Business How ATM Charge Will Save Nigerian Banking Industry- Experts



The reintroduction of ATM charges last week by the Central Bank of Nigeria was greeted by public outcry, with many lamenting that the move is another ploy by the apex bank and the banks to further impoverish Nigerians. People say the move would discourage customers from using ATMs, thereby threatening the cashless policy.

The reintroduction may not also be unconnected with the three-quarter withdrawal of government deposits in bank vaults by the apex banks, when it raised Cash Reserve Ratio (the percentage of deposits banks must keep with the apex bank at zero interest).

A peep into the half year score cards submitted to the Nigerian Stock Exchange by the various banks indicate that all may not be well after all, unless something is done.

Only a few have reported profit growth, while others recorded a drop, with Skye Bank’s half year profit 2014 slipping by as much as 31 per cent from the corresponding period of last year. Fidelity Bank’s profit fell by 15.7 per cent to N9.43 billion; United Bank for Africa, 13 per cent; FBN, 12 per cent; and Diamond Bank, 8.4 per cent. Zenith Bank could only grow its half-year profit by 18.13 per cent, a far cry from its 106.7 per cent full year 2013 growth.

The reintroduction, which takes effect from September 1, 2014, the CBN argued, became necessary after realising the unintended consequences of the withdrawal on banks.

However, experts according to the Daily Independent, have supported the move, saying it would save the Nigerian Banking Industry from the decline it is currently undergoing.

Experts Speak:

Frontline economist, Bismarck Rewane, while supporting the recent reintroduction of N65 charge for withdrawing cash from third party Automated Teller Machines (ATMs), wonders “Where do they expect banks to make profits after all these deductions? Don’t forget that banks have to invest and reinvest, so, it makes a lot of sense to return the charges for the ATM”

Such deductions, he said, include paying the 0.5 (up from 0.3) per cent of total assets as contribution to the Asset Management Corporation Of Nigeria (AMCON) sinking fund; insurance premium to the Nigeria Deposit Insurance Corporation, at a time when they are losing income from the gradual phase out of COT charges.

Speaking in an interview last week in #Lagos, CBN’s Director, Banking and Payment System Department, Dipo Fatokun, insisted that the removal of the N100 per transaction fee on Remote-on-us in December 2012, was to encourage people use other banks’ ATMs.

But, following the scrapping of the withdrawal charges on ATM, some banks introduced the N100 monthly maintenance fee on ATM cards. Again, the CBN on Thursday March 28, 2013, announced the cancellation of such maintenance fee introduced by some banks.

Still justifying the policy shift, Fatokun explained last week that “between 2012 and recently when the review was done, it was discovered that people have actually turned ATMs into their personally purses because nothing is charged. Somebody needs N500, N1, 000, he will go to an ATM to withdraw, such that in a day, some people can patronise ATMs up to five times," creating a huge cost burden for the banks that issued the cards in defraying the cost for the service.

According to the CBN, the re-introduction of the fee was also to cover the remuneration of the switches, ATM monitoring and fit-notes processing by acquiring banks, stressing further that “if you go to the ATM of your bank, you are free to withdraw as much as you like. So, it does not discourage financial inclusion.”

For example, the CBN puts volume of transactions on about 15,000 ATMs across the country at N1.7 trillion as at June, from N1.3 trillion in 2012.

A statement by Ibrahim Mu’azu, Director, Corporate Communications Department of the CBN, had on Wednesday lamented that some customers “were beginning to abuse the use of ATMs through countless daily withdrawals.”

As a result of such abuse, it said transaction volumes at other banks’ ATM have increased astronomically, due to the free cash withdrawal at other banks’ ATM, as a result of which “the wear and tear as well as the frequency of servicing the ATMs have increased significantly.

“If a part of this cost goes unabated, the banks may be forced to reject transactions coming from their customers at another bank ATMs, thereby frustrating the interoperability of payment systems,” Mu’azu said.

The introduction of the N65 fee, which is upon the fourth withdrawal in one month, the apex bank continued, is also to increase healthy competition among the banks, such that each would ensure there is no downtime on ATMs, thereby preventing their customers from going elsewhere.

Also Rewane, Chief Executive of Financial Derivative Limited, insisted that the removal of ATM charges was wrong ab initio, stressing that there was no way banks can recover their costs and improve their profitability at a time when they are losing so much life blood through the burgeoning operating expenses.

Arguing in the same vein, Sterling Bank’s Executive Director, Finance and Strategy, Abubakar Suleiman, said “the restatement of cost recovery for the use of other banks’ ATM is intended to limit the cost incurred by banks and does not constitute profit. Banks are still left with the burden of three free withdrawals a month, which translates to N195 monthly charge. While this cost is less than the income on medium and high value accounts, it is sufficient to render most low value accounts unprofitable, which will force banks to discontinue marketing such accounts.”

“The last thing the country needs is a rollback of the financial inclusion campaign, which has resulted in a noticeable uptick in customer enrollment by banks and has created access to financial services for more than one million Nigerians in just over a year.

“In addition, the current burden on Nigerian banks arising from the combined weight of NDIC premiums and AMCON levy as well as the increasing cost of Cash Reserves gives less little room for pushing additional cost to banks. It is also becoming a source of concern for investors and could have negative impact on capital flows.”

Suleiman assured also that “when it comes to the cost of using ATMs, Nigerian banking customers still have one of the best deals you can find in any jurisdiction.”

This may also have been why the Lagos Chambers of Commerce and Industry (LCCI) supports reintroducing the charges. LCCI President, Remi Bello, agrees on the need to keep the banks functioning by restoring the fees.

“The banks, after taken the inventory of what they have done in the last two years, realised that there are costs that they may not be able to continue to bear. If you are using the ATM of your own bank, the N65 charge is not applicable. It is when you are using ATM of other banks that you will be charged,” Bello stated.

#CBN #ATM #GTB #Fidelity #Skye #LCCI #AMCON #NDIC #Nigeria


  • Mr-Godwin-Emefiele.jpg
    10.8 KB · Views: 11