The good, bad, and ugly of Nigerian banks

According to the Nigerian Bureau of Statistics: “The history of modern Banking in Nigeria dates back to 1892 with the establishment of the African Banking Corporation in Lagos. In 1894, the Bank of British West Africa―now First Bank—took over the Africa Banking Corporation. The Bank for British West Africa remained the only bank in Nigeria until 1912 when Barclays Bank―now Union Bank—was set up. Subsequently, other banks came on-stream. Until 1959, the banking industry in Nigeria was largely unregulated. Thus, there were no reliable and organised data on the monetary sub-sector. As the country approached independence, the Central Bank of Nigeria was founded, on 1st July 1959. According to Section 4 of the 1958 CBN Ordinance, one of the principal objectives of the bank is “to promote monetary stability and a sound financial structure in Nigeria”.

Privatisation and commercialisation happened early for Nigeria’s banking sector. Owning bank accounts was elitist until the 1990s. Recall that depositing and withdrawing money from your bank accounts used to be ‘a day job’. Customers were handed ‘tally number’ as they arrived and the queue was often very long. Banking operations were then analogue with records kept in handwritten ledgers. Banks are open to customers from 8 am – 4 pm while Saturday and Sunday are observed as work-free days. Then came the computerisation of banking operations and banks started to digitise their services. Soon after, banks started the Know Your Customer policy where they collected detailed information and captured their biometrics.  The Bank Verification Number and National Identification Number collection were later introduced and made mandatory for customers. Thereafter came Automated Teller Machines aka ATMs and debit cards which made it easy to withdraw monies 24/7 that is, every hour of every day.

In order to drive financial inclusion, the CBN started licensing Micro Finance Banks in 1990. These banks operate at community levels and complement the commercial banks otherwise called Money Deposit Banks which are fewer in number.   Information Communication Technology has aided the digitisation of banking operations in Nigeria to the extent that bank customers no longer need to visit their banks to transact business. There are now online banking and mobile banking solutions. As such deposits and withdrawals can be made via mobile phones and laptops. Opening of bank accounts is now seamless and can be done with zero balance. This is unlike before when a potential customer needed to have a minimum deposit threshold to open certain categories of accounts.

In recent past many communities that have no bank branches have been saturated with Point of Sales machine operators or bank agents. They take deposits and also enable customers to withdraw cash from them by charging a token amount for the services. Indeed, Nigerians have largely embraced the cashless policy of CBN by making transactions through transfers rather than carrying on them huge cash for purchases. CBN has also introduced e-Naira. Sincerely speaking, banking in Nigeria has been made very easy considering where we are coming from when people have to endure long queues at banking halls to deposit and withdraw money. Internet banking has made banking ‘timeless’ and has eliminated the risk of carrying huge cash around for transactions, thereby exposing people to being robbed. It has also rendered the use of passbooks and chequebooks unnecessary.
On the flip side, however, digital transactions have exposed bank customers to internet fraud. Scammers are now on the prowl online using different tricks to defraud unsuspecting people. Bank accounts of customers are sometimes hacked and withdrawals are made from such accounts without the knowledge or approval of account owners. These fraudsters sometimes clone the debit cards of careless customers to make unapproved withdrawals from their accounts.  A couple of years ago, my aged mother was duped of N45,000 by a scammer using a PoS agent. Money Deposit Banks database have also been reportedly hacked by these unscrupulous elements and billions of Naira stolen from such banks. There is also the phenomenon of fake bank alerts which are being used to dupe unsuspecting customers.

This newspaper in its September 14, 2023 online edition reported that “Nigerian commercial banks have lost a total sum of N42.6bn to fraud and forgeries over a three-month period from April to June this year. The amount lost in the second quarter of 2024 alone exceeded the total amount lost to fraud by the banks throughout the entire year of 2023. In 2023, the banks lost a total of N9.4bn. The report quoted as its source the Financial Institutions Training Centre in its Q2 2024 Fraud and Forgeries report, highlighting a surge in fraudulent activities across banking platforms. The FITC report is based on returns on fraud and forgery cases received from 28 deposit money institutions in the country. This is mindboggling!
Apart from fraudulent activities of scammers and hackers, there are also the worrisome failed transactions where the bank ATMs, PoS, or online bank platforms will announce a failed or unsuccessful transaction yet the customer will be debited and the transaction is not reversed.   Many customers have also experienced frustrating times trying to open online bank platforms. This possibly is due to a system upgrade or internet downtime or poor network.
There are also multiple charges and levies deducted by banks on transactions or every month end. For instance, aside from bank charges on financial transactions, there is the debit card maintenance fee, endless SMS charges, stamp duty deductions, etcetera. Many bank customers have been complaining about these numerous deductions from their accounts. Banks have also been fingered in the unwholesome practice of round-tripping. For example, they collect foreign exchange from the Central Bank at the official exchange rate but rather than sell to customers at marginal profit, they sell to parallel or black market operators at a premium thereby making super profits. Some bank executives have been arrested and prosecuted for embezzlement and abuse of office.

Another unwholesome development in Nigeria’s banking sector is staff casualisation. In the past, studying Banking and Finance and working in banks and other financial institutions used to be the dream jobs of many graduates of tertiary institutions. Not anymore! In order to significantly reduce operational costs and improve their profit margin, many banks have resorted to outsourcing staff recruitment to employment agencies which serve as middlemen to the banks. These agencies recruit casual or temporary staff for the banks. This category of staff is not entitled to welfare benefits such as leave bonuses, transport, feeding, health, and accommodation allowances. They also don’t get pension or gratuity when disengaged. Banks pay the agencies monthly and they in turn deduct administrative charges from the salaries of the casual staff and pay them a paltry sum as emoluments. Daily Trust newspaper in its May 2, 2022 edition reported that over 75 per cent of workers in the banking sector are casual staff. This was credited to Oyinkan Olasanoye, National President Association of Senior Staff of Banks, Insurance and Financial Institutions. Little wonder there is a high turnover of staff in Nigeria’s banks as many of them are known to have resigned to seek greener pastures abroad. This is heart-rending!

While the revolution in the banking sector is a welcome development, concerns of customers in terms of fraudulent activities on their accounts, downtime on the bank’s online platforms, and the welfare of staff should be looked into.

X: @jideojong