This Day (Lagos)

13 June 2012

Nigeria: 'Bank Imposes Charges On Loans for Security Reason'

Financial consultant and Managing Director, Kenob-Lyn Nigeria Limited, Mr. Kenneth Nwachineke, has said the fear of losing a credit facility among others, as major reasons behind the unabated charges imposed on customers by many Nigerian banks.

Nwachineke, who made this known in a chat with journalists, hailed the Central Bank of Nigeria (CBN) for its efforts towards enhancing customer protection and financial literacy in the country.

He emphasised the need for openness on the part of customers in order to reduce the unfair charges imposed on them by banks.

He said despite the warning by the CBN to banks over exorbitant lending rates and excessive charges that they imposed on their customers, there were still complaints about such charges.

The apex bank had noted that the practice discouraged savings and did not promote healthy banking practice in the country, saying, for an industry that thrives on trust and confidence, excessive bank charges do not bode well for long-term sustainability and stability.

Nwachineke observed that with the trend, many commercial banks paid as little as one to three per cent on deposits while keeping lending rates high.

"One of the core businesses of banks is lending. However, there are times when there are errors in the charges associated with the credit facility. But the fear of losing such facility makes some bank customers to suffer in silence rather than making official their complaints," he said

According to him, there are four implications of not making complaints about banks' excess charges.

"If the error is not complained about, the charges will continue unabated and uncorrected; there is a tendency for the error to repeat itself; in the case of an over-draft facility, the configuration error otherwise known as excess charges will be added to the outstanding balance, thus leading to double charges and reducing the value of the initial amount of facility granted to the customer," he added.

As a firm of forensic accountants, he said, the company had assisted many businesses with re-computing various bank charges with the aim of recovering excess bank charges, especially those that were hidden in the bank statements and credit facility over several years.

He added that the extremely low rates paid to savers and depositors posed a major dis-intermediation risk and were inconsistent with the development goals of financial inclusion.

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