2M Bank Customer Closure: It’s Fee, not BVN Related

I had written many days ago that Nigerian banks lost customers in 2017 largely due to the sensitivities of customers to bank fees. Some agreed with me while others made the case that it was due to the introduction of BVN. The latter group noted that some government workers had to close bank accounts as a result of BVN. There was also another argument that it could be due to many customers consolidating their bank accounts. Besides, the banks themselves could possibly be closing accounts not tied to BVN.

Banks lost 2 million customers in 2017, dropping from 61 million to 59 million. Active bank accounts also shrank, from 65 million to 63.5 million in 2017.

Despite Central Bank of Nigeria’s (CBN) effort to promote financial inclusion, the Nigeria Inter-Bank Settlement System (NIBSS) banking industry statistics shows that the number of customers using financial services reduced in 2017.

The statistics obtained by the News Agency of Nigeria (NAN) from the NIBSS website on Sunday, showed that the total number of bank customers dropped from 61 million in 2016 to 59 million in 2017.

Similarly, active bank accounts reduced from 65 million in 2016 to 63.5 million accounts in 2017.

Possibly, it could be due to BVN but here are the bases of my call that fees have stronger correlation:

• Two million CUSTOMERS closed their accounts (61 million minus 59 million) in 2017. Also 1.5 million bank accounts were closed (65 million – 63.5 million). There is a mistake here as there is no way you can have more customers than bank accounts since the people became customers due to the accounts they opened. It is impossible to have more customers than account numbers unless they are counting joint accounts as separate “humans” or “customers”. For example a married couple share one bank account and the closure is captured as two customers for the one bank account. Doing that is just to confuse people. Nonetheless, we do have 2 million CUSTOMERS here that left the sector.
• Till today those who abandoned their bank accounts in commercial banks can still have access to them if they link BVN to them. So, technically commercial banks cannot record those bank accounts as closed. That the bank account has no BVN does not mean it is closed. The point is that if the corrupt people abandoned their bank accounts, as of today, banks cannot see those accounts as closed. So, abandoning bank accounts due to BVN could not have counted to this “2 million customer” number.
• Nigeria does not have more than 100,000 people at the position of power to perpetuate corruption. So, any insinuation that 2 million people closed their bank accounts as a result of the need to cut-off the axis of corruption does not make sense [they closed the accounts to avoid being found].

If you look at this critically, we do not have 2 million customers in government at positions to cause corruption that would have been compelled to go and close their bank accounts to avoid being detected. Also, dormant bank accounts, not linked with BVN, are still counted as customer accounts. You cannot use the word “closed” against them unless the banks closed them and returned the balances to the national treasury (i.e. the Central Bank of Nigeria). That has not happened yet.

Looking at this critically, I do not see how 2 million customers left the sector unless there is an exodus associated with fees. The common people would NOT have left because of BVN as they have no reason to abandon balances in their bank accounts to leave the banking sector. I do believe most left because of the bank fees.

To accelerate financial inclusion, the Central Bank of Nigeria should reform the varying levels of fees in the banking sector. Those fees could be discouraging the very people it wants to attract into the banking sector. For someone making N18,000 monthly and having to part with N300-N500 on fees and associated SMS charges, it could be a disincentive to bank. People are smart and when there is a burden via fees for extremely cost-sensitive people, any policy will collapse. CBN needs to revisit bank fees and work with our banks to find better ways to offer products that can reduce cost burdens on poor citizens. This is not a problem that technology can fix because the fintech companies do not take customer deposits. So, it is only policy that can solve this, and only the central bank has the capacity to make that happen. Yes, banks are not charities and are there to make money. So CBN needs to balance its policy.

All Together

While we may say it does not matter to know why, I do believe if our banking sector could lose 2 million customers in a year, we have a real issue. From the data provided by NIBSS, I do not see any strong correlation to BVN. We are not talking of losing just bank accounts, we are talking here of bank CUSTOMERS. This is a big issue. While people could have consolidated their bank accounts, that would only reduce the number of bank accounts, not bank customers.

Note: NIBBS did not state if the customers are unique customers. It is certainly not but even with that the argument does not change.

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