The Central Bank of Nigeria (CBN’s) recent policy reintroducing ATM charges in the banking sector which many lamented that the move was another ploy by the apex bank and the banks to further impoverish Nigerians may however, be a blessing in disguise afterall.
This is because more financial and economic experts have joined the league of stakeholders that have declared support for the re-introduction of charges for the Automated Teller Machines (ATMs).
Daily Sun findings showed that the decision might be CBN’s soft landing for banks following its withdrawal of government deposits in bank vaults when it raised Cash Reserve Ratio (the percentage of deposits banks must keep with the apex bank at zero interest).
A peep into the half year score cards submitted to the Nigerian Stock Exchange by the various banks indicate that all may not be well after all, unless something is done urgently.
This is because only a few have reported profit growth since the withdrawal of public sector funds by CBN as many recorded decline in profit. While Skye Bank’s half year profit 2014 slipped by as much as 31 per cent from the corresponding period of last year. Fidelity Bank’s profit fell by 15.7 per cent to N9.43 billion; United Bank for Africa dropped, 13 per cent; FBN by 12 per cent; and Diamond Bank profit declined 8.4 per cent. However, Zenith Bank could only grow its half-year profit by 18.13 per cent, a far cry from its 106.7 per cent full year 2013 growth.
The reintroduction of ATM charges, which takes effect from September 1, 2014, the CBN argued, became necessary after realising the unintended consequences of the withdrawal on banks.
While insisting that the removal of ATM charges was wrong in the first instance, front-line economist and Managing Director, Financial Derivatives Company, Mr Bismarck Rewane, said there was no way banks can recover their costs and improve their profitability under the current regulatory dispensation.
For instance, he noted, banks have to pay the Assets Management Corporation (AMCON) levy; they have to pay premium to the Nigeria Deposit Insurance Corporation (NDIC), coupled with the Financial Stability Fund and at the same time, lose money from Commission on Turnover (COT) charges.
The COT, according to him, is being gradually reduced and would eventually be phased out in the next two years.
“Where do they expect banks to make profits apart from these deductions? Don’t forget that banks have to invest and reinvest. So, it makes a lot of sense to return the charges on the ATM,” he said.
Sterling Bank’s Executive Director, Finance and Strategy, Mr. Abubaker  Suleiman, who corroborated Rewane ; said that the re-instatement of cost recovery for the use of other banks’ ATM was intended to limit the cost incurred by banks and does not constitute profit.
He said: “Banks are still left with the burden of three free withdrawals a month, which translates to N195 monthly charge.   While this cost is less than the income on medium and high value accounts, it is sufficient to render most low value accounts unprofitable, which will force banks to discontinue marketing such accounts.”
Suleiman argued that the last thing the country needs at this time is a rollback of the financial inclusion campaign, which has resulted in a noticeable uptick in customer enrollment by banks and created access to financial services for more than one million Nigerians in just over a year.
He stressed that the previous policy on limitless withdrawals might have benefitted those who were already financially included in the short-term but would have harmed mostly poor people with banks scaling back investments for mass market and refocusing on the middle class.
Furthermore, he emphasized that the current burden on Nigerian banks arising from the combined weight of NDIC premiums and AMCON levy as well as the increasing cost of Cash Reserves gave little room for pushing additional cost to banks.
He added that these costs has become a source of concern for investors and could have negative impact on capital flows.
“When it comes to the cost of using ATMs, Nigerian banking customers still have one of the best deals you can find in any jurisdiction” Suleiman averred.
Speaking in an interview in Lagos, Director, Banking and Payment System Department, CBN, Mr. Dipo Fatokun, said the policy will not affect the apex bank’s financial inclusion campaign.
He also insisted that the policy was not a re-introduction of charges.
Fatokun explained that prior to the amendments in December 2012, it used to be N100 on any remote-on-us withdrawal, but that the N100 was removed then to encourage people to go to other banks’ ATMs.
“But the truth is that, as we said in the circular, that of the N100, N35 goes to the payment bank, which has now been completely waived. But in going to other ATMs to make withdrawals, your bank, which is the acquirer bank, incurs a cost of N65 which they pay to the switches and the owner of the ATM that you are using.
“Between 2012 and recently when the review was done, it was discovered that people have actually turned ATMs into their personally purses because nothing is charged. Somebody needs N500, N1, 000, he will go to an ATM to withdraw, such that in a day, some people can patronise ATMs up to five times,” he said.
According to him, this had created a huge cost burden for the banks that issued the cards, which was the major reason why the central bank decided that even though remote-on-us would still be encouraged, a customer can go to other banks’ ATMs and withdraw up to three times and there would not be any charges. But the customer would be charged N65 when he makes the fourth withdrawal.
“Of course, if you go to the ATM of your bank, you are free to withdraw as much as you like. So, it does not discourage financial inclusion.”

N65 ATM charges’ll position banks for seamless services – Experts