By, Dr. Chalres Omole

A GLOBAL PERSPECTIVE

The exploitation of customers by their banks is a global phenomenon. In the USA, 6.5 percent of households are unbanked, meaning they don’t have a bank account at all Half of those affected report it’s because the fees are too expensive.

JPMorgan Chase, for instance, made $1.9 billion from overdraft charges alone in 2016. At some large regional banks, fees accounted for almost 40 percent of revenue that year, CNBC reports; U.S. consumers as a whole paid $34.3 billion in overdraft fees in 2017. In the West, the high costs associated with financial services from banking to borrowing eat away at many people’s incomes. So majority of the charges are for borrowing or unauthorised overdrafts.

Globally, banks love Fees and Charges. As a business model, the attraction is obvious. One $35 overdraft fee per year generates as much revenue as lending out $1000 at 3.5 percent for the year. The main difference in the proliferation of bank changes from Nation to Nation in the Western economies is Regulation. Where the regulatory frameworks is strong, bank fees are controlled as in many EU countries. But in a place like America, where there is little regulation (Trump has even waived some that were to come into effect), Bank charges are a major Revenue source for banks. But majority of the charges are customer habit contingent; unlike in Nigeria where you are charged multiple charges for doing basic banking without any borrowing involved. Many Western consumers don’t know it’s possible to avoid overdraft fees entirely by managing their finances better. So in d West where borrowing is easily available, charges are also on d rise as more folks borrow. But in Nigeria where there is little mass lending going on, majority of d charges are compulsory & apply even to all.

In many Western economies, Banks employ “trick-and-trap” fees by hiding them in the complicated terms of agreement that accompany many transactions, which effectively trick folks into unknowingly paying exorbitant costs & charges. So d bank charges rip off is a global phenomenon.

THE NIGERIAN FACTOR What is iniquitous about Bank Charges in Nigeria however, is the compulsory nature of many of them; their many titles & how most of d charges apply regardless of your banking habits. You can deposit N1millon into a current account in Nigeria, don’t use the account at all but come back in 5yrs to meet Thousands has been deducted in numerous charges by the bank. According to World Bank reports; up to 60% of Nigerians are unbanked. That is; they do not have bank accounts at all. Yet in Nigeria Bank charges represents as much as 75% of some Banks Revenue. In the USA, that is 20% on average, although it can be as high as 40% in some regional banks. Instead of earning money by borrowing and lending money to the real economy, banks in Nigeria simply turn to fees & charges to boost profits; with the acquiescence and even encouragement of d CBN. CBN is headed by a Banker who is sympathetic to his constituency (commercial banks) & their need for more profit. Hence even d restrictions imposed by Sanusi that reduced d burden of charges have been reversed by Emefiele.

SYMPATHY WITH D BANKS – THEIR HIGH COST OF DOING BUSINESS Banks will understandably argue they have a huge cost to cover if they are to operate successfully in Nigeria. While Nigeria needs 60,000 ATMs to serve the everyday cash needs of Nigerians, there are only about 18,000 ATMs across the country all owned by banks. So, to ensure the machines keep working fine maintenance is outsourced to companies such as Inlaks Computers, Computer Warehouse Group (CWG), NCR, and others. These companies are paid a fixed fee for the maintenance of each machine which may range from N200,000 to N550,000 per ATM. These cost pressures led to Banks successfully lobbying the CBN to allow ATM Charges under Emefiele. According to sources; GTBank pays the vendor in charge of its ATMs N250,000 per machine per year while UBA .pays about N280,000 per ATM per year. Diamond Bank pays over N300,000 per ATM per year to ensure the machines are in good condition. GTBank has at least 1,165 ATMs across Nigeria, which means it spends at least N291.3 million on maintaining the machines annually, while UBA’s 1,750 machines means it spends at least N490 million on maintenance. Diamond Bank could be spending as much as N350 million on maintenance of its ATMs per year. The banks feel customers need to help offset these costs through charges. This is a fair expectation.

READ MORE: https://thebelltimesng.com/2019/09/19/cbn-banking-charges-in-nigeria-a-regulator-gone-rogue-part-1/