with just a BSc Econs acquired 1983 and another degree in Sharia studies from Khartoum. Wow! If it's not nepotism at its best, I don't know what else to call it.

Please from my little understanding, banks need some income to pay rent, salaries, purchase some equipments, diesel, settle suppliers, pay for network connections, pay state and Local governments tax collectors, etc. They can't do it with your money deposited with them in trust for safekeeping. They derive income from the movement of funds and that's what they use to survive and still declare profits (which if it doesn't meet expectations, shareholders will still complain about) at the end of the day.