Excessive charges expose lenders’ lack of intermediation traction

The ongoing arbitrary charges by banks through what the lenders regard as maintenance, short message service (sms) fees and other hidden charges, even in the face of declining customer service and facilities, may have exposed their lack of intermediation footing, BusinessDay findings show.

The current exploitative inclination is further fuelled by the recent abolition of  commission on turnover (COT)  by both the Central Bank of Nigeria (CBN) and the banks, implementation of the Single Treasury Account and unification of both the cash reserve ratio (CRR) and the subsequent reduction of the rates, making investments in Treasury Bills less attractive.

“Apart from the disappearance of the cheap source of revenue, the current development has exposed lack of ingenuity and creativity on the part of banks to mobilise risk assets,” says Friday Ameh, an energy analyst in Lagos.

Ameh also attributes it to likely dearth of manpower to either prepare or scrutinise proposals brought by customers.

Bolade Agbola, executive director, Cashcraft Asset Management limited said, “The abolition of  commission on turnover (COT)  by the apex  banking regulatory agency  , the Central Bank of Nigeria (CBN) led to the emergence of all sorts of fees to replace the lost  COT, which in times past was a vital income source for banks .

“The CBN’s action symbolises  the full deregulation of banking services in Nigeria .The onus is on bank clients to engage their banks and negotiate the fees they are willing to pay, based on proper market survey.

“The big clients  who are discerning,  would be  able to secure concessionary fees  and charges because  of their clout and negotiating capacity, while the small  to medium  sized businesses and individual non- discerning   clients  may be at the mercy of their bankers. They should shop around and move their business to banks that are willing to charge reasonable fees.”

Consequently, Bismarck Rewane, chief executive, Financial Derivatives Company, predicts that the accompanying regulatory scrutiny will intensify in the sector, with the attendant poor showing in their earnings.

“Net interest margin compression, COT which takes full effect in 2016, will lead to bank’s profitability being called to question,” Rewane said.

Razia Khan, in the current Standard Chartered bank’s Premise Consumer Price Tracker (SC-PCPT) says that the development is capable or impacting negatively on the revenue of the country, as excessive charges could lead to diversion of activities to the informal sector.

“Banks comprise a key part of Nigeria’s formal sector economy, contributing even more significantly to government revenue, following the 2016 introduction of a stamp duty on banking-sector transactions. However, the diversion of economic activity from the formal banking sector risks further eroding this revenue contribution.”

John Omachonu