Are banks pinching pennies from the poor?

When the tireless Akintunde Asalu was alive, shareholders had influence over Board actions. There’s been less impact since his exit and less transparency as a result. One valuable insight from the meticulous watchman was: ‘Watch the kobos and the naira will add up. If someone steals a kobo from millions of people, that person can easily become a billionaire.’

As the naira sinks deeper in worth, most people have shifted their inspection to the thousand units of their transactions, especially in dealing with banks. This has left a boundless acreage for exploiting citizens. This happens frequently and randomly and even if one is observant, the amount is often too tiny to warrant taking any action. What actions are even available? Say you just made a transfer of N5000 to your son and you notice N79 less than ought to be in your balance.

Well, sometimes, N300 or more unexplained deduction. On one occasion, I made a N10,000.00 withdrawal while on a trip and it was debited without being paid.

Then you make another withdrawal to survive and you’re told it will revert and it never did. What’s your own story? Have you ever spent all day in the bank trying to resolve an amount that doesn’t make sense to spend more than one hour on or loaded data on your phone and had to repurchase? The only option is to go to the branch nearest to you which is a nightmare if you want to do anything short of making a deposit.

The company which executes these transactions is the Nigeria Inter-bank Settlement System and they are far from the view point of the average citizen who’s losing little sums everyday.

Sometimes, there’ll be a glitch with transactions being unaccounted for, for a couple of days, then when the alerts resume, the citizen is confused. We move on with our already challenging existence.

To apply Asalu’s insight and considering that, according to the NIBSS, cashless transactions surged by 44.84 per cent to N126.73 trilion in the first quarter of 2023, there’s much drainage going on per second with no eyebrow raised. This ultra casual citizens’ loss of money doesn’t include the N18billion bank fraud loss which NIBSS published for the year 2023.

Wole Soyinka doesn’t capture this seepage in his Chronicles of the Happiest People on Earth. However, individuals should begin to pay more attention to their bottom lines and opinion leaders should step out of the shades.

In June last year, it was reported that the Nigerian Inter-Bank Settlement System had slashed its transaction processing fee for NIBSS Instant Payment from N5 to N3.75k effective July 1, 2023.

According to a letter, dated May 31, 2023, signed by the Managing Director/Chief Executive Officer, Premier Oiwoh, and the Executive Director, Business Development, Ngover Ihyembe-Nwankwo, which read in part, “We are delighted to inform you that the board and management of Nigeria Inter-Bank Settlement Plc has approved a further reduction in the transaction processing fees on NIBSS Instant Payment from N5 to N3.75k effective July 1, 2023.”

There was no follow up to this story and one would like to read from anyone who experienced any reduction in the cost of instant payment. Interestingly, they declared a profit of N80 billion.
Furthermore, no one has addressed the aberration where citizens lose N100 per N5000 because banks and NIBSS have abdicated the responsibility of giving us our deposits without migraine.

It’s in place to miss a folk hero like Tunde Asalu at this time as there seem to be no one or institution to make the board of the NIBSS look over their shoulders. Its services include Instant Payment, Electronic Funds Transfer (EFT), Automated Clearing House (ACH), and Cheque Truncation System (CTS).

In Europe and America, the role performed by NIBSS in the financial system is typically handled by their respective central banks. A central bank’s most critical role is maintaining financial stability and overseeing payment systems. Some may assign it to coincidence, but stability has eluded the economy since the NIBSS became functional in 1994.

The naira started a steady nose-dive when the owners of NIBSS established another vehicle called the Bankers’ Committee on December 19th, 2000, ostensibly to sanitise banking and create an effective machinery for enforcing compliance. The role of the bankers committee is not replicated elsewhere in the world.

The Bankers Committee comprises of top executives from commercial banks who are already smiling to the bank, with the governor of CBN as chairman. The inclusion of the CBN governor gives it a veneer of national authority but in practice, these are aggressive non-state actors— a powerful entity that benefits bank managing directors (MDs).

Their investments in epic projects puts the committee in competition with the private sector for loans, raising issues of conflict of interest and wealth accumulation.

Addressing the Bankers Committee’s role and potential abuses requires robust governance and CBN must strike a balance between industry collaboration and individual enrichment.

In 2019, the Idanre born Senator Ayo Akinyelure  sponsored a motion that sought to examine the operation of the Nigeria Inter-Bank Settlement System (NIBSS) on the floor of the Nigerian Senate. The motion was titled, “The need to improve Internally Generated Revenue of the Federal Government of Nigeria through non-oil revenue.”

According to him, despite efforts by the Federal Government to recover over N20 trillion from Nigeria Inter-Bank Settlement Systems (NIBBS) to the Federation Account, “the Central Bank of Nigeria and NIBBS have technically refused to comply with the Presidential directives for the recovery of over N20 trillion revenue into the coffers of government.”
 
Akinyelure, a Chartered Accountant and tax professional, added, “The CBN and NIBSS deliberately failed to cooperate and comply with the directives of Mr. President for the realisation of over N20 trillion revenue due from stamp duties collected for 2013 to 2016 and subsequently over N5 trillion minimum revenue due to be collected annually to the Federation account.”
 
The lawmaker lamented that, “accountability by banks has not been transparent and no report by CBN or its subsidiary (NIBSS) to the Nigerian public to know the actual revenue generated, collected and transferred to the Federation Account.”

Note the irony of referring to NIBSS as a subsidiary of CBN. In reality, it is a private company in which the CBN has a stake of 3.5 per cent and the CBN director of financial stability is a chairman. It enjoys a neither bird nor fish status that makes opacity natural.

Of course, nothing is reported to have emerged from the investigation and with the resignation of Senator Ayo Akinyelure from the honourable house, such investigation may have been swept under the red chamber’s carpet.

What’s the way forward for the masses in the cashless economy dangling like an albatross around their neck?
According to MKO Abiola, when someone has k-leg, it’s superficial to say his cap is bent to one side. We need to do something about the foundation.

Increasing the government’s shares in NIBSS could be a strategic move.

A higher government stake would give more control and influence over NIBSS operations.

While we need to strike a balance between public interest and private sector efficiency, Government ownership ensures alignment with public interest and policy goals, with improved governance and transparency.

Bank financial reports should be accessible to the public and bank alert notifications should be more explicit.

NIBSS should have an independent board with diverse expertise, instead of being a clone of the bankers committee. As for the committee, it should revert to enforcing compliance among bankers, although the Chartered Institute of Bankers is in place for that purpose. The bankers committee should cease to be an organ of investment because of depositors funds at their disposal. It’s immoral to deny access to credit for small and medium-sized enterprises (SMEs).

SMEs are vital for economic growth and job creation.

Independent directors in NIBSS can oversee management decisions objectively.

There’s a need to promote financial literacy to empower consumers as informed customers make better decisions and can deal better with fraudsters.

Employees and stakeholders must be encouraged to report unethical practices without fear of retaliation and there must be a robust Anti-Money Laundering (AML), vigilance in place.

Banks should also provide clear terms and conditions for products and avoid hidden fees and deceptive jargon.

CBN should establish online channels for customer complaints and dispute resolution.

Let’s bear in mind that a vibrant capital market provides alternative funding sources for businesses.
Implementing some of the above suggestions gradually and consistently can lead to a healthier financial system in Nigeria.

Finally, it needs to be said that it’s immoral for NIBSS to be a profit pursuing organisation. Like
SWIFT —Society for Worldwide Interbank Financial Telecommunication— it should operate as a cooperative society rather than a profit-making company.

Like NIBSS, SWIFT is owned by its member financial institutions.

These member institutions collaborate to set the rules, standards, and policies that govern SWIFT’s operations.

The cooperative model ensures that SWIFT serves the interests of its members, rather than maximising profits for shareholders.

Its primary goal is to provide a secure and efficient messaging network for international financial transactions.

Any surplus generated by SWIFT’s operations is reinvested into the organisation to enhance its services and infrastructure.

So it ought to be with Premier Oiwoh’s settlement system.

Aoiri Obaigbo is the author of The Wretched Billionaire.

The post Are banks pinching pennies from the poor? appeared first on Guardian Nigeria News.

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