12 May 2014

Nigeria: CoT Reduction - Customers of Top Banks Gain N7.6 Billion

Customers of the top five banks gained N7.67 billion in 2013 through the reduction in Commission on Turnover (CoT) charges mandated by the Central Bank of Nigeria (CBN).

Last year the CBN released a new Guide to Bank Charges which stipulates phased reduction of CoT charge. The Guide stipulates that banks must reduce CoT charge from N5 per N1000 of transaction to N3 in 2013.

Analysis of the annual accounts of the top five banks, namely First Bank, Zenith Bank, GTBank, UBA and Access Bank, revealed a reduction of N7.67 billion in income from CoT charge in 2013.

The reduction from N5 to N3 per mile resulted to a reduction of N7.67 billion. From N84.96 billion in 2012, income from CoT for the five banks dropped to N77.29 billion in 2012.

Customers of First Bank benefitted most with N3.4 billion, followed by customers of UBA with N1.3 billion, customers of GTBank followed with N1.16 billion and customers of Zenith Bank with N1.12 billion. Customers of Access Bank received the least CoT reduction of N690 million.

In 2013, First Bank charged CoT of N17.6 billion, down by 16 percent from N21 billion. UBA charged N11.19 billion, down by 8.9 percent from N15.06 billion in 2012. GTBank charged N13.1 billion in 2013, down by 7.6 percent from N15.22 billion in 2012. The CoT charged by Zenith in 2013 dropped by 4.1 percent to N26.07 billion from N27.19 billion, while that of Access Bank dropped by 11 percent to N5.8 billion from 6.49 billion in 2012.

With the CBN mandating a further 33 percent decline in CoT charge this year, customers of the five banks might gain another N25.76 billion in CoT charge reduction this year.

Further analysis revealed the N7.67 billion reduction in CoT charge represented 2.1 percent of the profit before tax (PBT) of the five banks for 2013.

However, the CoT reduction also contributed to the 1.4 percent decline in the PBT of the banks for the year. Analysis revealed that the five banks recorded PBT of N354.71 billion in 2013, down from N359.87 billion in 2013. This translates to N5.16 billion reduction in profit before tax for the five banks during the year.

The implication of the above is that, except the banks work harder to discover new lines of income, or increase income from existing businesses, they would experience further decline in profitability this year.

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