Customers of eleven banks have paid N143 billion as Account Maintenance Fee, AMF, since 2016 when it was introduced by commercial banks.
The banks comprising the five Tier 1 banks and six Tier 2 banks are Access Bank, First Bank, GTBank, UBA, Zenith Bank, Diamond Bank, FCMB, Fidelity Bank, Stanbic IBTC, Sterling Bank and Union Bank. Ecobank, one of the big banks, did not disclose its income from AMF.
The 11 banks control over 80 percent of total customer base of the Nigerian banking industry.
Meanwhile bank customers under the aegis of Bank Customers Association of Nigeria, BCAN, have reiterated their opposition to the fee and are calling on the Central Bank of Nigeria, CBN to suspend it.
Financial Vanguard investigations, however, revealed that while most banks have introduced strategies to enhance income from AMF, customers are also aggressively negotiating for lower rates. Consequently, nine of the 11 banks analysed recorded 20 percent increase in income from AMF while two banks recorded 44 percent decline in the first quarter of 2018, Q1’18.
Prior to introduction of AMF, banks charge Commission on Turnover, CoT, of N1 per N1000 for every current account transaction. However in 2013, the CBN introduced a phased elimination of CoT charge which ended with zero CoT effective December 2015.
However, in a bid to mitigate the impact of this development on their earnings, some banks began to charge customers for AMF. This was hotly debated at the Bankers Committee meeting, with bank chief executives complaining about the impact of CoT removal on their earnings and the need to cover expenses associated with current account services.
CBN endorsement
Consequently, the CBN issued a circular which legitimised AMF.
The circular entitled, “Introduction of Negotiable Current Account Maintenance Fee Not Exceeding N1/Mille,” and signed by the Director, Financial Policy and Regulation Department, CBN, Mr. Kevin Amugo, stated: “The Revised Guide to Bank Charges, RGBC, which came into effect on April 1, 2013 provides for a phased elimination of COT charges in the Nigerian banking Industry. Under the guidelines, a zero COT regime came into effect from January 2016.
“The CBN noted that while the gradual phase out was being observed, some banks continued to charge Account Maintenance Fees in addition to the reduced COT rate, which in effect amounted to double coincidence of charges. The CBN is not oblivious of the impact of declining crude oil prices; operation of Treasury Single Account; and other market turbulences on the viability and stability of the banking system.
“In furtherance of the mandate to promote and safeguard a sound financial system in Nigeria, banks are by this circular reminded that the 2016 Zero COT regime as jointly agreed during the 311th Bankers Committee meeting of February 12, 2013 has come into effect. In the interest of stability of the banking system, a Negotiable Current Account Maintenance Fee not exceeding N1 per mille may be charged in respect of all customer induced debit transactions. Please ensure strict compliance”.
Financial Vanguard analysis of banks’ financial statement from 2016 to first quarter of 2018, Q1’18, revealed that eleven banks earned N143 billion as AMF income.
Zenith leads
The five Tier 1 banks dominated with 82 percent or N117.12 billion, while the six Tier 2 banks earned N38.63 billion, representing 18 percent of the total.
Further analysis revealed that Zenith Bank recorded the highest income of N50.04 billion or 35 percent, followed by First Bank with N25.29 billion or 17.6 percent. GTBank came third with N20.6 billion or 14.4 percent, followed by Stanbic IBTC Bank and UBA which earned N11.65 billion or 8.1 percent and N11.24 billion or 7.8 percent during the period.
The rising AMF
Further analysis revealed that the eleven banks enjoyed increased earnings from AMF, in spite of decline in number of current accounts in the banking industry.
According to the Nigeria Interbank Settlement System, NIBSS, the number of current accounts dropped by 9.6 percent to 22.6 million in 2017 from 25 million in 2016. But banks’ earnings from AMF rose by 17.66 percent to N74.66 billion in 2017 from N63.69 billion in 2016.
In 2017, eight of the banks recorded increased earnings from AMF. Access Bank led with 146 percent increase, as its AMF income rose to N6.45 billion in 2017, from N2.62 billion in 2016.
Stanbic IBTC came second, with 97 percent increase to N7.11 billion in 2017 from N3.61 billion in 2016. Zenith Bank recorded the third highest increase of 60 percent in AMF income which rose to N27.71 billion in 2017 from N17.37 billion in 2016.
The three banks that recorded decline in AMF income in 2017 were led by First Bank with a decline of 58 percent to N6.67 billion from N15.63 billion in 2016. Fidelity Bank came second with 33 percent decline to N1.74 billion from N2.6 billion in 2016, while Union Bank recorded decline of 15 percent to N1.21 billion from N1.43 billion in 2016. Sterling Bank’s income from AMF in 2017 remained stable at N1.44 billion.
Financial Vanguard analysis of the Q1’18 financial statements of the banks also revealed that nine of them recorded 20 percent year-on-year increase in AMF.
Sterling Bank recorded the highest increase of 49 percent as its AMF income increased to N471 million in Q1’18 from N317 million in Q1’17. First Bank followed with AMF increase of 25 percent to N2.99 billion in Q1’18 from N2.39 billion in Q1’17. Stanbic IBTC came third with increase of 18 percent to N927 million from N786 million in Q1’17, while Fidelity Bank recorded 17.5 percent increase in AMF income to N637 million in Q1’18 from N542 million in Q1’17.
On the other hand Zenith Bank and Diamond Bank recorded decline in AMF income in Q1’18. While Zenith Bank recorded decline of 48 percent to N4.96 billion in Q1’18 from N9.57 billion in Q1’17, Diamond Bank recorded decline of 11.3 percent to N985 million from N1.11 billion in Q1’17.
Banks’ reaction
Speaking to Financial Vanguard on the sidelines of the launching of the Unified Payment’s Hourly Settlement Service, Victor Etokwu, Executive Director, Personal Banking Division, Access Bank, said the increase recorded by banks in AMF income was due to increased current account transactions and increase in number of bank customers, adding that banks are even granting lower AMF rate to customers based on negotiations.
This negotiated lower rate, according to Ifeatu Onwuasoanya, Head of Investor Relations at Diamond Bank, was responsible for the 11.3 percent decline in the bank’s AMF income in Q1’18.
He said: “As highlighted, the bank (Diamond Bank) reported a decline of 11.2 percent in account maintenance fees from N1.11 billion to N985 million. Recall that CBN directed all banks and other financial institution to effect account maintenance charges (maximum of N1 per mile) to its customers with current accounts, thereby replacing COT charges.
“This maximum amount is, however, negotiable and the drop you see in this fee category is due to the very active and high volume customers negotiating rates below the maximum permitted. The bank is more than able to make up for this loss through fees applied to other transactions we encourage customers to do with the bank as well as fees applicable to our extensive range of digitally driven retail services.”
Speaking to Financial Vanguard on condition of anonymity, a branch manager in one of the Tier 1 banks confirmed that customers, especially corporate customers are becoming increasingly aware that the AMF is negotiable and hence have been demanding a lower rate from their banks. He said this accounted for the sharp decline recorded by Zenith Bank and the marginal increase recorded by most Tier 1 banks in Q1’18.
He said while some of the increase recorded by the banks in 2017 and Q1’18 might have been due to increased transactions, most of the increases were due to elimination of zero AMF products by banks.
He said that the zero AMF products which usually come with high account balance, from N50,000 upward, were offered with the hope that they will generate patronage that will compensate for the AMF income loss, but when they realised that the patronage is not enough to compensating for the AMF loss, they decided to cancel the products or upgraded the account balance limit. He said this has helped most of the banks to recover and boost income from AMF.
Bank customers kick: But speaking to Financial Vanguard, Mr. Uju Ogubunka, President Bank Customers Association of Nigeria, BCAN, said that it was wrong for banks to charge AMF, stressing that all over the world there is nothing like CoT or AMF.
“We tried to fight it the last time because as far as we are concerned, it is not the right thing to do. You said you removed CoT and replaced it with AMF, and the principle of COT is the same for AMF. So it is like you changed the name. All over the world there is no where banks charge something like CoT, it is only in Nigeria. Now you changed the name and say you have removed CoT and introduced AMF. What is AMF?
Call for the removal of AMF
“I do know for sure that AMF will one day be removed from our lexicon but the customers need to come out together and fight it because it is not right. Every other thing you do, the banks charge you. In fact whether you even transact anything or not they charge you in some banks. Meanwhile it was supposed to be based on specified items. If there is a debit on your account, no matter how the debit came about, whether it is internal or external, they charge in some banks.
“But it will take the awareness of all bank customers and all of us joining hands together and then someday it will become a thing of the past just like CoT or they will change the name to another thing.”
Ogubunka added that BCAN will not relent on its call for the removal of AMF, adding that the issue is one of the focus of the Association’s summit coming up next month.
“At the summit we would join hands together to look at issues affecting bank customers like the AMF with a view to take a position on how to push it forward”, he said.
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