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When a regulator aids and abets illegalities


[FILE PHOTO] Central Bank Governor Godwin Emefiele speaks during the monthly Monetary Policy Committee meeting in Abuja, Nigeria January 26, 2016. REUTERS/Afolabi Sotunde/File Photo

The relationship between Central Banks and operators should be professionally formal.

It is so because operators in the banking industry are bound to comply with banking rules and regulations as stipulated by the Central Bank no matter how stiff as long as it conforms to international best practices.

Unfortunately the relationship between the Central Bank of Nigeria (CBN) and deposit money banks have been so diluted that it leaves much to be desired since the de-regulation of the banking system in 1986.


Instead of wielding the big stick and regulate the operations of deposit money banks, the banks seem to be regulating the CBN.

Yes, they do so because the CBN is indirectly having their policies influenced by banks through their umbrella organisation, the Bankers Committee that have been given the privilege to have a say in some CBN policies.. Why do I say so?

Take the vexed issue of bank charges. Rather than fix bank charges as it deems fit as regulator in accordance with what is in the best interest of customers to maintain a stable banking system, the CBN gets the Bankers Committee involved in decision making in the guise of de-regulated banking scheme in fixing bank charges.

In doing so, the traditional banking practices are jettisoned on the altar of de-regulation.

For instance, prior to the de-regulation of the banking system by the General Ibrahim Babangida regime in August 1986, the traditional practice is for banks to issue cheque books, savings account paying and withdrawal booklets free of charge to customers on opening of bank account.

Bank statements on current accounts were also sent free of charge to customers on agreed intervals, weekly, monthly or quarterly.

It is only in the case of cheque books that banks recover stamp duty which is paid over to the revenue authorities.


We shall return to the issue of stamp duty later in this write-up.

That established banking practice of issuing free cheque books and savings account booklets has been dumped by banks who now charge as much as N2,000 or N3,000 on customer’s account to issue cheque books.

In the case of savings account, banks charge as much as N200 per leaf if one wants to withdraw from savings account using counter voucher.

Ironically, these charges that breach traditional banking practice have now been codified by the CBN in guidelines to bank charges.

By approving the recovery of printing cost of cheque books and savings account booklets, is the CBN supporting banks not to incur revenue expenditure which translates to bumper profits to banks and rip off of bank customers?

Is it not also ridiculous and a breach of traditional banking practice for banks to charge customers to issue bank statements which by law they are bound to do in fulfilling the legal requirement of rendering an account of funds customers deposited with the banks?

Since the era of electronic banking, the practice of levying unapproved charges by banks has escalated.

Banks are abusing the ease of doing business afforded by electronic banking through levying all manner of charges as they deem fit in the process of withdrawal, deposits and funds transfer.


In the guise of regime of cashless banking, the CBN and Bankers Committee meet and decide to penalize bank customers that withdraw cash above a stipulated amount or even deposit cash above a certain amount into their account.

The reason for the penalty is to discourage cash transactions because the cost of handling cash by banks is prohibitive.

And I ask, is it the business of CBN to make policies aimed at cutting operational cost of handling cash for banks?

If anything, it is the CBN that encouraged the cash culture in the 1970s and 1980s when under the rural banking scheme, they compelled banks to open branches in rural and remote areas of the country so that citizens can deposit and withdraw cash with ease instead of saving money under their pillow or other odd places at home.

To ensure the success of the scheme, the CBN embarked on opening cash centres or agencies nationwide to sustain the rural banking scheme.

With the advent of Automated Teller Machine (ATM) banks in a way have become self service shops.

But unlike conventional self service shops where you do not pay to serve yourself, in the case of serving yourself at ATM point, you pay.


You pay when you operate the ATM to make funds transfer, withdraw cash the fourth time from a third party bank, pay bills or even recharge your phone.

When you open a personal account, banks compel you to purchase a debit or credit card and charge you N1050 plus VAT.

Elsewhere in the banking world, it is not compulsory that you must have a debit card. If you need it you apply.

Banks also charge ATM card maintenance fee and I ask again, what card are banks maintaining when the ATM card is in possession of their customers?

This is yet another way of passing revenue expenditure spent in maintenance of ATM to bank customers with the CBN approval.

Perhaps, the most ridiculous of the frivolous charges is the N52.50 paid to NIPOST for every funds transfer transaction. The banker customer relationship is a contract.

And I ask, is NIPOST a party to the contract between a bank and its customer to be entitled to remuneration or did NIPOST provide a platform (service) for the transfer to be effected that earns it remuneration? The answer is no.

Justifying the charge by quoting the provisions of Stamp Duty Act that requires payment of stamp duty on financial transactions amounts to implementing an old order in a new dispensation.

At the time Stamp Duty Act was enacted by our colonial masters, financial transfers or transactions were conducted strictly with cheques.

Enyinnaya, a fellow of Chartered Institute of Bankers, wrote from Lagos.

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