Zero CoT: Banks to face revenue challenges


Deposit Money Banks (DMBs) operating in the country are to face revenue challenges as Central Bank of Nigeria begins zero Commission on Turnover (CoT) as from January 2016.

The CBN had last year revealed plans to start a gradual phasing out of CoT in the country in the revised guideline which introduced a gradual reduction of CoT from N5 per mille in early 2013 to N3 per mille, N2 per mille in 2014, N1 per mile in 2015 and zero CoT in 2016.

The Managing Director of APT Securities and Funds Limited, Mallam Garba Kurfi, explained to our correspondent that the CBN policy on CoT removal would have negative effect on DMBs revenue which might erode profitability and dividend payout to shareholders.

According to him, “Banks operation this year might be facing huge challenges as CBN policy on general provision on loan exposure from one per cent to two per cent and the policy on CoT removal might effect profitability.”

According Nigerian NewsDirect investigation, some financial institutions in the country have failed to abide  with the CoT instruction issued by CBN guide on Bank Charges issued last year.
Some DMBs are still charging N3 per Mille, while some others have begun the phase two of the road to zero CoT.

In a circular dated June 11, 2014 entitled: ‘Implementation of the revised guideline to bank charges- Commissions on Turnover’, referenced FPR/DIR/GEN/CIR/01/008, the CBN said information at its disposal indicates that some banks continue to charge CoT at the rate of N3 per mile, which was the agreed rate for 2013.

The circular reminded all banks that the maximum CoT for 2014 as contained in the guide jointly agreed between the CBN and the Bankers Committee (comprising chief executives of all banks, among others) remains N2 per mile.

It, therefore, directed all banks that have charged customers in excess of the agreed CoT since March 27, 2013 “to refund same to the affected customers, not later than 30 days from (June 11, 2014).”

The CBN noted that the guide was part of efforts to standardise charges for various products and services offered by banks in the country, lamenting a situation where the banks have continued to abuse the portion that says that CoT is negotiable.

The circular, signed by Franklin Ahonkhai for CBN’s Director of Financial Policy and Regulation Department, did not, however, say what would happen to those that fail to refund such excess charges.

Some banks were also said to be charging fees not specified in the guide but which are hidden under all sorts of names.

For example, some banks offer accounts that are supposedly CoT-free, but impose a maintenance or similar fee, (which is) not covered by the guide.