Experts call for caution as banks reap bountifully from charges

BY EMEKA EJERE

Increasing revenue generated by deposit money banks (DMBs) in Nigeria from electronic transactions and other forms of commission may be strengthening the balance sheet of these financial institutions.

But financial experts are worried that the trend, if not well managed, also has a high propensity of discouraging the public from subscribing to banking services, with negative consequences on the financial inclusion agenda of the Central Bank of Nigeria (CBN).

According to the financial reports of banks in the country, 11 DMOs charged their customers N714.61bn for electronic fees and other forms of commissions in the first nine months of 2022. This is a 16.92 percent increase from the N611.21bn earned by the banks from the income source in the corresponding period of 2021.

Data from the National Bureau of Statistics (NBS) showed that just nine of the DMOs made N554.23 billion in fees and commissions in 2021. This is 29.4 percent better than the N428.32 billion for the same period in 2020.

According to Access Holdings Plc, fees and commissions expenses are fees charged for the provision of services to customers transacting on alternate channels platform of the group and on the various debit and credit cards issued for the purpose of these payments.

It said, “They are charged to the group on services rendered on internet banking, mobile banking, and online purchasing platforms. The corresponding income lines for these expenses include the income on cards (both foreign and local cards), online purchases, and bill payments included in fees and commissions.”

The 11 banks that raked in N714.61bn from the charges included: Zenith Bank Plc, Sterling Bank Plc and subsidiary, Stanbic IBTC Holdings Plc, Wema Bank Plc, Fidelity Bank Plc, and Union Bank of Nigeria Plc.

Others were: United Bank for Africa Plc (UBA), Unity Bank Plc, First Bank of Nigeria Holdings Plc, Guaranty Trust Holding Company and subsidiary Companies, and Access Holdings Plc.

The fees and commissions included: credit related fees and commissions; account maintenance charges; corporate finance fees; e-business income; asset management fees; and commission on foreign exchange deals.
Others were commission on touch points; shared service fees; income from financial guarantee contracts issued; account services, maintenance and anciliary banking; and transfers-related charges among others.

While UBA led in revenue from these sources with N138.08bn, Unity Bank made the least with N5.34bn.  Zenith Bank Plc made N117.90bn; Wema Bank made N12.02bn; Fidelity made N25.04bn; Stanbic IBTC made N72.47bn; Union Bank made N12.65bn; Sterling Bank made N19.84bn; Access Holdings made N133.49bn; GTCO made N66.94bn while FBN made N110.84bn.

With insecurity forcing banks to down on operations in the hinterland, preferring to operate in the relatively more secure urban centres, banking is not expanding as it should, thereby cutting off many people.

According to the Nigerian Inter-Bank Settlement System (NIBSS), as of 2020, there were 111.54 million active bank accounts, a 14.41 percent growth over the 2019 figure, and largely driven by the Covid-19 pandemic lockdown. Despite this, financial exclusion is still high for the adult population, partly because of the banks’ costly charges.

A 2020 survey by the Enhancing Financial Innovation & Access (EFInA) said only 45 percent of adult Nigerians were banked in 2020, up from 40 per cent in 2018. EFInA data shows that about 64 percent of Nigerian adults were financially included by the end of 2020, meaning that 36 per cent of Nigerian adults remain completely financially excluded.

This is out of tunes with the National Financial Inclusion Strategy target of 80 percent. Experts say financial inclusion is a key enabler to reducing poverty and boosting prosperity. The CBN says, “Financial inclusion is a strong lever for bridging income inequality, combating poverty and preserving social harmony.”

A tribunal established by the Chartered Institute of Bankers of Nigeria (CIBN) received 2,256 petitions from depositors amounting to N546 billion in 2021. Although the CIBN resolved 2,216 cases, sources say victims are traumatised; many others do not get a reprieve.
A report by the Innovations for Poverty Action and the Inclusion for All initiative, Measuring Fees and Transparency in Nigeria’s Digital Financial Services released in March noted that banks are charging customers above regulatory limits and are making them pay undeclared charges, thereby hampering the country’s effort to reduce financial exclusion.

The report said the cost of financial services remains a major barrier to access for price-sensitive consumers, especially within marginalised, vulnerable, and lower-income segments of society.

Recognising the impact of product pricing on financial inclusion outcomes, the CBN reviewed pricing guidelines in 2019, issuing lowered pricing caps for electronic banking transactions effective January 1, 2020. The new guideline mostly impacted card maintenance fees, charges for hardware tokens, and the amount that can be paid for electronic transfers. In addition, the apex bank encouraged financial service providers to restructure transaction fees and limits.

The action supports Nigeria’s digital financial services uptake, which increased during the Covid-19 pandemic, where government responses such as lockdown restrictions led to the temporary closure of bank branches, reinforcing digital access.

According to the President of the Bank Customers Association of Nigeria, Uju Ogubunka, banks were making a lot from bank charges, burdening bank customers.

“The issue of excess charges has been a major source of concern to us as an association. We have since been fighting it and we will not stop.
“However, I must say that in most cases, the excess charges imposed on bank customers are not deliberate but a result of a capacity-building problem.

“That is when new recruits or inexperienced hands handle transactions and overcharge. Also, most times, when the banks overcharge, they are made to repay customers with prime interest plus two percent.”

A finance and public policy expert, Jide Ojo, said the impunity of indiscriminate and criminal bank charges from ATM maintenance fees to card maintenance fees is capable of jeopardising the nation’s drive toward development and financial inclusion.

“Even the issue of removal of charges on ATM withdrawal has been grossly flouted by banks. Unlike before when bank customers could withdraw up to N40,000 at once, now you can only withdraw N10,000 at once.

“It, therefore, does not come as a surprise that many bank customers are closing their bank accounts. This poses a serious threat to the financial inclusion plan of CBN.”

However, the Head of Corporate Communication at the Nigeria Deposit Insurance Corporation (NDIC), Bashir Nuhu, in a statement on Tuesday seen by Business Hallmark, said activities of NDIC have not only enhanced depositors’ confidence in the financial system, but have also served as incentive to the unbanked to access financial services of the licensed banks.

He said: “The NFIS (National Financial Inclusion Strategy) set the target of reducing the percentage of adult Nigerians that do not have access to financial services from 46.3% in 2010 to 20.0% in 2020.

“Since the launch of the NFIS, stakeholders have achieved great strides in achieving financial inclusion objectives which has resulted in the exclusion rate dropping from 46.3% in 2010 to 35.9% in 2020.”