I am a big fan of the Nigerian banking industry. It remains one of the few sectors that continue to deepen our national competitiveness. A force for good, we are increasingly proud of our banks. Yet, there is paralysis in the sector. Yes, it is on stasis, and they need to correct the ills as quickly as possible.
Our banking sector is now a den of fees. There are amalgam of fees in all forms and formats. It is very nauseating that you pay fees to keep your money with your bank, and to take it out, you pay another fee. The ATM fee is a bad idea. Sure, I know that banks have bills to pay, and they are not charities. But the redesign in the programming of most ATM machines is fraudulent.
This is my observation: most bank ATM machines would not allow you to collect anything more than N10k in one transaction. And by the time you hit the three free transactions in non-domiciled bank ATMs in a month, the N65 fee kicks in. The N10k limitation is not because of ATM dispensing capacity; most of the ATMs are churning out N1000 bills. So, technically, the ATM can pay N20k (with N1K bills) in one transaction if it can pay N10k with N500 bills. (The thickness of the N1k and N500 is the same.) But there is no option for that; most ATMs would simply tell you that your maximum withdrawal limit is N10k. But it has no problem allowing you to use it five times for N50k.
Do not tell me that they are using that to reduce fraud. Far from it, since the individual can withdraw five times for N50k broken into 10k fractions, and no one is stopping him or her. I see this as pure play for fees. It is unfortunate.
Clusters of Fees
The strength of our industry is how efficient it can remove frictions in its sector. Our banks are creating huge frictions with the clusters of fees. Without spending minutes, I can count more than five common fees in the industry:
- ATM fees for more than three transactions in non-domiciled bank in a month. That goes for N65.
- Debit card maintenance fee which is now very popular. Some banks charge N50 for that monthly. I do not have problem with the original debit card issuance fee. That is fine. While most banks in some economies do not charge such, it is fair for our banks to charge the issuance fee.
- Stamp Duty is now popular for digital transactions. In other words, if you process transactions digitally, government buys stamp and puts on them. That is unfortunate.
- Account maintenance fee is charged monthly. It is what you get for banking with some Nigerian banks. So, every month they collect small money from your balance.
- Over the counter transaction fee is a fee if you want to work with a bank human teller on some transactions. This fee is structured to bias customers to use digital channels. Of course when you have to pay all kinds of stamp duties on electronic transactions, some may like to go manual. Unfortunately, that would not help. There is a big fee, sometimes N500 to execute such transactions. The stamp duty still applies, of course.
- The VAT which is another fee you pay for paying bank fees. Sure, that goes to the government.
- SMS charges which the banks do not keep. They go to telcos. Of course, the average amount charged to customers is always more than the bulk negotiated amount they could have gotten from the telcos. In other words, if they get N3 per SMS on bulk pricing, and bill customers N4, that would be bad.
These fees are some examples and they make me to hate looking at Nigerian bank statements. They simply make one wonder if we have consumer protection institution in this country. People are devising schemes to rip one another. That is very unfortunate for a nation.
As I have noted many times, the financial inclusion message that the Central Bank of Nigeria has been preaching would not happen if the apex bank does not help in curtailing these fees. How do you expect someone earning N18k per month to go through this financial torture of fees? There is a clear likelihood a person can lose N500 per month to bank fees. In some cities, that could be transportation budget for the week. Of course, those who are paid by the government have no chance. The real issue is those that make money in villages. When they hear such fees, they would make the pillow case thicker. They have no reason to listen to government to begin banking when they would lose a huge proportion of their incomes to bank fees.
The new generation banks in Nigeria must understand how they grew: they innovated and provided a new basis of competition. Nigerians responded and embraced them. What they did to old generation banks could happen to them if the fees continue unabated. I have been looking at the annual reports of our banks and the trajectory is not good: the transaction-fees are now increasing faster than interest-fees. Simply, it is a more lucrative business to extract fees from customers than to lend them money to do business. That is not how to grow income, and if they stifle the companies, banks would have none, in future, to make their banking missions worthwhile. The Bankers Committee must lead and find a way to tell its members to apply the brakes on fees.