The reintroduction of N65 charges on Automated Teller Machines (ATM) withdrawals by the Central Bank of Nigeria since September 1, 2014, has continued to elicit mixed reactions from a cross-section of Nigerians, many of who see it as counterproductive, reports Bukola Afolabi
AS the N65 charge on extended use of other banks’ Automated Teller Machines, ATMs, reintroduced by the Central Bank, kicked off in September 1, Nigerians have continued to react to a policy many believe is unnecessary.
While most Nigerians accuse the CBN of abandoning its regulatory responsibilities and taking sides with the bank to exploit customers through the policy, the CBN says the decision is aimed at curbing frivolous withdrawals and abuse by ATM users.
The new policy alters the old arrangement in which the CBN resolved with the Bankers Committee in December 2012 to transfer the payment of N100 fee on remote-on-us ATM withdrawal transactions to issuing banks.
Under that arrangement, the fee was shared between the ATM acquirers, card issuers and switches. Banks, as the issuers of the ATM cards, were required to waive the N35 issuer’s fee, while bearing only the cost of N65 each time their customers used another banks’ ATM.
The CBN said the loss for not collecting the N35 issuers’ fee from the card users had imposed a substantial cost burden on banks.
The bank said the re-introduction of the remote-on-us ATM cash withdrawal transaction fee of N65 per transaction was necessary to cover remuneration for switches, ATM monitoring and fit-notes processing by acquiring banks.
The new charge was applicable from the 4th remote-on-us withdrawal in a month by a card holder.
By implication, the first three transactions by a card holder using ATMs of banks other than theirs would be free, as the charge for such transactions would be paid for by the issuing bank.
On the other hand, all ATM cash withdrawals by customers on ATMs owned by their issuing banks would continue to be free.
It would be recalled that the CBN had in a circular dated August 13, 2014 announced the reintroduction of ATM cash withdrawal transaction fee to N65 per transaction, to cover the remuneration of switches, ATM monitoring and fit-notes processing by acquiring banks.
In a statement issued by the Director, Banking and Payment Systems Department, CBN, Mr. Dipo Fatokun, he said the apex bank and the deposit money banks agreed to re-introduce the ATM charges because the cost of transaction was becoming too burdensome for the banks to continue to bear.
CBN abandoning its role
Centre for Social Justice, CSJ, a non-governmental organisation in Abuja, in its review of the policy, criticised the decision, saying there was no reasonable justification for CBN to have done so.
The CSJ Lead Director, Eze Onyekpere, and partner, Ikenna Ofoegbu, said a reversal of the policy by CBN did not address the premise and rationale for the removal of the charges in the first place.
According to Mr. Onyekpere, if the removal was to support and encourage CBN’s cashless or cash-lite policy and ensure that bank customers got value for their patronage, nothing seems to have changed to warrant the removal.
“Or is the CBN now about to reverse the cashless and cash-lite policy?” the Mr. Onyekpere asked, pointing out that the new CBN Governor, Godwin Emefiele, had, while unveiling his agenda on assumption of office, vowed to reduce poverty, ensure job creation and development agenda in monetary policy.
Wondering how the policy would help realise Mr. Emefiele’s agenda, CSJ described it as “a clear retrogressive step that will unduly burden bank customers, discourage the unbanked from using the banking system and negate the cash-lite policy.”
The policy, the civil society group stated, was equally a negation of Nigeria’s international and domestic economic and social rights obligations to respect already guaranteed rights, especially as provided in Chapter 2 of the 1999 Constitution and the obligations under article 2(1) of the Covenant on Economic, Social and Cultural Rights.
The policy, the CSJ said, questions the basis and concept of regulation in an economy, arguing that what should concern regulators in taking policy decisions should not be the benefit of the strong, rich and accentuation of inequality, but the interest of all parties that may be affected.
It also condemned the CBN for allowing the banks to arm-twist it into approving extra charges from ATM withdrawals alongside bank charges and commissions imposed on customers, including ATM issuance and maintenance fees, N50 charges on SMS alerts, emails, print of account statements, etc.
“It appears the appointment of a former director of a mainstream bank is leading to a policy in favour of his former constituency and colleagues in the industry without taking cognizance of the bigger picture of the rights of the Nigerian people who are ultimately his employers,” CSJ stated.
The management of School of Banking Honours (SBH) Lagos, has also called on the apex bank to stop the planned implementation of the new policy regime introducing N65 charges.
CBN claims policy will curb abuse
However, CBN insists the policy was necessary to ensure that ATMs continue to function across the country to the satisfaction of all bank customers.
According to CBN, cash withdrawals at the ATMs of a customer’s bank are free. The Apex bank said that “Remote-on-us” transaction was when a card holder goes to the ATM machine of another bank other than his or her own bank to make a withdrawal.
The N100 fee on “Remote-on-us” ATM cash withdrawal transactions transferred to issuing banks, in line with the resolution reached with the Bankers’ Committee on December 2012, the CBN noted, was never removed, rather it was only for the customer’s bank to pay, to encourage the use of ATMs nationwide.
Consequently, under the proposed policy, CBN said the first three “Remote-on-us” transactions in a month would be FREE for the card holder, but PAID FOR by the issuing bank.
The N65 charge, CBN stated, would only apply from the 4th transaction when a customer withdraws cash from another bank’s ATM other than that of his/her bank in a month.
Policy not to discourage financial inclusion
CBN’s spokesman, Ibrahim Mu’azu, said the N65 charge was not intended to discourage financial inclusion, assuring that the CBN would not endorse any anti-customer policy.
“Charging of fees on interbank networks is a widely acceptable practice globally,” Mr. Mu’azu said, pointing out that ATM charges were meant to guarantee better services to customers and increase healthy competition among banks.
The CBN Director of Payment Systems, Dipo Fatokun, said transactions volume on ATMs by banks across the country increased significantly from about N1.3 trillion in 2012 to about N1.7 trillion as at June 2014.
These transactions, he said, were conducted at different locations across the country through ATM machines, which grew in number from about 10,727 to about 15,000 within the same period.
According to Mr. Fatokun, the country’s Point of Sales, PoS, terminals equally increased from 21,400 in 2012 to 135,000, with transaction volume increasing from N57.3 billion to N138 billion during the period.
With such increases, CBN said transaction volumes at other banks’ ATMs have risen astronomically due to the free cash withdrawals at other banks’ ATMs, with some customers beginning to abuse the system through frivolous daily withdrawals, increasing the volume of cash transactions and negating the cashless policy.
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As debate on the recently reintroduced ATM charge gathers momentum, Nigerian banking community has been urged to embrace the policy, considering its potential to guarantee unhindered flow of financial services to bank customers.
Tunde Adeojo a Lagos-based businessman said that on his part admonished the CBN to clearly explain the rationale behind the reintroduction of the charges, saying the policy will further impoverish the customers.
“It should be pointed out that using ATM more than three times in a month automatically prevents a customer from earning interest in that month.
“This policy might discourage people from using their cards in other bank ATM machines and a likely return of long queue in banking hall.
“If CBN is interested in encouraging cashless policy, it should come up with policy that will drastically reduce cost of operating accounts by customers rather than increasing these costs,” Adejo said.
Managing Director 4Dot Communications, Babatunde Aroloye, believes the re-introduction of the fee resulted from complaints by banks “that they were not making too much profit like before.”
“But the question that needed to be asked is whether the CBN should be protecting the interest of the populace or that the CBN should be dancing to the tunes of these greedy bankers.
“I am sure there were genuine reasons before the CBN decided that the ATM charge of N100 should be cancelled in the first place; is the CBN saying those reasons were no longer valid?
“With all intents and purposes, I think the CBN should be seen to be issuing guidelines that will make life easier for the populace rather than embarking on policy reversal at the detriment of the people,” he added.
However, arguing for a reintroduction of the fees, Chief Executive of Ecobank Nigeria, and member of the Bankers’ Committee, Jubril Aku, said it was part of measures to make banking business sustainable in the country.
The reversal, he explained, was due to the rising cost of maintaining ATMs.
“If your bank has made its own ATMs free for you anytime you want to use it, then you should make use of it. I understand that in some of the performances we saw, we had in extreme cases about 500 withdrawals in a month.
“Such large pressure on the ATM needs to be curbed. The banks must be encouraged to continue to invest in ATM. I think that was the whole essence behind it,” Aku said.
This may also have been why the Lagos Chambers of Commerce and Industry (LCCI) support the reintroduction of 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.
Preye Ogriki, Managing Director of Trans-Atlantic Mortgages Limited, said: “Policies of governments and central banks all over the world change from time to time and the reintroduction of these charges is not a new thing”.
Reacting, Juliet Okafor, a development economist and CEO of Sea Route Communication Limited, also agreed that the CBN was right in re-introducing the fees, which ought not to have been totally removed in the first instance.
She believes that Lamido Sanusi, the immediate past CBN Governor, may have done it then, feeling that the banks have good enough balance sheets to absorb the cost of the ATM charges.
For the new Governor “to have decided to re-introduce the policy, means that he probably has looked into the cost implications on the banks and the effects of such removal on the current balance sheets of the banks”.
She reasoned that the return of the ATM withdrawal charges was a middle course approach by the apex bank to ensure banks and their customers absorb the relevant charges.
“This is the proper situation that ought to have prevailed. It is actually not a good policy in basic economic principles to shift the entire cost of the ATM charges completely from the customers to the banks.
“What the CBN should have done was to do what they have done now, by allowing both the banks and their customers share the cost at a specified ratio to both parties, so that CBN does not engage in avoidable policy somersault, from customers first to the banks and now to the middle course which is the banks and customers.
“So this N65 charges after three withdrawals on another bank’s ATM machine other than the customer’s issuer bank as against the initial N100 charge per withdrawal, is a fantastic and realistic middle course approach by the CBN.
“It is only after observing this current formula the CBN now decides whether to retain the status quo or cancel the policy completely,” she argued.
Okafor appealed to critics of Emefiele to exercise some restraints in condemning the policy, as according to her, both he and his predecessor represent two extreme tendencies in their management approach to the nation’s monetary policies.
“Both Sanusi and Emefiele are CBN Governors from the same banking sector where one (Sanusi) is coming from a conservative family of banks that accommodates both the poor and rich depositors, while the other (Emefiele) is coming from the generation of banks that essentially takes care of the rich and upper class clients.
“Somehow, you will see their tendencies in the CBN policy formulation of these two individuals.”
To help Nigerians properly appreciate the situation, Rivers State based politician and Ijaw leader, Anabs Sara-Igbe, wants the CBN to urgently begin a public enlightenment programme so that members of the public will understand better.
“Majority of (bank customers) are not economically buoyant to absorb the financial effects of these bank charges, and above all, they are not even aware of how the banks are computing these charges.
“That is where the CBN as a regulator needs to come in to educate the people because they are not happy about the whole development,” he noted.
According to the CEO of Financial Derivatives, Mr. Bismarck Rewane, a frontline economist: “It makes a lot of sense to return the charges for the ATM as you cannot keep your money with Bank A and always keep collecting it from Bank B; that will be a case of working for John Bull and collecting salary from Afamako Company.”
