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NIGERIA - Nigerians bemoan multiple bank charges.

Summary: With a number of unwarranted bank charges, will Nigerians begin to abandon their bank accounts?

The first day of every month is a big day for Nigeria's com- mercial banks. It is the day all sorts of fees and commissions are charged on customers' accounts for services rendered -- and with this comes a huge chunk of bank revenue.

But while banks' balance sheets feel the benefit of a windfall, banks' customers are usually left feeling disgruntled as cash seemingly just vanishes from their accounts.

This is exactly how Bisi Amodu felt when she received a SMS alerting her that N4,500 ($16) was debited from her savings account. "They have just taken my money again. And it is painful to pay for services that I never even subscribed to, let alone enjoyed. I never asked for my bank to send me daily account balances, but they do and it is costing me a fortune," she says.

Her friend, Aisha Bello has also fallen victim to seemingly unwarranted charges. In three months, Bello lost over N100,000 in fees and commissions on her corporate account. "My bank balance kept falling even when I did not make any cash withdrawals. My bank keeps saying the charges are legal, but for me, it is a disturbing situation that needs to be addressed by the regulators otherwise a lot of people will have to abandon their accounts," she claimed.

One of the highest charges shouldered by customers are for debit card transactions abroad, which are often far above official exchange rates and is actually in violation of the guide to bank charges monitored by the Central Bank of Nigeria (CBN).

One customer, Adetayo Sotade, was charged over N380 per dollar by his bank, even when the official exchange rate was N285 to dollar on the interbank market and N350 on the parallel market. "I do not know where my bank got its figure. I think they just sit down there and decide the rate and nothing is being done about it," he said.


Over 30m bank customers in Nigeria have continued to endure multiple -- and sometimes illegal -- bank charges and fees, which were worsened after banks' revenues plunged over loan loss to oil assets and tough regulation by the CBN.

Banks' results in the first quarter of this year a widespread decline in almost all indicators. Ecobank group's profit after tax (PAT) dropped 35% to $81.4m while FCMB Holdings' PAT also declined by 93% year-on- year to $2.11m. Fidelity Bank's results came in weaker than expected with PAT dropping by 99% year-on-year while that of FBN Holdings, Nigeria's biggest bank by assets, fell 8.3% from $114m to $104m. The same weak performances were seen across all other lenders.

In response, banks introduced several charges and fees to recoup losses and remain af loat at the expense of their customers.

Today, customers pay N105 for every online transfer and N50 stamp duty on current acount transactions over N1,000. As part of its cashless banking drive, the CBN has approved a processing fee of 3% for individuals and 5% for corporates if they exceed their daily limits on cash withdrawals of N500,000 and N3m respectively. There are also text message fees and processing, management and draw- down fees for loan accounts.

When more than 400,000 customers lodged arbitrary charges complaints against their lenders between June and December 2015 the debate around bank charges came to a head. The Consumer Advocacy Foundation of Nigeria, a non-governmental organisation led by Sola Salako urged bank customers to shun banking services, including online transactions throughout the day on 1st March. Nearly 40% of bank customers took part in the No Banking Day protest.

Richard Obire, co-founder and chairman of ReadyCash Nigeria, described these bank charges as too high. He said the customers of the banks are also affected by the same economic downturn in the economy that hurt lenders' performance.

"Bank customers have lost a lot sustaining their purchasing power because of rise in inflation which is 13.7% in April. The customers also bear the brunt of price increases in energy and electricity tariffs. Remember the charges also come with VAT paid to government. They are trying the kill the customers, especially small businesses, which are the goose that lays the golden eggs for this economy," he said.

For Obire, introducing more charges is not the solution to banks' decline in profit. Rather, the lenders should adopt a more efficient cost management strategy that could entail infrastructure sharing.

"Many banks build big telecom masts for their networks, run on generators throughout the day to support their systems and even open more branches instead of improving on their e-payment platforms. I believe they can produce better results if two or three banks run on one generator, share telecom masts and also share the costs equitably," he suggested.

He said that the rising cost of banking operations could hurt the small and medium-sized enterprises (SMEs) that create majority of the country's jobs.

Uju Ogubunka, former registrar, Chartered Institute of Bankers of Nigeria, said that both the CBN and banks are expected to protect the interest of customers but that they do not seem to be doing so. He believes those who are protecting banks' interests at the expense of their customers and businesses are not helping to bring the needed growth to the banking sector and economy. He said the new fees will discourage the financial inclusion advocated by the CBN and commercial banks.

The CBN's financial inclusion target remains to provide financial access to the hundreds of millions of men and women who are presently excluded from financial services.

Fears for the future

As Aisha Bello fears, if these fees are not eased or reduced drastically, the number of people excluded from the financial services sector will likely increase from 39.5% at present to over 50% in the next five years.

She has therefore called on the CBN to take a second look at these fees and charges in order not to discourage more people, especially the low income earners, from embracing financial services which boost productivity and economic development.

Over 30m bank customers in Nigeria have continued to endure multiple -- and some illegal -- bank charges and fees.

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Publication:African Banker
Geographic Code:6NIGR
Date:Aug 31, 2016
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