New CBN Guidelines to Weaken Banks’ Earnings, Boost Lending

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By Dipo Olowookere

Over the weekend, the Central Bank of Nigeria (CBN) announced the downward review of some fees charged on transactions carried out by customers of banks and others operating in the financial sector of the country.

While many consumers have applauded the industry watchdog for this move they described as laudable, which is majorly aimed to deepen financial inclusion in the country, some analysts have said it could ‘spell doom’ for the financial institutions because what they usually generate as income may be greatly affected when the changes become effective.

Commenting on the issue, United Capital Research said in a report released on Monday that next year could be very tough especially for banks in the country because of these new regulations.

The notable highlights of downward review of charges by banks and other financial, as well as non-bank financial institutions, effective January 1, 2020 were electronic funds transfer dropped to N10 for interbank transfers less than N5,000 (previously: N50 flat); N25 for interbank transfers between N5,001 and N50,000 (previously: N50 flat); N50 for interbank transfers above N50,000 (previously: N50 flat); maximum of N35 ATM charges after third withdrawal within the same month (previously: N65); no charge for debit cards linked to current account; and a maximum of N50 per quarter for cards linked to savings account (previously: N50/month).

United Capital Research said this new policy “is a further attempt [by CBN] to compel banks to lend to the private sector and support overall economic growth.”

It noted that, “Prior to the new guideline, we had expected banks fee-based income to be stable and reduce the expected impact of lower interest income in 2020.

“However, with the latest regulation, 2020 is going to be tough for the banks as all revenue lines may be under pressure. In our opinion, this will compel the bank to seek lending outlets to shore up interest income.”

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