The Central Bank of Nigeria (CBN) has announced that it is considering a reduction of the 5% cost on transaction (COT) or its entire removal from transactions between customers and banks. Analysts believe that the move would boost businesses and enhance financial inclusion.
Tunde Lemo, CBN deputy governor for operations, said the apex bank was uncomfortable with the high rates charged by banks, because they undermine the apex bank’s key mandate of maintaining price stability.
Speaking to members of the House Committee on Banking and Currency in Abuja, Mr Lemo said, “There is a review going on, on bank charges and part of that review is to look at various charges and see how bankers can work together and agree, so that overall, the charges to customers are reduced and one of the areas they are looking into, is actually to reduce the COT from a maximum of 5 percent per million that it is now, to something lower. They have not yet concluded but the discussion is ongoing.”
Responding to the concerns of law makers on high lending rates and charges by banks, Lemo explained that interest rates in the country were high on account of inflation and a hostile business environment. He added that the CBN was working with the banks to ensure they reduced their margins.
Lemo explained that banks bore high operational costs which tended to over-burden their balance sheets, since many of them constantly generated electricity on their own, and provided security to guard against armed robbery, among other challenges.
Lemo told the law makers that despite these challenges, the CBN was championing the initiative of ‘shared services’ by the banks, which would help them reduce their operating costs and translate into lower interest rates, as the efficiency gains emerge.
One of Lemo’s recommendations was that the money and capital markets must be deepened, to create a pool of long term funds which banks could tap into and boost their lending.