Slashing of charges, banks have no choice but to implement it

Over two months after the slashing of bank charges by the Central Bank of Nigeria (CBN), some banks have shown compliance while few other banks are being stubborn about it.

As part of efforts to stabilise prices and balance rates, the CBN on December 20, 2019 released the regulatory guidelines on revised guide to charges by banks, other financial and non-bank financial institutions, to replace the one issued in May 2017.

Investigations revealed that a good number of customers do not monitor their transaction charges. Some of those who do either complained or were satisfied with their banks in terms of compliance.

“I have not really looked at it that is just the bottom-line,” a Lagos based importer told BusinessDay by phone.

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. These developments have made it imperative for continued vigilance by the regulatory authorities to ensure the protection of consumer rights as more individuals are financially included whilst encouraging market forces to increasingly drive pricing for financial products.

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“My bank (Polaris Bank) charged me N10 on one of the transactions and N25 on another transaction,” said a customer who lives Okoko and works in Apapa.

Following the new guidelines, which took effect from January 1, 2020, customers are to pay N10 for transactions below N5, 000. Transaction from N5,001 – N50,000 is to attract N25 fee and above N50,000 is pegged at N50, instead of N50 – N52.50k charged before the new guideline.

Another bank customer, lady from Ikorodu said, I did transaction of N20,000 and GTBank charged me N10. I did another transaction with First Bank and I was charged N25”.

However, all the customers of Access Bank interviewed by BusinessDay complained that the bank is still charging between N50 and N52.50k.

Statistics from NIBSS on electronic transfers from June to November 2019 show that number of transfers below N10,000 accounted for 61 percent of the number of electronic transfer transactions. This is a confirmation that that the reduction of the charges for micropayments has huge potential for financial inclusion.

Johnson Chukwu, managing director, Cowry Asset Management Limited, said banks customers stand to gain in the new charges and that because they are the beneficiaries; it is in their interest to enforce it.

“Because it is now regulated to the extent that the CBN will enforce it, I don’t think the banks have the freewill to bypass or circumvent it”, he said.

Some of the major highlights of the new guide includes removal of card maintenance fee (CAMF) on all cards linked to current accounts, a maximum of one naira per mille for customer-induced debit transactions to third parties and transfers or lodgements to the customers’ account in other banks on current accounts only, reduction in the amount payable for cash withdrawals from other banks’ Automated Teller Machines (Remote-on-us), as well as from N65 to N35, after the third withdrawal within one  month.

Other reductions include Advance Payment Guarantee (APG) which is now pegged at maximum of one per cent (1 percent) of the APG value in the first year and 0.5 percent for subsequent years on contingent liabilities.

Uju Ogubunka, president, Bank Customers Association (BCAN), said if the banks are still using the old guide to bank charges, they are overcharging customers and that shows disobedience the regulators.

“The earlier the banks begin to comply with the new directive on bank charges, the better for all of us”, Ogubunka told BusinessDay by phone call.

The development is part of CBN’s monetary instruments used to complement fiscal policies and tackle other challenges including checking inflation to grow the economy.

Inflation moved up to 11.98 percent (year-on-year) in December 2019, the highest rate within that year and also since May 2018.

More so, the rates cut can be seen as a buffer against VAT increase to 7.5 percent effective this month, which will in turn further spike prices.

Ayodele Akinwunmi, relationship manager, corporate banking, FSDH Merchant Bank Limited, said the magnitude of the increase in the VAT will be more than the reduction in the bank charges.

He noted that the Federal Government raised VAT because it needs more revenue as tax to revenue is low, revenue to GDP is low and interest expense to revenue is very low.

Akinwunmi said the FG is adopting this strategy to see how it can generate more money in its coffer. He admitted that banks electronic transactions are increasing, and the CBN is trying to create more efficiency, through cost reduction.

The two are addressing two different things he said adding that people will also adopt the cashless policy that the CBN is trying to push which also will drive efficiency.

It was stated in the revised guide to bank charges that any breach of the provisions of the new guide carries a penalty of N 2,000,000 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 CBN said in the guide.

The innovations supported by a sound regulatory framework have indeed transformed the Nigerian financial landscape over the past decade which has driven financial inclusion (according to EFINA, financial inclusion increased to 63.2 percent as at December 2018 from 60.3 percent in December 2012 ) and the increased use of electronic payments across several channels by bank customers. Data from the Nigeria Inter Bank Settlement System (NIBSS) shows that PoS transactions increased by 4,692 percent between 2012 and 2018 from N48.46 billion to N2.3 trillion while electronic transfers increased by 1,967 percent from N3.8 trillion to N80.42 trillion. Paper based cheque transactions declined by 32 percent from N7.48 billion to N5.03 billion.

The revised guide to charges according to Isaac Okorafor, director, communications department, CBN, is yet another move by the CBN to build an inclusive banking system that adequately caters for the needs of the banking public whilst preserving the financial sustainability of banks, other financial and non-bank financial institutions.

The Guide will incentivize stakeholders, especially those making micro payments, to further embrace electronic banking channels, thus improving financial inclusion. It will also reduce cost of banking services to customers to deepen access without much impact on bottom line of regulated institutions under the purview of the Bank.

Other changes introduced in the revised guide include card maintenance fee on current account which has been removed as the accounts already attract account maintenance fee. Savings accounts will now attract card maintenance fee of N50 per quarter from N50 per month. Bank customers decried that their banks are still charging them N50 maintenance fees monthly.

Annual card maintenance fee on Foreign Currency (FCY) denominated cards is reduced to $10 from $20.  Remote on us ATM charges are reduced to N35 after third withdrawal within a month from N65; the charge for hardware token will on cost recovery basis subject to a maximum of N2,500 from previous maximum charge of N3,500; and Bill payment via e-channels will attract a maximum charge of N500 from 0.75 percent of transaction value subject to maximum of N1,200, among others.