The policy by the Central Bank of Nigeria (CBN) that saw a downward review of bank charges has impacted the first quarter financials of tier-one banks as their earnings from electronic transactions dropped by N7 million, the first decline in decades.
Nigeria’s biggest banks generated N32.19 billion from e-transactions in the first three months of 2020, this was a 0.22percent decline from the N32.26 billion they raked in the comparable quarter of 2019.
“If you recall last year, the CBN implemented significant cut to E-Banking and other transactional charges for banks. Thus, while many of them saw volumes grow, the cut in fee per transaction outweighed volume growth,” Ayorinde Akinloye, research analyst at CSL Stockbrokers said.
With effect from January 1, 2020, charges on electronic funds transfer, for instance, attracted N10 for transactions below N5,000; N25 for those between N5,001 and N50,000, and just N50 for those above N50,000. This is compared to the initial flat rate of N52 per transfer.
“In a bid to encourage financial inclusion and to reduce the burden of bank charges on consumers of financial service, CBN has issued a revised Guide to charges by Banks, Other Financial and Non-Bank Financial institutions in response to the evolution in the financial industry over the last few years,” the Central bank said in December 2019.
The Guide to charges which was first released 15 years ago was revised in 2013 and 2017 in the light of market developments such as innovations in products and/or channels and new industry participants.
The new Guide sent to Banks, Other Financial and Non-bank Financial Institutions as contained in a circular includes, amongst others, a downward review of charges for electronic banking transactions, removal of Card Maintenance Fee (CAMF) on all cards linked to current accounts, reduction in the amount payable for cash withdrawals from other banks’ Automated Teller Machines (Remote-on-us), review of other bank charges to align with market developments, and inclusion of new sections on accountability/responsibility and a sanction regime to directly address instances of excess, unapproved and/or arbitrary charges.
According to the data from the financials of Nigeria’s biggest banks as analysed by BusinessDay, Zenith Bank, the lender with one of the largest customer base saw the most revenue decline from electronic transactions in Q1 2020.
The commercial bank reported N3.3 billion revenue drop from its electronic business. From the N8.7 billion generated in the first three months of 2019, Zenith Bank’s earnings from electronic banking shed 37.76 percent as it reported N5.44 billion in Q1 2020.
This was followed by GTB, which reported a decline of N69 million, from N3.18 billion generated from electronic transactions in the first quarter of 2019 to N2.49 billion in the three months ended March 31 2020.
To ensure strict compliance with the new guide to charges for financial institutions, the Central Bank instructed that an infraction by the lenders will attract a penalty of N2million.
“To guard against excess, unapproved or arbitrary charges by banks and other financial institutions, the Guide to Bank Charges stipulates a penalty of N2 million per infraction,” the Central Bank said.
The apex bank emphasized that the failure by any bank to comply with the directive in respect of any infraction shall attract a further penalty of N2 million daily until the directive is complied with or as may be determined by the CBN from time to time.
Further analysis of the banks’ first-quarter financials revealed that Access Bank had the most revenue from electronic transactions. The tier one bank reported an increase of N2.38 billion, from N2.56 reported in 2019 to N4.94 billion in Q1 2020.
The result by the tier-one lender largely reflects Access Bank post-merger benefits.
