As the year 2019 comes to a close, the Central Bank of Nigeria (CBN) released two regulatory guidelines,
namely: Revised Guide to Charges by Banks, other Financial & Non Bank Financial Institutions
Guidelines and Consumer Protection Regulations: aimed at implementing the principles prescribed in
the Consumer Protection Framework issued in November 2016.
According to the apex bank, whilst the revised guidelines would, amongst other things, build an inclusive banking system that adequately caters to the needs of the banking public as it preserves the financial sustainability of banks, other financial and non-bank financial institutions, the Consumer Protection Regulations would provide clarity on the roles and responsibilities of all participants in the industry and preserve trust in the entire financial system as banks would be held responsible within the confines of fair treatment, disclosure and transparency, business conduct, complaint handling and redress, amongst other things. A glimpse of some of the changes introduced in the revised Guide include:
A graduated fee scale for electronic transfers to replace the current flat fee of N50. Accordingly transfers below N5,000 will attract a maximum charge of N10; transfer from N5001 – N50,000 attract N25; and transfers above N50,000 attract N50; card maintenance fee on current account has been removed as the account already attracts account maintenance fee; Savings accounts will now attract card maintenance fee of N50 per quarter from N50 per month; annual card maintenance fee on foreign currency denominated cards is reduced to USD10 from USD20.
Remote on Us ATM charges are reduced to N35 after third withdrawal within a month from N65; the charge for hardware token will on cost recovery basis be subject to a
maximum of N2,500 from previous maximum charge of N3,500; fee for SMS mandatory alert will be on cost
recovery from previous maximum charge of N4; bill payment via e-channels will attract a maximum charge of N500 from 0.75% of transaction value subject to maximum of N1,200; and a new section on
accountabilities/responsibilities and sanctions regime to address instances of excess, unapproved and arbitrary charges.
It appears that the banks have been caught in the middle of their regulator’s unending policies, which it has continued to churn out in order to support the Federal Government in its quest to boost economic growth.
Also it’s a friendly fire on the banks as CBN feels there is an urgent need to protect customer’s purse in order to bring to bear its financial inclusion objective. In the middle of this regulatory shake up, deposit money banks’ (DMBs) income lines would be hit at almost every end.
Banks’ interest income is set to decline amid lower yield environment; more so, their non interest income lines should suffer the same fate as bank charges are cut – beginning from January 1, 2020.
However, not all hope is lost given the nature of banks, especially Tier-1 banks, in finding a way to navigate tough environment. We expect the DMBs to take advantage of trading (both securities and forex) activities to augment the effect of lower interest income arising from lower yield
In addition, the lower interest rates should avail banks the opportunity to extend cheaper risk assets to their customers without necessarily booking higher non performing loans. Similarly, we see the low interest rate environment as uncommon opportunity for the banks as they get stable fund cheaply (fixed deposits).
Hence, the low cost of funds for all and sundry should stimulate economic growth; albeit, infrastructure is pivotal to reducing overall costs of doing business which the country looks forward to the fiscal authority to fix, using a rather cheaper means than borrowings.
We therefore opine that investors should make cautious investment in banks, especially Tier – 2 banks, as their capacity to sustain or pay higher dividend may have been dented.