Nigerian Banks revenues is expected to plunge by about N100 billion in 2016, with the implementation of the zero Commission On Turnover (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.
The “Guide to Bank Charges” implementation, which started in March 2013, has seen the COT gradually drop to N3 per mille in 2013; N2 per mille in 2014; and N1 per mille in 2015 to Zero COT per mille started on January 1.
The “Guide to Bank Charges” is an initiative of the Central Bank of Nigeria (CBN) to reduce charges widely seen by bank customers
In a circular titled: “Implementation of Revised Guide to Bank Charges –Commission on Turnover,” posted on CBN’s website and signed by its Deputy Director, Financial Policy and Regulation Department, Franklin Ahonhai, the regulator said there was no going back on the policy implementation.
It mandated banks that charged excess COT since the effective date to refund same to the affected customers or be sanctioned.
According to the CBN, the policy is expected to have implications for both banks and their customers as it is expected to give the regulator more power to deal with banks reluctant to lower service fees considered ‘as the highest in the world’.
