Nigeria: Relief As Bank COT Is Slashed By 40 Percent

After years of groaning by banks' customers over arbitrary charges on cost of transactions (COT), the Central Bank of Nigeria (CBN) has concluded plans to peg the transaction cost at N3 for every N1,000 transacted.

Part of the clause is that the new COT regime will be a flexible one that must not exceed 3 per cent. Sources at the Central Bank said customers can negotiate COT charges between zero and 3 per cent, so that what customers will pay depends upon their negotiating power.

Before now, transaction cost was officially N5 for every N1,000 transacted. This means that, officially, the Central Bank will effectively reduce cost by 40 per cent for banks' customers. But the snag before now was that banks never adhered to the formerly stipulated N5 for every N1,000 transacted.

Most of the banks contacted could only agree that they had been compliant with the N5 for every N1,000 transacted. But most customers said they had not been aware of what had been charged them as COT.

Amid fears over the willingness of banks to comply with the proposed transaction cost, analysts said it would be great relief to bank customers who had been taken to the cleaners by banks, mostly because of their ignorance.

Central Bank spokesman Ugochukwu Okorafor said the policy will not discourage the cashless policy because of lower cost of transacting business, adding that infrastructure were being built to encourage the cashless policy.

Bismarck Rewane, chief executive officer of Financial Derivatives Company (FDC) Limited, told LEADERSHIP in a telephone interview that the move by the apex bank was a good development. In some developed climes, he said, there is nothing like COT and the banks still survive.

Rewane said the move would ensure banking transactions were cheaper and more people wouldprobably embrace banking.

He also said that the reduction and pegging of COT would force banks to become more efficient as they would devise other ways of making profits.

Samir Gadio, an analyst with Standard Bank, London, told LEADERSHIP in an e-mail: "We see this development as a positive step and a complement to the policy of cashless banking implemented by the CBN."

source:leader