By Omodele Adigun and Chinwendu Obienyi
The rising bank charges in the country is getting to the nerves of customers and, if something urgent is not done, it may cause alienation of the banking public, particularly, the low income earners, who may resort to burying their money in cemeteries and farms , which may, once again, delay the financial inclusion target of the Federal Government.
Already, the country has missed the deadline of achieving 80 per cent financial inclusion of its adult population by 2020, prompting the Central Bank of Nigeria (CBN) to set new 94 per cent target by 2024.
“No wonder businesses are folding up and liquidated on a daily basis! No wonder people now bury cash in cemeteries and farms,” a customer lamenting the rising bank charges once expressed his shock.
The social media is awash with the tales of woes of customers on the exploitative nature of the endless bank charges. For instance, a user narrated his ordeal recently. Hear him:
“Nigerian Banks have finished this Nation! They are silent killers and unarmed robbers.If you’re in doubt, below are a series of charges always placed on innocent customers in a single banking transaction. VAT.(Value Added Tax); account maintenance charges;. SMS alert charges; transfer charges; Stamp Duty charges; weekend charges.
The problem is this: I am a cement trader. The landing cost of a bag of cement is N3,550 while we sell N3,600. That is a profit, just N50 per bag of cement. Now on every two bags of cement, a customer transfers N7,200 into my account due to Cashless policy and my profit is N100.
To my amazement, the bank deducted the following on that transaction! N53 transfer charges; N100 Stamp Duty; N6.98 VAT; N76 SMS alerts charges; #93.13 account maintenance charges.
“As if that was not enough, on every single transaction, both accounts from where money is being transferred and the account to which money is being transferred were charged for the same transaction.
No wonder businesses are folding up and liquidated on a daily basis! No wonder people now bury cash in cemeteries and farms.
Very soon, they will complain of shortage of cash in circulation because people will find alternative savings and security for the cash.”
This must have forced Honourable Kazaure Gudaji, representing Yankwashi Constituency, Jigawa State, to register his displeasure during a National Assembly seating recently. Hear him: “This issue about rising bank charges is very important because anything that will affect our people is our responsibility as a representative of the masses. We have heard complaints of banks removing charges on deposits and yet they do this when people are suffering in this country and I do not know if what the CBN is trying to do is to rob us. How else can you explain, taking your money to the bank to save and there is an exorbitant fee placed on it just because you are saving your money? Yes I know there are charges already whether it is monthly, withdrawal percentage and so on, but the rising charges is not good particularly at a time like this as it will cause serious issues which is why we must call the attention of the CBN to stop this.”
But defending the banks, a financial expert, Taiwo Ayodeji, said commercial banks are not deducting illegal fees from customers. “Rather, most of these charges are in bank’s terms and conditions which most customers do not go through. Banks are providing professional services and they must be paid for those services because if we keep our money at home, there is a cost attached to it. Business is Business and so emotions are not attached to it.”
Ayodeji has a soul mate in Dr Biodun Adedipe, the Chief Consultant of B.Adedipe Associates Limited, who stated that the banks are merely following the template given them by their regulator, the CBN.
He added: “Bank charge is an issue between the Central Bank of Nigeria (CBN) and the banks because CBN is the one that provides the template and give the limit within which they can operate. There is even a source that says this is between customers and banks on whatever they can negotiate and agree upon.The reality is that that kind of environment takes after the market system. If the market system says it is a matter of demand and supply in that space that determine the price, the more alienation of the low income earners you get. The more you structure your monetary system after that, the more such system alienates those that are on low income. That is the reality of the market system. The market system does not protect the weak.
“One of the challenges of the banking system, not only in Nigeria, but all over the world, there is a way I put it, bankers are smart. What they are after is money. Although, I sympathise with the banks. It is not easy, especially now, to provide services 24 seven. To provide services 24 seven, that means power will have to be there. In those days, the banks used to provide two generating sets per branch. Now it is not only generators, they also invest in solar. That is additional cost.”
But despite this, 12 among the nation’s banks raked in N216.52 billion from their e-business earnings last year The same banks reported N217 billion in income from the digital channels in 2019, a marginal drop of 0.24 per cent. Income from digital channels is also known as electronic business or banking income by the majority of the commercial banks. As for the current template of charges, The Guide to Charges by Banks, other Financial & Non- Bank Financial Institutions, handed down to the banks by the apex bank, which came to effect on January 1, 2020, shows that CBN instructs the banks to slashed withdrawal fees, usually charged after the third withdrawal from other bank’s Automated Teller Machines (ATM) within the same month, from N65 to N35; Card maintenance fee cut to N50 every three month (quarterly), from the initial monthly period. A graduated fee scale for electronic transfers to replace the old flat fee of N50 shows transfers below N10,000 will attract a maximum charge of N10; while a transfers above N50,000 attracts N50.
Card maintenance fee on the current account is removed as the accounts already attract maintenance fees.
Savings accounts attract a card maintenance fee of N50 per quarter (three months) instead of N50 per month. Yearly card maintenance fee on foreign currency denominated cards is $10 as against $20 charged in the old template.
The charge for hardware token is on a cost-recovery basis subject to a maximum of N2,500 from previous maximum charge of N3,500, while the fee for SMS mandatory alert also on cost recovery basis from previous maximum charge of N4.
Bill payment via e-channels attracts a maximum charge of N500 from 0.75 per cent of the transaction value subject to a maximum of N1,200.
While releasing the new template in 2019, the apex bank said that the revision of the Guide to Charges and strengthening of the Consumer Protection Regulation was necessitated by continued evolution in the financial industry over the past few years, which has spurred innovation and the introduction of new products, channels and/or participants. It then vowed to fine any financial institution that breaches any of the provisions as contained in the new guide N2 million per infraction or as may be determined by the CBN from time to time.
It states: “Financial Institutions are to note that any breach of the provisions of this Guide carries a penalty of N2,000,000 per infraction or as may be determined by the CBN from time to time.
“Failure to comply with CBN’s directive in respect of any infraction shall attract a further penalty of N2,000,000 daily until the directive is complied with or as may be determined by the CBN from time to time.” The Unstructured Supplementary Service Data (USSD) fees also got a cut few months later as the apex bank announced that customers would pay a flat fee of N6.98 per transaction every time they use USSD services with effect from last March 16, 2021. The Covid-19 pandemic also played a major role in bank performance as it affected the expansion of the digital rollout plans earlier in the year. However, the pandemic will swing in their favour as Nigerians increasingly relied on mobile banking for transactions while avoiding banking halls for fear of contracting Covid-19.
Just as the banking public mount strident complaints, the balance sheet of some banks blossomed in 2020 by raking in N216.52 billion from their e-business.First Bank, UBA, Access Bank, GT Bank, and Zenith Bank topped the list of highest earners of income from digital channels also classified as electronic business or banking income. Figures from the audited financial statements of 12 showed N217 billion in income from the digital channels in 2019. The banks attributed the reason for the drop in 2020 compared to 2019 to the revision of fees and charges for electronic transfers by CBN in early 2020.
While the apex bank’s policy was aimed at reducing the number of unbanked in the country, banks have seized on the opportunity to offer a wide range of services that have increasingly provided an alternative source of income. According to Nigeria InterBank Settlement System (NIBSS), the total value of electronic transfers for 2020 topped N158 trillion, a 50 per cent growth when compared to 2019. Transaction volume also rose to 2 billion up by 77 per cent when compared to 2019
Though the impact of these charges on the nation’s financial inclusion drive may be difficult to measure. But a report by the Enhancing Financial Innovation & Access (EFInA) , however, showed that 36 per cent of Nigerian adults (38 million adults), remained completely financially excluded at the end of 2020.
In 2019, the country had targeted at reducing financially excluded adults to 20 per cent through the National Financial Inclusion Strategy (NFIS).
However, data from the report, entitled “Access to financial services in Nigeria survey”, showed that only 64 per cent of Nigerian adults were financially included by the end of 2020.
Of the 64.1 per cent, 50.5 per cent (54.6 million adults) of Nigerian adults had access to formal financial services in 2020. The figure was up from 48.4 million.
In Sub-Saharan Africa, the data indicated that Nigeria had a higher rate of financial exclusion than many other countries.Although Nigeria has a higher proportion of banked adults than many comparator countries, it also has a high proportion of financially excluded adults at 36 per cent,” the report said.
It added that the financially excluded are predominantly dependents, reside in rural areas, have low education with and low proximity to access points. Of the 38 million financially excluded adults, 43 per cent live in the North West of the country.
Meanwhile, the Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele, announcing the new 94 per cent financial inclusion target for Nigeria by 2024 said the aim of the old financial inclusion target was to raise the number of those who are outside the system into the financial system by 80 per cent in 2020,” In other words, we wanted to reduce exclusion rate to 20 per cent by the year 2020. But the target was not feasible, hence the new deadline.