Nigerians who have bank account in tier-one banks in the country paid a total of N15.65 billion as account maintenance charges in the first quarter of 2019.
BusinessDay’s analysis of Q1’19 financials of Nigeria’s biggest banks – Zenith, Access, Guaranty Trust (GTB), United Bank for Africa (UBA) and First Bank – revealed an increase in account maintenance changes as against the year before.
The five tier-one banks reported 18.65 percent increase in the collection of account maintenance charges from N13.19 billion paid by the banks’ customers in the previous comparable period to N15.65 billion in Q1’19.
Johnson Chukwu, managing director, Cowry Asset Management Limited, said the increase was a result of the high level of economic activities in Q1 19 compared to the corresponding period of 2018.
“We have seen an increase in the level of financial inclusiveness to the extent that a lot more transactions now go through the financial institutions instead of the normal cash transaction,” Chukwu said.
“Hardly do you see people do large volume of cash transactions and so it simply means that a lot more economic engagements are now going through the financial system,” he said.
Thus, the Lagos-based analyst said, it is only normal that whenever there is general improvement in economic activities, tier-one banks will be the first beneficiaries considering they are the dominant players in the market. He added that the surge in the account maintenance charges may not be due to increase in the charges but increase in the volume of transactions.
Account maintenance charges are fees charged to current accounts. One naira on every N1,000 in respect of all customer-induced debit transactions is charged on these accounts. These fees are earned by the bank at the time of each transaction and the bank recognises its income accordingly, according to the Central Bank of Nigeria’s guide to charges by banks released on April 21, 2017.
Thus, the current account maintenance fee (CAMF) should be charged at a negotiable rate but subject to a maximum of N1 per mille when a customer initiates a transfer out of their account.
Ayodeji Ebo, managing director, Afrinvest Securities Limited, agreed that the increase in the banks’ account maintenance charges was due to the surge in the volume of bank transactions in Q1 2019.
“We see there is now increase in financial inclusion, as there is reduction in cash transactions. You can see this in the adoption of POS coupled with the fact that businesses now resort to carrying out financial transactions through the banks relative to conventional cash transactions,” Ebo told BusinessDay.
BusinessDay analysis of the big banks’ financials revealed that they received a combined N16.9 trillion from customers through deposits across various account types in Q1 of 2019, which is 12.5 percent above N15.1 trillion collected in the previous comparable period.
The total deposits received from customers based on account type for the tier-one lenders revealed that 44 percent, equivalent to N7.54 trillion, was paid into current account.
According to Yinka Ademuwagu, research analyst at Lagos-based investment advisory firm, United Capital plc, this points to the fact that banks are leveraging financial technology (Fintech) to grow their customer deposits.
“Most banks are seen to be exploiting Fintech such as Chatbot, USSD and Internet Banking to penetrate into the economy and bank the unbanked,” Ademuwagu said, adding that overall, it connotes improvement in economic activities.
A breakdown of other account deposits revealed that customers deposited N4.05 trillion in term account; N3.82 trillion in savings account, N1.53 trillion in domiciliary account and N11.08 billion in electronic purse account on the aggregate, in Access Bank, Zenith Bank, United Bank for Africa, Guaranty Trust Bank and First Bank.
A further analysis of the individual charges collected by the five banks in Q1 2019 revealed that Zenith Bank reported N5.24 billion in charges compared to the N4.96 billion it recorded the year earlier.
First Bank, GTB, and Access followed in line with N3.22 billion, N3.04 billion and N2.21 billion, respectively, as against the N2.99 billion, N2.74 billion and 895.45 million they each reported the year before.
Although it reported an increase in the review quarter, UBA recorded the least account maintenance charges in Q1 2019 compared to its tier-one peers. It reported a 23.13 percent increase from N1.6 billion in Q1 2018 to N1.97 billion in Q1 2019.
Endurance Okafor
