We all know that Nigerian banks are declaring tons of money as profits. If you check very well, the transaction-based fees are growing faster than the interest-based fees. In other words, banks make money by charging fees. Lending is an after-thought. (This is not necessarily the fault of banks; topic for another day.)
One of my banks charges monthly debit card maintenance fees. Yet, if you want to avoid debit card to use paper mandates, they impose fees. Largely, there is no way you can put money in the bank without paying to get it out. The bank management few years go stopped automatic rollover of Treasury Bill investment to make sure you initiate the contract monthly so that all the fees are repeated, monthly. It is unfortunate.
But I can absorb the fees. Not many of my fellow citizens can. As I have noted before, unless the Central Bank of Nigeria can get ahead of these fees, its financial inclusion crusade would be muted.
To accelerate financial inclusion, the Central Bank of Nigeria should reform the varying levels of fees in the banking sector. Those fees could be discouraging the very people it wants to attract into the banking sector. For someone making N18,000 monthly and having to part with N300-N500 on fees and associated SMS charges, it could be a disincentive to bank. People are smart and when there is a burden via fees for extremely cost-sensitive people, any policy will collapse. CBN needs to revisit bank fees and work with our banks to find better ways to offer products that can reduce cost burdens on poor citizens. This is not a problem that technology can fix because the fintech companies do not take customer deposits. So, it is only policy that can solve this, and only the central bank has the capacity to make that happen. Yes, banks are not charities and are there to make money. So CBN needs to balance its policy.
Banks lost 2 million customers in 2017, dropping from 61 million to 59 million. Active bank accounts also shrank, from 65 million to 63.5 million in 2017.
Despite Central Bank of Nigeria’s (CBN) effort to promote financial inclusion, the Nigeria Inter-Bank Settlement System (NIBSS) banking industry statistics shows that the number of customers using financial services reduced in 2017.
The statistics obtained by the News Agency of Nigeria (NAN) from the NIBSS website on Sunday, showed that the total number of bank customers dropped from 61 million in 2016 to 59 million in 2017.
Similarly, active bank accounts reduced from 65 million in 2016 to 63.5 million accounts in 2017.
Why Nigerians are closing bank accounts
According to News Agency of Nigeria, banks think people are closing accounts because of Buhari anti-corruption efforts. That is partly the reason, but relying on that is laughable. The total number of civil servants in Nigeria at positions to do corruption is not in the region of 2 million people. So, there is no way we would lose two million customers purely because of anti-corruption crusade in the 3rd year of Buhari presidency.
“When Buhari assumed office, many people abandoned their accounts, especially civil servants because of fear of investigation.
“While some out rightly closed down their accounts, others opted for gradual withdrawal so as not to raise alarm,’’ the source.
Here are the main reasons:
Fees: But when you speak with people, the answer is clear: “A bank customer, Olaitan Alagbe told NAN that she closed some of her accounts due to unnecessary and illegal charges by banks”. Yes, customers do not like the fees. So, the easiest way to manage that is to close the account. As I have noted someone earning N18,000 monthly could lose N500 on bank charges monthly. That is very significant.
Interest Rate: Another reason is the low saving rate. From a bank customer according to NAN: “First of all, the interest rate is next to nothing, so there is little reason to keep your money at the bank when you can turn it over doing other businesses”.
When you combine high fees and low savings rate, CBN would begin to see why people are losing interest in the bank sector. Of course, the people who can afford the bank fees would not close an account because of N500 charges. But the citizens, usually the poor, who the bank wants to join the sector would struggle.