Banks’ revenues will drop by about N100 bilion this year, with the implementation of the zero Commission On Transactions (COT) policy.
It is the last phase of the “Guide to Bank Charges” policy initiated by the Central Bank of Nigeria (CBN).
A former Executive Director of Keystone Bank, Richard Obire, explained that of the annual N550 billion average revenue for the 21 banks, about N100 billion is raked from COT.
Obire explained that bank’s revenues are made up of interests on loans, which constitute 70 per cent of the total revenue. Fees and commission make up the remaining 30 per cent. Fees and commission covers 30 per cent of the total revenues. COT constituting 60 per cent of income within the segment.
Obire said banks should be moving towards income diversification to shore up their revenue base. He said lenders should be creative and think of how to diversify to support activities that generate foreign exchange from local industries. He said aside the COT-free banking, the lenders will face pressure arising from interest revenues on loans.
Effective from last week Friday, January 1, 2016, Nigerian banks are expected to charge nothing as Commission on Turnover (CoT) according to the gradual phase out plan of the Central Bank of Nigeria (CBN).
The CBN in April 2013 had revised the guidelines on bank charges, introducing the gradual phasing out of commission on turnover.
The revised guideline had introduced a gradual reduction of CoT from N5 per mile (per N1000) in early 2013 to N3 per mille or N1000, N2 per N1000 in 2014 and is to be N1 per N1000 in 2015 and finally phased out effective January 1, 2016.
Although some banks had stopped charging CoT, some others still charge and in some cases above the stipulated N1 per mille which it was last year. Also for some banks, the amount charged as CoT depends on the customers’ relationship and ability to haggle with the bank.
Last year, the apex bank had ordered deposit money banks to refund illegal fees charged customers over a period of one year, giving them 30 days to refund the excess charges or face severe penalties.
Specifically, the central bank said some banks had been overcharging customers on the Commission on Turnover while some lenders had also imposed illegal maintenance fees on the CoT-free accounts.