What might seem like minor deductions, when accumulated, create a significant burden often unaccounted for by consumers.
Ozovehe Blessing, an Abuja-based school teacher, regularly sends money to her younger brother at Kogi State University. Recently, she transferred N5,000 via her mobile banking app and was charged a N10 transfer fee. When her brother withdrew the money from an ATM outside his bank's network, he lost an additional N100 in withdrawal fees.
Had he used a POS agent, the cost could have been even higher, ranging from N300 to N500, depending on location. By the end of the transaction, the original N5,000 could have been reduced to N4,600 or less, all due to banking charges.
Nigerians have long expressed frustration over the numerous and often hidden charges associated with their banking and electronic transactions. What might seem like minor deductions, when accumulated, create a significant burden for bank customers.
These charges--from ATM withdrawals to fund transfers and card maintenance fees--increase transaction costs across various banking services. As these costs rise, many Nigerians feel the impact more amid a high inflationary trend that has weakened their purchasing power.
ATM and card costs
In response to rising costs and the need to improve the efficiency of Automated Teller Machine (ATM) services, the Central Bank of Nigeria (CBN), on 11 February, introduced new charges for both "on-site" and "off-site" withdrawals.
Nigerians will now pay higher fees on cash withdrawals. On-site ATM withdrawals--those made at a machine owned by a bank but outside its branch premises--attract N100 per N20,000 withdrawn. Off-site ATM withdrawals, such as those at shopping centres, airports, or standalone cash points, will incur a N100 fee plus a surcharge of up to N500 per N20,000 withdrawal, bringing the total possible charge to N600 for every N20,000. Withdrawals from an account holder's own bank's ATMs remain free.
Similarly, debit and credit cards have annual maintenance fees. Savings account-linked debit cards incur N50 per quarter, while issuing, replacing, or renewing credit cards attracts a N1,000 charge.
In addition, customers who use hardware tokens for internet banking--a security device often required for high-value transfers--must pay up to N2,500 for the device.
Cybersecurity levy
The CBN initially announced a 0.5 per cent cybersecurity levy on all electronic transactions. The decision sparked a widespread public outcry, prompting the House of Representatives to ask the central bank to suspend its implementation.
In response to the backlash, the CBN announced that the levy was 0.005 per cent on all electronic transactions processed by banks and other financial institutions, which is in line with Cybercrime (Prohibition, Prevention, etc.) Act, 2015.
Under the revised structure, a N10,000 transfer now attracts a cybersecurity levy of N0.50. The charge is N5 for a N100,000 transfer, while transactions exceeding N1 million incur a N50 fee. Although the reduction lessens the burden, it remains one of many fees Nigerians pay in their daily financial transactions.
Transactions charges
Electronic funds transfers also come at a cost. Transactions below N5,000 attract a N10 charge, while those between N5,001 and N50,000 incur a N25 fee. Transfers above N50,000 cost N50 per transaction. Though seemingly insignificant in isolation, the frequency of transactions--whether for bills, remittances, or simple transfers--results in a steady erosion of disposable income.
Merchant services are also affected. A 0.5 per cent commission is imposed on every transaction, capped at N1,000 for general merchants. Bill payments via electronic channels have a N500 limit per beneficiary.
While these fees may appear negligible, their cumulative impact across multiple service points makes them significant for many Nigerians.
Not-so-clear deductions
Many Nigerians only realise the full extent of these deductions when they see their account balances shrink after routine transactions.
The impact is even more severe for larger transactions.
Olalekan Adewale, a frozen foods trader at FHA Market in Abuja, regularly transfers N500,000 to his suppliers to replenish stock. Each transaction now attracts a N25 cybersecurity levy, a N50 bank transfer fee, N3.75 in VAT on the service charge, and N6 for SMS notifications--bringing total deductions to N84.75.
While seemingly minor, these charges add up quickly for traders like Mr Adewale, who process multiple transactions weekly. For many Nigerians operating on thin margins, such routine deductions--though individually small--have become a quiet but persistent burden in a tough economic condition.
Upon receiving the funds, Mr Adewale's suppliers also face deductions when making further transactions, effectively diminishing the value of the original amount.
Thriving neobanks
In the midst of the concerns generated by the deductions, neobanks have become a lifeline for Nigerians, not just for tech-savvy youth but for businesses of all sizes. In open markets and shopping malls, traders and artisans own POS machines operated by neobanks to ease transactions.
"Customers don't always have cash, and POS agents charge too much," says Adetifa Kemi, an Abuja-based trader. "With my own machine, I don't lose sales."
This shift is reshaping everyday commerce. Rather than relying on traditional banks, which burden customers with high transaction fees and unreliable service, businesses are turning to neobanks for smoother, cheaper payments. Platforms like Moniepoint charge lower fees, charging 0.5 per cent for withdrawals up to N20,000 and a flat N100 for anything higher. Transfers cost just N20--far less than what banks demand.
For many, the choice is now clear. "I used to visit my bank almost every day, but now I barely go," says Mr Adewale. "I do everything with my Moniepoint."
Impact on businesses
The implications of these financial pressures extend beyond individual customers. High transaction fees create additional barriers to financial inclusion, making formal banking services less accessible.
Excessive banking charges also reduce profit margins for small businesses, complicating cash flow management and discouraging digital payments.
Also, account maintenance charges are an additional burden for many Nigerians. Some banks charge fees on current accounts based on the transaction amount, set at N1 per N1,000, while others accumulate the charges and debit them at the end of the month. Some banks offer exemptions under specific conditions. For example, a transfer of N500,000 would incur a fee of N500. While savings accounts are usually exempt from these charges, other fees--such as those for electronic transfers, card maintenance, and SMS alerts--still apply.
While the CBN periodically revises banking fees to reflect economic realities, Nigerians continue to face an ever-expanding list of charges, including VAT at 7.5 per cent, a USSD charge of N6.98, an SMS alert of N6, and stamp duties of N50 on eligible transactions above N10,000.
Certain exemptions exist for transactions between accounts held by the same customer or for salary payments, but these do little to ease the financial strain on the average consumer.
Regulatory oversight
The CBN, through its Guide to Charges by Banks, Other Financial, and Non-bank Financial Institutions, regularly reviews and enforces penalties for excessive charges, with financial institutions found in breach facing fines of up to N2 million per infraction.
Despite these regulations, concerns persist about the fairness and transparency of banking costs.
In some cases, customers face fees for services they were not explicitly aware of, such as intra-scheme money transfers, which attract a minimum charge of N50 for account holders and N500 for non-account holders.
Under the CBN's cashless policy, individuals depositing over N500,000 are subject to a two per cent fee, while withdrawals above this threshold incur a three per cent charge.
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Corporate entities face even higher rates, with deposits above N3 million attracting a three per cent fee, while withdrawals incur a five per cent charge.
Banking or money keeping?
With the cumulative effect of these charges, many Nigerians are left questioning whether it is worth keeping funds in a bank.
The barriers to banking continue to rise for the financially excluded, and for those already struggling, the mounting fees only deepen economic hardship.
Paul Alaje, an economist and senior partner at SPM Professionals, argues that Nigeria's traditional banking model is outdated and primarily focuses on holding money and imposing charges rather than lending to businesses. He contrasts this with banking systems in places like the UAE, where seamless transactions are the norm.
He says that traditional banks have strayed from their core function. "Banking is not done in Nigeria. What we have is moneykeeping and charges on deposits," he says.
He predicts that traditional banks will struggle against fintech companies, which continuously evolve to meet customer needs. Over time, as fintechs gain market trust and demonstrate longevity, investors will shift their focus, selling shares in legacy banks and buying into fintech firms.
"Those banks, no matter their size, may eventually give way to the new," he says.
Mr Alaje also points to what he describes as a fundamental flaw in Nigeria's banking model: SMEs struggle to access loans because banks prioritise collecting deposits and imposing fees.
He argues that this is unsustainable, as banks rely on depositors to maintain their posh offices, fleets of cars, and large staff numbers.
"Where do you think the money will come from? It will come from depositors, and that is why new charges will be introduced to gather the money and declare billions of naira at the end of the year," he says.
