22 August 2014

Nigeria: Charges On ATM Withdrawals


Charges on ATM withdrawals are back, courtesy of the Central Bank of Nigeria (CBN). The apex bank had abolished them, at 100 naira per transaction, in December 2012, much to the relief of ATM users.

Their recent re-introduction, now pegged at N65 per transaction from the third and subsequent withdrawals on ATM of another bank other than the customer's own, is a step in the wrong direction that could hurt ongoing efforts to promote electronic banking and cashless transaction in the country. The new policy is due to take effect from next month. The applause that greeted the 2012 decision was a clear indication that any charge on the use of ATM meant a lot to millions of bank customers, some of who sometimes withdraw as little as N500 because of their low deposit base. The idea of electronic banking was meant, among others, to help make bank transactions more convenient to the average customer and to also decongest the banking halls of most of the banks. It was also to attract more Nigerians to save their money in established financial institutions and not under pillows or buried in the ground.

With the new charge, what the average customer is likely to do in order to avoid it would be to insist on going to his own bank that may not necessarily be within easy reach. And if his bank is one of those with a large customer base, this could mean having to experience the inconvenience of waiting for long periods for the service he desires. At the moment, the banking halls of some of the big banks look like a football stadium at peak periods and the long-winding queues at their ATM stations like the queues to enter the stadium. Many small customers would consider the experience in making an otherwise simple banking transaction, such as withdrawing what little money they have in their account, not worth going through.

Beyond this, the electronic platforms of some of the banks are already overloaded. Further undue pressure on them will lead to their breakdown occasioning greater hardship on customers, which is why it makes sense to maintain the status quo that allows customers to use the ATM of any bank most convenient to him at no extra cost to him.

It is probable that in endorsing this new policy, the apex bank caved in to pressure from commercial banks that are unwilling to bear the cost of remunerating the switches. This is not necessarily in the larger interest of the economy. Mr Godwin Emefiele, the new CBN governor being a commercial, rather than a development, banker, may have influenced this decision, which we urge him to reverse before it takes effect. The profit motive may be the underlying principle of the activities of commercial banks in a capitalist economy; but they still need to perform certain services that would increase their customer base, not shrink it, as this policy would like lead to.

The new policy will also have a negative effect on the economy as a whole. Because of this, the CBN should desist from taking actions that portray it as being indecisive, or catering to narrow interests. The cry of most of Nigerian economic policymakers and bankers over the years has always been that Nigeria is under-banked, and every effort should be geared towards attracting more people to patronize banking services. The new CBN policy will certainly not help in advancing that objective.


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