Central Bank set to phase out COT by 2016

by Tunji Andrews


Sanusi Lamido Sanusi, CBN Governor

It may prove to be better days ahead, for bank customers who do a high number of bank transactions as the Central Bank of Nigeria (CBN), has begun proceedings to scrap the statutory Commission On Turnover charged by banks to customers for transactions. This is coming nine years after, the CBN, published a guide to charges as it concerns bank transactions, which was issued in 2004 to provide a standard application for charges in the industry, while minimizing bank-customer conflicts. The CBN on Thursday published a revised guide, which amongst other things, approves, with effect from Monday, April 1, 2013, a N100 annual debit card maintenance charge; while hinting of a gradual phase-out of commission on turnover from this year, until 2016 when it customers’ accounts will no longer be debited for transactions on current accounts.

Prior to now, the charge had been at “N5 per mile”, which actually means that you are charged N5 for every N1,000 transaction. The document will now bring the COT fee to “N3 per mille” for this year; which will further reduce to N2 in 2014; and N1 in 2015; before moving to zero COT from 2016. A worrisome development however is that with the emergence of this revision, banks would no longer be allowed to charge COT on returned outward clearing cheques, even though its extension to reversal of transactions and all bank-induced debts, is a welcomed development. Where a cheque is returned for reasons other than being unfunded, there will be no charge, while 0.5 per cent of cheque value, maximum N5,000 is to be borne by the drawer, without prejudice to the dud cheque act.

Transactions on approved independent ATMs will cost N150/transaction; while interbank funds transfers will attract a N100 fee, with same applying to intra-bank fund transfers, and bill payments. There will also be no charge on debits representing transfers to other accounts in the same name, in the same branch or at another branch of the same bank, while customers will pay cost, plus stamp duties for cheque books, and N200 per leaflet for counter cheques. A N1,500 one-off charge for tokens for internet banking transactions may also prove as more good news for those who are planning to do more on-line transactions

It is key to note that though this was a CBN announcement, the review process itself involved imputes from stakeholders including members of the Bankers’ Committee. IT Nwaoha, the acting director, Financial Policy and Regulation Department, of the CBN on behalf of the apex bank said in a circular that ‘the review had became necessary in order to reflect current developments in the market and provide clarity on banking terms.” He stated that the CBN hoped to discourage third-party cheque indemnities, while non-clearing financial institutions like micro finance banks will be able to post a negotiable rate, in the same way which bank guarantees are negotiable, but subject to a maximum 2% one-off charge..

The CBN also made a few recommendations to banks, suggesting they charge N100 for bill payment and interbank transfers; and N70 for all electronic fund transfers below N500,000; N100 for funds between N500,000 and N10 million; and N500 for funds above N10 million.

In the preface to the document, the CBN warns that “where a charge is stipulated as ‘negotiable,’ (banks) are required to appropriately draw the attention of their customers to its consequence and the two parties should mutually agree on the applicable charge.”

All commissions, charges and rate stipulated in the guide are also subject to relevant taxes, while the apex bank mandates banks to present any new product, service and charges not covered by the guide for prior approval.

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