DMBs and extortion of customers

EXPLOITATION and single-minded pursuit of profit maximisation, the very nature of capitalism, come most lucidly to the fore in Nigeria’s banking business. Even when the economy is tottering and other businesses are manifesting clear evidence of ill-health, banks often appear insulated from the challenges in the domestic economy, declaring huge profits gained from the exaction of their customers. In particular, the Deposit Money Banks (DMBs), also known as commercial banks, are reputed for aggressive income generation from levying a litany of unwarranted charges and fees on their customers. They earn a significant portion of their profits as fee-based incomes rather than from their core function of financial intermediation. For instance, between January and June 2019,  the four leading DMBs in the country reportedly  generated N23.4 billion from maintenance charges on their customers’ accounts alone. 

To be sure, banks need to charge fees and make reasonable income to defray the high cost of doing business, especially in a clime like Nigeria where there is a paucity of economic infrastructure. However, the long list of fees and charges usually imposed on bank customers and their compulsory nature are really concerning. While bank charges are also a source of worry to a limited extent in other jurisdictions, especially in the Western world, they are usually dependent on customers’ habits. For example, in a clime where there is ready access to consumer credits, the terms and conditions of such credits may be surreptitiously couched in a manner that the beneficiaries end up paying  relatively huge charges,  but customers who use other basic banking services and do not access such credits would not pay such charges. However, what obtains in the country is quite different. Apart from the fact that access to credit by the masses is grossly limited, it is possible to leave a bank balance in one’s account only to discover that it has suffered a diminution in size without conducting any transaction on such account for more than one year. Charges of different titles simply eat away at people’s incomes in their bank accounts. 

Unfortunately, the Central Bank of Nigeria (CBN), whose statutory responsibilities include regulation of the activities of commercial banks, has been deliberately turning a blind eye to the flagrant disregard of its guidelines while the DMBs, on the other hand, are acting in unison to rip off their customers. Indeed, commercial banks and CBN have literally made life unbearable for Nigerians. No banking transaction can be done without charges. It is incredible. The burgeoning list of charges include but are not limited to account maintenance charge, short message service (SMS) alert charges and transfer charges. Oftentimes, customers know of a new charge only when it hits their accounts. It can be really frustrating: if you withdraw from other banks’ ATMs, you pay charges after the third usage and many of the banks have even programmed their ATMs in such a way that customers can only withdraw N10,000 at once. So, a customer who withdraws N50,000 is charged the applicable fee  five times!  

Perhaps because its leadership is often recruited from amongst the senior bankers in the DMBs, the CBN as a regulatory agency has more or less become a captured regulator, unwilling to ruffle feathers in any significant manner in the banking sector, even when such act of partiality translates into further immiseration of the banking populace. Usually, civilised societies have systems in place to stop extortion. Even in Nigeria, unjust exaction from bank customers through excessive bank charges is still persistent not because there are no official, even if weak guidelines, to rein it in but principally because of the refusal to enforce such guideposts. For instance, there are certain categories of charges that the CBN has left to the banks and their customers to fix after discussions and agreements, while the apex bank only sets the ceiling for such charges. But how many banks do apprise their customers of such charges, let alone reaching agreements with them before imposing them?  

The CBN may not receive many complaints from bank customers because the majority of them are small and largely illiterate or half-literate. However, the CBN has access to the records of the banks during its routine examination of their books to ascertain the level of their compliance with its guidelines. A simple interrogation of the components of an income head hosting a particular charge is all it needs to do to unravel any anomaly if it is indeed serious about ensuring that the DBMs do not impose unapproved and exorbitant charges on their customers. There is the need for the CBN to up its ante and become a more serious and dispassionate regulator which prioritises and monitors the fairness of fees and bank charges while penalising unfair and sharp practices. It may also help if the CBN maintains and regularly publishes a log of DBMs in terms of customer satisfaction, the volume of complaints and the resolution (or otherwise) of such complaints. The DMBs are most likely to be more circumspect about their extortion of their customers if they realise that such will negatively impact their positions on the log table.

 About 60 per cent of the Nigerian population is currently unbanked, according to the World Bank, but this poor statistics promises to worsen presently if much more serious and deliberate efforts are not made by the relevant authorities to streamline and reduce the burden of charges and fees on bank customers.

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