Banks to lose N100b revenue as zero COT begins

Banks’ revenues will drop by about N100 bilion this year, with the implementation of the zero Commission On Transactions (COT) policy.

It is the last phase of the “Guide to Bank Charges” policy initiated by the Central Bank of Nigeria (CBN).

A former Executive Director of Keystone Bank, Richard Obire, explained that of the annual N550 billion average revenue for the 21 banks, about N100 billion is raked from COT.

Obire explained that bank’s revenues are made up of interests on loans, which constitute 70 per cent of the total revenue. Fees and commission make up the remaining 30 per cent. Fees and commission covers 30 per cent of the total revenues. COT constituting 60 per cent of income within the segment.

Obire said banks should be moving towards income diversification to shore up their revenue base. He said lenders should be creative and think of how to diversify to support activities that generate foreign exchange from local industries. He said aside the COT-free banking, the lenders will face pressure arising from interest revenues on loans.


The “Guide to Bank Charges” implementation, which started in March 2013, has seen the COT gradually drop to N3 per mille in 2013; N2 per mille in 2014; and N1 per mille in 2015 to Zero COT per mille started on January 1.

The “Guide to Bank Charges” is an initiative of the Central Bank of Nigeria (CBN) to reduce charges widely seen by bank customers

In a circular titled: “Implementation of Revised Guide to Bank Charges –Commission on Turnover,” posted on CBN’s website and signed by its Deputy Director, Financial Policy and Regulation Department, Franklin Ahonhai, the regulator said there was no going back on the policy implementation.

It mandated banks that charged excess COT since the effective date to refund same to the affected customers or be sanctioned.

According to the CBN, the policy is expected to have implications for both banks and their customers as it is expected to give the regulator more power to deal with banks reluctant to lower service fees considered ‘as the highest in the world’.

The apex bank said the “Guide to Bank Charges” would make it more difficult for banks to set high fees and charges without having reasons acceptable to regulators. The regulator said banks’ drive to make inroads into the legions of this country’s unbanked, financially illiterate and those isolated from traditional banking services through distance and hard terrain will be hampered by excessive charges.

It said the guideline was meant to address complaints arising from bank tariffs and other miscellaneous fees charged by banks on their customers’ accounts. The policy is also expected to ensure greater competition in retail banking and achieve real benefits for customers through lower costs, better service and greater access of financial services to poor communities whilst at the same time preserving the stability of the banking system.

Afrinvest West Africa Plc Managing Director Ike Chioke said banking was confronted with the reality of declining fee incomes, mobile money and dollar denominated capital sourcing.

In a report titled: “Nigerian Banking League – The fate of small players” Chioke predicted that the era of “real banking” appears to be gradually re-emerging as traditional sources of high income/profitability continue to come under threat from increased competition and tighter regulation.

He predicted that in the next five years, outlook on yields and fee income remains downwards, necessitating the need for banks to focus on lending to the real sector. Also, banks are expected to develop and grow the depth of their core retail banking businesses to retain and amplify cheap deposits.