For all we all know, the Central Financial institution of Nigeria (CBN) was established as regulator of banks not an establishment to interact in advocacy for banks. Nevertheless, in what appears to be like like advocacy for banks, the CBN lately made an upward overview of costs relevant to money transactions via Computerized Teller Machine (ATM).
For off-site (places exterior the banking atmosphere), N100 cost plus surcharge no more than N500 for N20,000 withdrawal. For onsite, N100 per N20,000 withdrawal from March 1, 2025.
This isn’t the primary time the CBN is elevating tariff to allow banks to get well rising operation prices. The explanation for the upward overview of costs can not deceive anybody who desires to consider that the CBN is complicit within the sport of ripping off financial institution prospects. It is because it’s not the operate of the CBN to assist banks get well working prices. However why solely banks? Each enterprise entity is dealing with rising value of operations at the moment.
Within the case of banks, they report outrageous revenue 12 months in 12 months out thus supporting the argument that they get well all working prices, fastened value, variable value and marginal value of operations. Certainly banking is likely one of the most worthwhile companies in Nigeria of at the moment with the very best return on capital employed vis a vis different industries. It’s on report that previously ten years, a lot of the banks have been reporting rising revenue. What then is the enterprise of the regulator in serving to them to get well working prices by elevating tariff?
In accounting phrases, the bills in upkeep of ATM is a income expenditure, prices you invite to drive your small business. Such bills are recoverable from the tax authorities as allowable expense by charging it to revenue within the revenue and loss account earlier than arriving at revenue earlier than tax. So elevating tariff to allow banks get well prices is a subsidy on banking enterprise in an period authorities is eradicating subsidy on petrol, energy, agricultural worth chain and so forth.
An examination of Information to Financial institution Expenses 2017 is critical at this stage of our dialogue to maintain our argument that the CBN is utilizing unconventional tariffs to prosper banks. Underneath part 1.1 referring to present account credit score stability, the doc didn’t state a selected curiosity to be paid by banks. What’s acknowledged is that it’s “negotiable”. What’s the foundation of negotiation?
Part 2.1 offers with rate of interest on native foreign money loans. It states that the speed payable is “negotiable” (the speed ought to anchor on MPR reflecting the danger based mostly pricing mannequin). What the CBN had performed is to cost deposits at easy curiosity and loans and different credit score merchandise at compound curiosity. In different phrases, if I’ve say N10m deposit in a financial institution, they pay me curiosity at easy curiosity (slower fee ) but when I borrow similar N10m, the financial institution costs me compound curiosity (sooner fee).
The above pricing mannequin is in gross violation of established banking rules in belongings and liabilities administration. The precept states that you just value belongings and liabilities in the identical funding portfolio on the identical foundation? So why is the CBN pricing belongings (loans) and liabilities (deposits) on totally different foundation? This mis-match in pricing is liable for the huge default by mortgage beneficiaries which is dangerous for the financial system. The nation can not report development when Small and Medium Enterprises can not borrow at reasonably priced fee.
One other part of the financial institution tariff which favours banks is part 2.1.9 coping with Penalty Fee. That is penalty fee for late reimbursement of mortgage instalment. Underneath this part, Naira loans and advances beneficiaries pay most one per cent flat fee (12 per cent each year) on unpaid quantity along with charging present fee of curiosity on excellent debit (with out prejudice to the provisions of Prudential Pointers on limitation of accruals). This part ought to be scrapped as a result of enterprise has gestation interval to mature and yield revenue however banks don’t appear to grant a interval of curiosity cost solely, (moratorium) to mortgage prospects. Throughout this time, cost of principal is suspended.
One other cost that ought to be scrapped is Present Account Upkeep Charge (CAMF). This payment is relevant to present accounts in respect of buyer induced debit transactions to 3rd events and debit/ lodgement to the client’s account in one other financial institution. This cost was referred to as Fee On Turnover (COT) The speed payable is negotiable topic to most N1 per mille, N1 per N1000 debit or 0.001 per N1000.
What’s the rationale for this cost when no curiosity is paid on present account credit score stability? That’s the reason this author is of the view that the CBN is complicit within the rip off of financial institution prospects.
The proposed increase in ATM costs is ridiculous. Why cost prospects when ATM is self service transaction? If the client walks into the banking corridor to withdraw cash, a financial institution teller or cashier paid by the financial institution will render the service freed from cost throughout the counter of the financial institution. ATM is a mechanised money service level. Banks ought to make the price of upkeep of those machines as a traditional enterprise expense.
The time has come for the CBN to focus on their operate as a regulator not as an Advocacy group for banks. It isn’t the operate of Central Financial institution wherever within the banking world to repair costs for companies like ATM utilization which by the best way is an choice. One can nonetheless accumulate money from the financial institution with out ATM. Due to this fact, the directive ought to be withdrawn as a result of it can’t be justified. Enyinnaya, Creator and Fellow Chartered Institute of Bankers.
