Good, bad, and ugly sides 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 the Nigeria’s banking sector. Owing bank accounts was elitist until 1990s. Recall that depositing and withdrawing money from your bank accounts used to be ‘a day’ job. Customers are handed ‘tally number’ as they arrived and the queue was often very long. Banking operations was then analogue with records kept in handwritten ledgers. Banks are open to customers from 8am – 4pm while Saturday and Sunday are observed as work-free days. Then comes computerisation of banking operations and banks started to digitise their services. Soon after, banks started the Know Your Customer policy where they collect detailed information and captured their biometrics.   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 makes it easy to withdraw monies 24/7 that is, every hour of everyday.

In order to drive financial inclusion, the Central Bank of Nigeria 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 digitisation of banking operations in Nigeria to the extent that bank customers no longer need to visit their banks in order to transact business. There is 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 need to have a minimum deposit threshold to open certain categories of accounts.

In the 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 cashless policy of Central Bank of Nigeria 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 in order to deposit and withdraw money. Internet banking has made banking to be ‘timeless’ and eliminate the risk of carrying huge cash around for transaction thereby exposing people to being robbed. It has also rendered use of Passbook and cheque books 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 made from such accounts without knowledge or approval of account owners. These fraudsters sometimes clone 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’s also the phenomenon of fake bank alerts which is 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 is also the worrisome failed transactions where the banks 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 system upgrade or internet downtime or poor network. There is also multiple charges and levies deducted by banks on transactions or every month end. For instance, aside bank charges on financial transactions, there is debit card maintenance fee, endless SMS charges, Stamp Duty deduction, 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 Central Bank at 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 time past, studying Banking and Finance and working in banks and other financial institutions use to be dream jobs of many graduates of tertiary institutions. Not anymore! In order to significantly reduce operational cost and improve their profit margin, many banks have resorted to outsourcing staff recruitment to employment agencies who serve as middlemen to the banks. These agencies recruit casual or temporary staff for the banks. These category of staff are not entitled to welfare benefits such as leave bonus, 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 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 high turnover of staff in Nigeria’s banks as many of them are known to have resigned to seek greener pasture 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 banks online platforms and welfare of staff should be looked into.