By Odunewu Segun
Commercial banks in the country are said to be bracing up for the effect of the full implementation of the zero CoT which took off this January with banks nursing the fear that its implementation may further shrink their lean profit.
Around N100bn, National Daily gathered has been lost in revenue following the directive by the Central Bank of Nigeria for the phasing out of Commission on Turnout (CoT) and the implementation of the Treasury Single Account.
The CBN had in 2013 released the guidelines, “Guide to Bank Charges,” which gradually phased out CoT in the country. According to the guideline, CoT was reduced to N3 per N1, 000 in 2013, N2 per N1, 000 in 2014 and N1 per N1, 000 in 2015, while it would be finally phased out next year.
National Daily gathered that Revenue from CoT will now be shut down from January 2016. It was also discovered that the combination of the CoT phase out and TSA; the effect of income reduction and cost increase puts a significant pressure on banks’ profits, as one of the reasonable options to sustain profitability would be through cost-cutting, including staff rationalisation.
With the implementation, there is a potential reduction in income from CoT, which is being phased out and increase in expenses from interest expense and AMCON expenses, which is now 0.5 per cent of total assets from 0.3 per cent earlier.
Central Bank of Nigeria had in 2015 ordered deposit money banks to refund illegal fees charged customers over a period of one year, giving them 30 days to refund the excess charges or face severe penalties. Specifically, the central bank was worried that some banks had been overcharging customers on the commission while others had imposed illegal maintenance fees on the CoT- free accounts.
A banking industry insider who spoke on the condition of anonymity said that 2013 was a very challenging year for financial services institutions in Nigeria due to the effects of regulatory-induced reduction in income lines and increase in funding costs.
He said, “you will recall that CoT, which used to be at N5 million maximum, was reduced to a maximum of N3 per million. As you know, CoT is a major component of the income lines for banks. There was also the removal of the N100 that was charged by banks for ATM usage. In addition, there was an increase in savings interest rates leading to costs for banks because significant portion of our deposits comes from savings deposits especially for banks like us that have been around for a very long time.”