What Has Gone Wrong with Nigerian Banks?
What has gone wrong with Nigerian banking? That was the question many asked as they saw pictures and videos shared on social media of crowds that besieged the gates of several bank branches across Lagos on May 4, 2020. Why would anybody need to go to the bank when there were Automated Teller Machines (ATMs) available and internet banking used by many? The responses were quite revealing.
One man, had his ATM card swallowed by the ATM during the lockdown and had to appear at the nearest branch that morning to get a replacement. Another man, Mr X, had walked three miles to the bank because, during the lockdown, he had tried withdrawing N20,000 from the ATM and there was a dispense error. He never received the cash but the amount was debited from his account and was never reversed. That was all the money he had. He was adamant that first thing that Monday morning, he would be at the bank to resolve the matter as soon as the lockdown was lifted. This was a common scenario that people narrated of dispense errors and also stories of ghost withdrawals in varying amounts from their account. These financial transaction disputes are sometimes resolved by email or the bank’s contact centre but the banks had actually suspended the resolution of all e-transaction failures during the lockdown period leaving customers aggravated and frustrated. During the lockdown period, complaints were many and the Federal Competition and Consumer Protection Commission (FCCPC) confirmed this in a statement dated April 22, that they had received a lot of complaints from consumers on issues bordering on failed electronic banking transactions within the period of lockdown. Transactions failure on e-payment platforms in Nigeria are of serious concern to millions of users. The e- payment platforms managed by the Nigerian Inter Banking Settlement System (NIBSS) covers the processing of standard e-payment channels in the country, namely ATM, Point of Sale Terminals (PoS) and Electronic Money Transfers.
As an example, the failure rate shared by NIBSS data for the first week in May 2020 saw an average rate of between 12 to 15 per cent daily which is on average 120,000 - 150,000 failed transactions per million. These are not impressive figures and they do not translate to a working and efficient system especially for a county that advocates for a cashless society.
The benefits of a cashless society are clear. In a 2019 research conducted by the Boston Consulting Group, it was concluded that economies that are more cash intensive tend to grow slowly and miss out on significant financial benefits; whereas, economies that switch to digital or electronic payments are more successful as the switch can boost annual GDP by as much as three per cent.
Sadly, the number of bank accounts in Nigeria appear to be decreasing and not increasing and the quest for a cashless society is one fraught with challenges. Aside from the financial infrastructure challenges, if your targeted audience does not see any value in the product you are offering, they will refuse to sign up. Customers are not happy with the constant deductions for one charge or the other and would prefer to hold onto their cash than fully utilise a bank account.
Some of the customers who turned up at the bank that Monday did not have ATM cards because of the monthly maintenance charges that accrue to the account. Also, the mandatory N50 Point of Sale (PoS) charge for transactions one thousand naira (N1000) and above, in line with the directive given by the Central Bank of Nigeria (CBN) and other e-payment charges, is a deterrent for many in obtaining and using ATM cards or fully operating a bank account.
For those on low or irregular incomes, the N50 deductions cannot just be given away. The amount of fifty naira (N50) represents a packet of Indomie noodles or a loaf of Agege Bread - food for the day.
a lawyer and sustainable development consultant writes from London