AN EXAMPLE OF WHAT IS WRONG WITH NIGERIAN BANKS (II)

The Zone is where the damage is done to the banks, the economy, the shareholders and the depositors. COT was introduced by the Central Bank of Nigeria (CBN) in 2004 with the hope that it will eliminate the conflicts between banks and their customers. But since COT is being grossly abused by the banks and customers are being repeatedly charged, the CBN wants to eliminate COT altogether, and the banks are already charging customers other fees. The CBN realized that allowing the banks to continue to charge COT and many other fees amounted to double-dipping. COT is charged on a customer's account when he lodges a cheque into his account. He is charged COT again when he gives someone a cheque from the money recently deposited into the account. For a small scale business or a self-employed artisan that can mean a drain on his capital. COT has the ability to drive up the cost of doing business and the price of goods. The garri seller and the hairdresser must factor COT into garri and the price of hair care otherwise there may be nothing left.

COT is being gradually wind down and will be completely phased out by 2016. Are Nigerian banks ready to focus on core banking and dedicate their attention to helping the economy to grow and less to their own getting rich quick schemes? Foreign Exchange (FOREX) used to be the darling of the banks in the days when there were two rates in Nigeria; when Babangida and his fellow annihilators chose to prosper where they have not sown. With the CBN plan the banks will not be able to charge on returned outward clearing cheques or on transfers to other accounts in the same name, the same branch or at another branch of the same bank. Without doing any decent professional banking, the banks in Nigeria are merely living off the common man. Millions would prefer to be paid their salaries and wages in cash these days if allowed to do so.


The banks are hoping they can bank roll the people the people currently in power to reverse the incoming policy regarding COT. COT is hurting millions of low income earners, and what should go towards buying food for their families is being taken from them and being used by the banks to fund the excessive lifestyle of their executives. Once upon a bank managing director who used to open his trouser pockets and reveal its content for everyone around to see as a proof that he was not stealing from the bank and declare that he did not have money, but the truth was that when this man ate lunch, drank water, hosted a party in his house, dedicated and named his children, sent his kids to private school, traveled overseas, donated an organ to his church, etc. the bank paid for it. He calibrated everything in such a way that the bank picked up all his bills, domestic and foreign. Even his shares in the bank was paid for with the bank's funds. How cool and clever was that eh? How crookedly clever it was to use the bank's money to gain part-ownership and control of the bank?

Most Nigerian banks are not structured to do banking. They have all positioned themselves for highway robbery, voodoo financial services and cash-grabbing schemes. Until Nigerian banks return to core banking and financial services and focus wholly on the business of developing the economy, supporting small and medium enterprises with loans at reasonable rates, develop the housing industry through the introduction of mortgage programs at interest rates that will draw millions to approach them for mortgage loans, and create investments that will bring them profitable ventures and earn them fees that is a direct result of their core business, they will remain fringe players and seekers of easy profits. There are millions of middle class people out there in Nigeria hoping for a reasonable mortgage loans at rates below the double digit rates most banks in Nigeria are offering. Mortgage loans to a million middle class paying at an interest rate of about 5% and paying regularly will yield good returns for the banks, but they would rather go for quick profit and dabble in dubious deals. Some of the banks are even building houses and offering them for sale at unbelievable prices because some of their executives have over bloated the cost of the building project! When does it become the function of banks to build and sell houses? Building houses just leaves the door open for bank executives to inflate the prices relating to the construction of the houses, which takes the final cost of the houses way up, and at the end of the day it was not the bank that benefit the most from such uncouth projects.