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Nigerian bank customers as beasts of burden

Henry Boyo

Regrettably, both the Central Bank of Nigeria (CBN) and the Money Deposit Banks (DMBs) seem to perceive customer deposits as a burden which must be taxed, rather than the primary platform on which their lending capacity and ultimate profitability are predicated.

For example, with the subsisting mandatory Cash Reserve Ratio of 22.5 per cent for banks, a customer’s deposit of N1,000 will create, at least, additional N4,000 liquidity, which banks can lend out with interest and profit from.

The irony is that as cost of adopting information technology should normally decline with mass applications, it is worrying that the arbitrary ‘excessive bank charges’ on customer deposits still subsist.

This is even when significant cost savings evolve, from the related reduction in cash handling and operational floor space, plus the popular adoption of less expensive contract Labour force with smart banking transaction Apps and infrastructure.

Although the CBN is the actual driver of these banks charges, the regulator, inexplicably, appears complicit and helpless to protect customer deposits.”

Bank customers have become clearly unhappy with the sporadic debits from their deposits.

Indeed, the social media is replete with reports from very angry bank customers, who consider these deductions as a rip-off of their hard-earned incomes.

Unexpectedly, it seems the CBN, as the prime regulator of the banking sector, has kept aloof and remained mute to the cries of tens of millions of bank customers for justice.

It is likely that everyone who owns a bank account must be increasingly riled by the unceasing nibbling off their accounts by financial rodents, who pose deceptively as veritable custodians of public funds.

Inexplicably, despite the perceived excesses of banks, in this arrangement, the CBN, as the 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 revenue agencies.

The list of subsisting bank charges includes 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, the 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 from the customer account without notice!

Consequently, in addition to the outrageous double-digit interest charges on their traditional mainstay of loans, banks may also earn well over N600bn annually from this odd mix of controversial charges on customers’ deposits.

Incidentally, the application of the trillions of naira reportedly consolidated from stamp duty deductions, since 2016 still remains controversial, while the consolidated value has also eluded annual appropriation.

Nevertheless, as if in defiance to public angst, in a seeming determination to express its presumed right to do as it pleases with the lodgments of every customer, the CBN issued a fresh circular on Wednesday, September 18, 2019, to all Money Deposit Banks.

In the directive, under reference, “henceforth three per cent processing fees would now be also paid for withdrawals and two per cent for deposits above N500,000 on individual accounts.

The CBN also confirmed that these ‘penalty’ charges are in addition to the already existing charges on withdrawals, while it also affirmed that the measures are aimed, at promoting its cashless policy.

Furthermore, according to the same circular, Lagos, Ogun, Kano, Abia, Anambra, and Rivers states, plus the Federal Capital Territory were designated as testing grounds for the application of the latest charges.

In addition, the 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 from 0.75 per cent capped at N1,200 to 0.50 per cent capped at N1,000.

Furthermore, 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 had called on the CBN to suspend the ATM card maintenance charges in 2017 was brazenly ignored, while banks continue to also derive substantial income, from several other charges levied on loans, money transfers, foreign trade, bonds, guarantees, etc.

In this event, the latest call, in September 2019, by the House of Representatives for the CBN to suspend the implementation of the new charges imposed on customer accounts, may just also be hot air, as was the case in 2017.

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 and savings account, as the 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 high interest-bearing loans to borrowers.

The latest charges, according to the CBN, are imposed to drive the implementation of the cashless policy, which is expected to promote more financial inclusion, with the adoption of prompt and speedy e-payment systems.

Clearly, with the present mix of charges, further expansion in financial inclusion will, invariably, earn banks trillions more naira annually, even when their disgruntled and dissatisfied customers remain united in condemning their perceived oppression.

However, if this vindictive perception continues, customers may, ultimately, choose to keep their funds away from banks, not minding the related security and safety implications of such a decision.

Similarly, the threat of hackers and increasing fraud related incidents with electronic transactions may also discourage some customers from readily embracing the CBN’s cashless project.

In practice, despite the significant returns from the very high interest rates on the primary banking business of lending money to customers, the additional income to Money Deposit Banks from a heavily padded list of bank charges alone, may still exceed N500billion annually.

In essence, this figure may actually be less than one per cent of the total value of all transactions settled through 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 5.3billion volume of transactions valued at N340tn 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 one per cent of the total value of transactions, i.e., well over N12trillion annually.

Evidently, although the CBN’s cashless policy may reduce cash handling and drive more inclusiveness as projected, in practice, however, the transition to an increasingly cashless economy will invariably drive a higher velocity of circulation of money, as the same one Naira, for example, could be serially used for several transactions, instead of just one or two transactions in several days!

Consequently, some critics would consider that the CBN’s quest for a cashless economy is, probably, presently counterproductive and misguided, particularly, as the higher velocity of circulation of cash will spur higher inflation rates, which will challenge the apex bank’s ability to achieve its prime mandate for price stability.

In other words, with the present promotion of the cashless policy, the CBN may actually be cutting its nose to spite its face!

Nevertheless, it is disturbing that the Federal Competition and Consumer Protection Commission may have also abandoned its responsibility to the consumers by ignoring the brazen rip-off, currently endured, when the customers put their hard-earned money in the custody of banks! (The Punch)

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