The decision by the Central Bank of Nigeria (CBN) to cut down electronic payment charges by banks is crucial for its financial inclusion strategy as espoused in its five-year policy thrust and it is also a reassurance on its stance to protect consumers, writes James Emejo
Perhaps to the ordinary Nigerian, arguably, one of the greatest disincentives to banking is the various unjustified service charges, particularly in the use of electronic payment platforms, including automated teller machine (ATM) and point of sale (PoS) services as well as debit card maintenance charges, in recent times.
At a period when efforts are being made by financial regulatory authorities to deepen financial inclusion by enhancing access to financial products, the outrageous bank charges on consumers who utilise services could be a major drawback in the current efforts to bridge the percentage of adults who are excluded from financial services in the country.
Hapless Nigerians had continued to groan under all sorts of bank charges including stamp duty, intra and inter-bank transactions, deposit and withdrawal fees and account management fees-a development, which had heightened customers apathy to banking services, especially amidst the present economic reality.
Yet, financial inclusion seeks to deliver services at affordable costs to sections of disadvantaged and low income segments of the society.
The CBN, in collaboration with other stakeholders, had been implementing policies that would encourage more people to embrace digital financial services thereby cutting down on the cost of producing and managing the physical currency, with all its attendant negative consequences and the socio-economic implications.
Earlier in the year, CBN Governor, Mr. Godwin Emefiele, while unveiling his five-year policy thrust following his reappointment as the apex bank governor for the second tenure, stressed that the bank sought to “broaden access to financial services to individuals in underserved parts of the country.”
He said: “Our ultimate objective is to ensure that 95 per cent of eligible Nigerians have access to financial services by 2024.
“We will also intensify our financial literacy and consumer protection programmes such that current and eligible bank customers are fully aware of the financial services being offered to them as well as the cost of utilising these services, which will enable them to make well informed choices.”
He said: “Besides providing valuable information to banking customers, we are committed to developing and enforcing strong rules to protect consumers.
“Our banking supervisory and consumer protection department at the CBN will ensure that dispute resolution mechanism in financial institutions are not only efficient, but also timely, in order to maintain the confidence of the Nigerian populace in the utilisation of banking services.”
It is estimated that 60 per cent of the Nigerian adult population which is estimated at 99.6 million are now financially included while 39.6 million are financially excluded, according to a 2018 report by EFInA.
The ultimate objective of financial inclusion had been its potential to boost poverty alleviation, and aid real sector growth as well as assist regulatory agencies better and informed decisions as idle capital from the informal sector is brought is attracted into the formal sector.
It is against the backdrop of public outcry over the persistent bank charges and the need to keep the financial inclusion target alive that Emefiele recently provided a reprieve to bank customers by announcing some reduction in bank charges to customers.
The CBN governor had on the eve of Christmas via a new circular titled ‘Guide to Charges by Banks, Other Financial, and Non-Bank Financial Institutions,’ which becomes effective from January 1, 2020, announced the downward review of charges for electronic banking transactions.
The directive further reviewed other bank charges to align with market development and the inclusion of new sections on accountability/responsibility and a sanction regime to directly address instances of excess, unapproved or arbitrary charges.
Some of the major highlights of the new Guide to Bank Charges include the removal of Card Maintenance Fee (CAMF) on all cards linked to current accounts, a maximum of N1 per mille for customer induced debit transactions to third parties and transfers or lodgments to the customers’ account in other bank on current accounts only; reduction in the amount payable for cash withdrawals from other banks’ Automated Teller Machines (Remote-on-us), as well as from N65 to N35, after the third withdrawal within one month.
Other reductions include Advance Payment Guarantee (APG) which is now pegged at maximum of one per cent of the APG value in the first year and 0.5 per cent for subsequent years on contingent liabilities.
Also, for cards linked to savings account, the maintenance fee has been reduced to a maximum of N50 per quarter, from N50 per month, amounting to only N200 per annum instead of N600.
Furthermore, there will be no more charges for reactivation or closure of accounts such as savings, current and domiciliary accounts while status enquiry at the request of the customer (like confirmation letter, letter of non-indebtedness and reference letter) will now attract a fee of N500 per request.
On CAMF, the guide expressly stated that this would be applicable only to current accounts in respect of customer-induced debit transactions to third parties and debit transfers/lodgments to the customer’s account in another bank. It stated that CAMF was not applicable to savings accounts.
To guard against excess, unapproved or arbitrary charges by banks and other financial institutions, the guide stipulates a penalty of N2,000,000 per infraction or as may be determined by the CBN from time to time for financial institutions that breach any provision of the guide.
The guide also stipulates that failure by any bank to comply with CBN’s directive in respect of any infraction shall attract a further penalty of N2,000,000 daily until the directive is complied with or as may be determined by the CBN from time to time.
Among other things, the apex bank, further directed banks to log every complaint received from their customers into the Consumer Complaints Management System (CCMS) in addition to generating a unique reference code for each complaint lodged, which must be given to the customer.
Emefiele had explained that the decision to slash the bank charges was particularly considered to ameliorate the pains of customers.
He said: “The CBN has been receiving commentaries by bank customers about bank charges. Normally, these charges are reviewed every five years. But this time, we decided that in order to assuage the feelings of bank customers, that we should review downward some charges.
“Like you can see, for the various charges that have been reviewed, you will find that we have taken into consideration, the interest of bank customers and we would continue to review this.
“Where we find out that there are pains being borne by bank customers, we would try as much as possible to ameliorate such pains, so that banks are not seen to be extorting the customers in unfair manners.”
The new directive has, however, been applauded by experts who maintained that it would have a salutary impact on the well-being of Nigerians and the economy in general.
Also, in a related development, the apex bank, in further providing succour to consumers also advised customers not to pay N50 charge to businesses for using POS machines.
Currently, consumers who made payments for merchandise using the POS are debited N50 per transaction for the use of the platform.
CBN Director, Payment System Management Department, Mr. Musa Jimoh had explained that, “The stamp duty is a fee regulated by an act. The CBN doesn’t regulate the stamp duty so we can’t change anything. Stamp duty as it is today has been misinterpreted.”
According to him, “Our circular that talks about merchants paying stamp duty according to the law does not say that the stamp duty should be paid by the consumer. That’s actually a misrepresentation of the CBN’S directive.
“What our directive says is that merchants should pay all necessary charges as regulated by the government agency including stamp duty. When there is an electronic transaction to an account other than savings account and the transaction amount is more than N1,000, you have to pay stamp duty.
“Our explanation to banks is that we would like the merchants to comply with this directive by ensuring that every single payment customers make to them, the merchants pay the regulated stamp duty of N50.”
However, commenting on the development in an interview with THISDAY, an economist, Dr. Anthony Onoja, commended both the review on bank charges as well as stoppage of N50 PoS charge for consumers, further describing it as a positive response to the yearnings of financial services consumers as well as boost the momentum for a cashless economy.
He said, “The reduction in bank charges and slashing of ATM, card maintenance charges as well as stoppage of the N50 POS charge for consumers is very timely and needful in Nigerian economy given its negative impact on Nigerian economy.
“It is a positive response to the yearnings of consumers, households and firms in Nigerian economies who have since been beleaguered by increasing cost of doing business in Nigeria owing to increased transactions costs which have negated the drive to attain a cashless economy in the country.”
According to him, “Most customers and businesses who were operating electronic banking were already changing their strategies by doing business with cash rather than doing so via electronic banking to avoid the overwhelming costs involved in engaging in e-commerce in Nigeria lately.
“With the increase in cost of transactions in the economy before now business firms burdened by these costs transferred the marginal costs from increase in financial costs of their businesses to the customers so as to stay on the same and previous level of profitability before the new regime of increased costs of e-commerce costs occasioned from hikes in bank charges and electronic banking charges.
“Consequently these have contributed to rise in inflation (general increase in price level in the economy). Hence, with the latest decision of reduction in these charges by the Central Bank of Nigeria, there will be, at least, some marginal decrease in inflation rate in the country as well as increased momentum in attainment of a cashless economy.
“This is one of the best decisions taken by the Central Bank this year to regulate the Nigerian economy. Results of the impact of this policy will be positively observed in 2020.”
According to the Director, Communication and Public Affairs. Nigeria Deposit Insurance Corporation (NDIC), Dr. Sunday Oluyemi, on the role of banks in financial literacy and financial inclusion, many payment products suffer from being supply driven, aimed at solving industry inefficiencies instead of consumer pain points.
In a paper presentation at the just-concluded workshop for finance correspondents and business editors in Yola, Adamawa State, he maintained that achieving the targeted level of financial inclusion required concerted efforts by all stakeholders, particularly banks to tackle the associated challenges as the country moves towards the ideals of Vision 2020.
According to the NDIC director, “Enhanced financial literacy is key to financial inclusion: financial inclusion, consumer protection, and financial literacy complement each other.
“The National Financial Inclusion Strategy (NFIS) is essential to increase financial inclusion and consumers have to gain the knowledge, skills and confidence they need to make good financial decisions and the banking industry is necessary and supportive of the strategic goals.”
Even though the CBN directive on the review on bank charges has been applauded, Nigerians still await a concrete directive to PoS vendors to practically desist from charging consumers N50 for the use of the machine as the practice currently subsists despite the clarification from the apex regulatory body.