Is the CBN confused? The Commission on Turnover (CoT) has been reintroduced
The Central Bank of Nigeria (CBN) has indirectly reintroduced a negotiable Commission on Turnover (CoT) as a current account maintenance fee across all commercial banks.
According to a circular sent by the CBN on Wednesday, January 20th, banks are to charge nothing more than N1 per every N1,000 as CoT for every current account transaction, “in respect of all customer-induced debit transactions.”
The reintroduction of the CoT adds to the unclear monetary strategy of the CBN following last week’s imposition of a compulsory stamp duty of N50 on all non-self current account transactions. Last year, the CBN announced, in a circular titled “Implementation of Revised Guide to Bank Charges –Commission on Turnover,” that a zero-commission on turnover would commence in January 2016 stating, affirmatively, that there was no going back on the implementation of the policy. However, it appears the CBN failed to take into consideration how much banks could lose from the implementation of this policy.
According to the former Executive Director of Keystone Bank, Richard Obire, 70 percent of the total revenue generated by Nigerian banks comes mainly from interests gotten on loans, while ‘fees and commissions’ account for the rest. CoT alone contributes over 60 percent to the ‘fees and commissions income’ section, which shows commercial banks would inevitably face revenue challenges with the CBN’s former plan to adopt a zero-commission on turnover.
Despite strong protest by banks following this decision, the CBN remained adamant on the zero CoT policy which would see banks lose about N100 billion (out of N550 billion) in annual revenue. The reintroduction of the CoT as current account maintenance shows a confused CBN which probably needs a minister that can foretell the future in its policy implementation.
A review of CBN policies, last year, bred doubt and unease among Nigerians which means the apex bank needs to understand that its mandate is to promote and safeguard a sound financial system in Nigeria by initiating thoughtful policies, rather than to work on assumptions during this very critical period.
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