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CENTRAL BANK OF NIGERIA

Consumer And Financial Protection Department
Central Business District
P.M.B. 0187
Garki, Abuja.

Tel: 09-46236441, 46236418
E-mail: cfpd@cbn.gov.ng

6th July, 2012
CFP/DIR/GDL/01/018

ADMINISTRATIVE LETTER TO ALL DEPOSIT MONEY BANKS (DMBs) AND OTHER STAKEHOLDERS

EXPOSURE DRAFT OF THE GUIDE TO BANK CHARGES

The Central Bank of Nigeria (CBN) is currently reviewing the extant Guide to Bank Charges (the Guide) which has been in use since January, 2004. The review is intended to align the tariff regime in the banking industry with present economic realities and offer a platform for standard application of charges on different types of banking products and services.

An important component of the review exercise was the development of a minimum disclosure requirement that stipulates the information banks are required to disclose to all customers prior to the consummation of every credit transaction.

In order to reduce misrepresentation and ambiguity, a Glossary of Terms has also been developed to provide clear and simple definition of technical terms used in the Guide.

The overarching goal of the review is to produce a Guide that is collectively owned by all the stakeholders in the banking industry with the concomitant feature that it will accommodate the freedom of operators to charge competitive prices, while protecting consumers from arbitrary and excess charges.

In view of the need to carry along operators and other stakeholders, coupled with the desire of the CBN to uphold the spirit of cooperation among regulators it is essential to expose the draft Guide for the comments of relevant stakeholders prior to its release to the industry.

Consequently, we hereby attach the Guide as exposure draft for comments from stakeholders to enable the CBN finalize the document and issue same

subsequently. The exposure draft can be accessed at the CBN website www.cbn.gov.ng

Your Comments can be forwarded in hard or soft copies. Hard copies should be sent to the Director, Consumer and Financial Protection Department, Central Bank of Nigeria, Abuja, while soft copies captioned “Comments on the draft Guide to Bank Charges” should be e-mailed to tyahmed@cbn.gov.ng and doakoma@cbn.gov.ng within four (4) weeks of the date of this circular.

U. F. Shehu
Director

REVISED GUIDE TO BANK CHARGES (Draft)

CONSUMER AND FINANCIAL PROTECTION DEPARTMENT

PREFACE

The “Guide to Bank Charges” provides a standard for the application of charges on the various types of products and services banks in Nigeria offer to their customers - individuals, corporate organizations and governments (Federal, State, Local and their agencies).

Wide consultations with relevant stakeholders were considered in arriving at the charges prescribed in the Guide. The intendment of this Guide is to enhance flexibility, transparency and competition in the guided deregulated Nigerian economy.

Where a charge is stipulated as “negotiable”, banks are required to appropriately draw the attention of their customers to it consequent upon which the two parties should mutually agree on the applicable charge. All commissions, charges and rates stated in this Guide are subject to relevant taxes.

Although the Guide provides for charges on various products and services of banks, it is not exhaustive. Banks are mandated to present any new product, service and charge(s) not covered by this Guide to the Central Bank of Nigeria for prior approval.

A glossary of terms is contained in pages 40-47, to provide readers with an explanation of the words/terminologies used in the Guide.

PREFACE...................................................................................................................1
SECTION 1: INTEREST ON DEPOSITS........................................................................3
SECTION 2: INTEREST RATES/ LENDING FEES...........................................................4
SECTION 3: COMMISSION ON TURNOVER.................................................................11
SECTION 4: COMMISSION ON BONDS GUARANTEES & INDEMNITIES, ETC..................13
SECTION 5: FOREIGN EXCHANGE COMMISSION.......................................................14
SECTION 6: BILLS FOR COLLECTION.........................................................................19
SECTION 7: STRAIGHT FORWARD HANDLING OF DOCUMENTS...................................22
SECTION 8: INWARD AND OUTWARD LETTERS OF CREDIT.......................................23
SECTION 9: INTERNAL TRANSACTIONS (within Nigeria)..............................................29
SECTION 10: ELECTRONIC BANKING..........................................................................33
SECTION 11: MISCELLANEOUS..................................................................................36
GLOSSARY...............................................................................................................40
MINIMUM DISCLOSURE REQUIREMENTS IN OFFER LETTERS FOR LOANS...................47

CONSUMER LOAN.............................................................................................47
MORTGAGE LOANS...........................................................................................48
OVERDRAFTS....................................................................................................49
MINIMUM DISCLOSURE REQUIREMENTS IN AN OFFER LETTER FOR CREDIT FACILITIES..50
MINIMUM DISCLOSURE REQUIREMENTS FOR CONTINGENT LIABILITY.....................52
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SECTION 1: INTEREST ON DEPOSITS

S/NO	DESCRIPTION IN THE EXTANT GUIDE	PROPOSED DESCRIPTION	RATES IN THE EXTANT GUIDE	RECOMMENDATION (RATES)	JUSTIFICATION	REMARKS
1	Current Account in credit balance	Current Account in credit balance	Negotiable	Negotiable subject to a minimum of 0.5% p.a. payable monthly, on daily balance of N500,000 and above.	This is in line with best practice.	Payment of a minimum of 0.5% p.a. on monthly average balance of N500,000 and above should be discussed and agreed by the bank and the customer.
2	Savings and deposits Accounts	Savings Accounts	Negotiable	Minimum of 3% p.a. on daily balance, not subject to any conditions.	To encourage savings	For clarity, savings and term deposit accounts were separated in line with current efforts of the CBN to encourage savings habit.
3	Term Deposit Accounts			Negotiable	This is in line with banking convention.	The rate payable should reflect market rate.
4	Domiciliary Accounts:					Given that banks enjoy the usage of the foreign exchange deposited in these accounts, they should pay a rate for having those deposits. This would also encourage banking culture.
4.1	Current Accounts			Negotiable	Industry practice
4.2	Savings Accounts			Negotiable (Withdrawals from savings account should not attract charges).	Industry practice
4.3	Term Deposits			Negotiable	Industry practice

SECTION 2: INTEREST RATES/ LENDING FEES

S/NO	DESCRIPTION IN THE EXTANT GUIDE	PROPOSED DESCRIPTION	RATES IN THE EXTANT GUIDE	RECOMMENDATION (RATES)	JUSTIFICATION	REMARKS
1	INTEREST RATES	Lending Rates		Lending rate should be MPR + maximum of 8% (customer must be notified at least 48 hours before the application of the new rate).	To ensure that the lending rate is referenced to the MPR.	Lending rate was omitted from the extant Guide; Lending rate could be fixed or floating; The latter is recommended in view of the guided deregulation regime in Nigeria.
2	Additional Interest (on authorized excess)	Interest (on authorized excess OD)	Negotiable	Lending rate should be MPR + maximum of 8% (customer’s consent must be obtained on any changes to agreed rates).	To ensure that the lending rate is referenced to the MPR.	-do-
3		Unauthorized OD/Credit (separated for clarity)		Not permissible. The bank should sanction the officer and forward the name to the Director of FPRD, CBN.	Illegal ab initio.	Unauthorized O/D is illegal and should not be encouraged.
4	Unauthorized OD, Drawing against uncleared Effects. (whether within authorized limit or not)	Drawing against Uncleared Effects (separated for clarity)	Negotiable	MPR + prevailing lending rate on the amount overdrawn.	As a credit facility, it should be priced at prevailing lending rate.	This is a form of lending. So the customer should negotiate with the bank, and should be guided by the market rate.

S/NO	DESCRIPTION IN THE EXTANT GUIDE	PROPOSED DESCRIPTION	RATES IN THE EXTANT GUIDE	RECOMMENDATION (RATES)	JUSTIFICATION	REMARKS
5	Warehousing Facility	Warehousing Facility	Negotiable	To be agreed amongst all the parties	Specialized service involving more than two parties	This often involves various parties other than the bank and the customer. The rate applicable should be agreed with all the parties.
6	Equipment Leasing	Equipment Leasing	Negotiable	Negotiable	Specialized service.	Often, those who patronize this service have the financial knowledge that would enable them negotiate effectively.
7	Discountable instruments e.g. Bankers' Acceptance, Commercial Papers, Promissory Notes etc.	Discountable instruments e.g. Usance bill, Bankers' Acceptance, Commercial Papers, Promissory Notes etc.	Negotiable	Negotiable	High net-worth commercial customers involved.
8	Inter-branch cash Deposits/withdrawals	Inter-branch cash Deposits/withdrawals	Not specified	No charge for such transactions subject to the CBN cash withdrawal policy	The policy on Cash Withdrawal/deposit Limit and Cash Handling Charge effectively addresses the concerns of cost incurred in cash handling.
9	Minimum amount for opening savings accounts	Minimum amount for opening savings accounts	Not specified	The DMBs are required to abide by the Monetary Policy Guidelines which implores banks not to stipulate high minimum savings account opening and maintenance balances.	To encourage financial inclusion.	The Monetary Policy Guideline provides the requirement for minimum savings account balances.

	LENDING FEES
1	Not stated	Credit Reference Reports	Not specified	Consumer credits - N1,000; Corporate credits - N2,500	To cover cost of credit reference	The cost of reference should be borne ultimately by the customer.
2		Facility Restructuring Fee	Negotiable, subject to a maximum of 0.25% flat	Negotiable, subject to a maximum of 0.25% on the outstanding amount being restructured (one off charge).	Chargeable only at restructuring.	The fee is to be computed on the outstanding amount.
3	Not stated	Cost of Quarterly Monitoring Reports from Credit Bureau.	Not specified	N200 - N500 per customer, cost to be borne by the bank.	The banks are charged by the CR companies.	Make further enquiries with the Service Providers

S/NO	DESCRIPTION IN THE EXTANT GUIDE	PROPOSED DESCRIPTION	RATES IN THE EXTANT GUIDE	RECOMMENDATION (RATES)	JUSTIFICATION	REMARKS
4	Processing/ Renewal Fee	Management fee: It covers processing and appraisal fee (one-off charge). Where the transaction is not consummated, a processing fee of not more than 0.25% should be applied.	Not specified	Negotiable subject to maximum of 1% of the principal (one off charge).	To check frequent imposition of multiple management fees.	Note: Management and renewal fees are chargeable for all requests granted whether fresh or renewed facilities. The charge applies each time an excess is granted but only for the excess figure or amount of the increase. No charges when loan requests are declined.
5		Renewal Fee:
5.1	Corporate Bodies	Corporate Bodies	Negotiable, subject to a maximum of 0.25% flat	Negotiable subject to maximum of 0.25% flat	Industry practice	Inputs obtained from the banks range from 0.25% to 2.0%.
5.2	Individuals	Individuals	Negotiable, subject to a maximum of 0.25% flat	Negotiable subject to maximum of 0.25% flat	Industry practice	Inputs obtained from the banks range from 0.25% to 2.0%.

NOTE ON MANAGEMENT AND RENEWAL FEES: Chargeable for all requests granted whether fresh or renewed. The charge applies each time an excess is granted but only for the excess figure or amount of the increase. No charges for requests declined.
6	Processing Fee for consent for share security	Processing Fee for consent for share security	Negotiable, subject to a maximum of 0.25% of amount of facility	Negotiable, subject to a maximum of 0.25% of amount of facility	Industry practice
7	Late repayment of loan facility	Penalty rate for Late Repayment of Loans/Advances (Default or Penalty Rate).	1% flat per month on unpaid installment in addition to charging current rate of interest on outstanding debt (without prejudice to the provisions of the Prudential Guidelines on the limitation of accruals.)	1% flat on unpaid installment per month in addition to charging current rate of interest on outstanding debt (without prejudice to the provisions of the Prudential Guidelines on the limitation of accruals.)	Industry practice and subject to extant CBN regulation.	The banks reported a penalty charge of 1% per month on outstanding unpaid installments.

S/NO	DESCRIPTION IN THE EXTANT GUIDE	PROPOSED DESCRIPTION	RATES IN THE EXTANT GUIDE	RECOMMENDATION (RATES)	JUSTIFICATION	REMARKS
8	Commitment Fee	Commitment Fee	Negotiable, subject to a maximum of 1% flat of the amount	Negotiable, subject to a maximum of 1% of the amount (one-off charge)	Retain as contained in the extant Guide.	Industry practice reflects a charge ranging from 0.25% to 2.0%.
9	Advisory/ Consultancy fee	Advisory/Consultancy fee	Negotiable	Negotiable	Retain as contained in the extant Guide.	Industry practice indicated that banks charge a fee that is negotiated with the customers.

		INTER-BANK BORROWING RATES
10		Overnight /Call Money	Negotiable	Negotiable	Industry practice	Most banks reported the market rate as applicable.
11		Tenured	Negotiable	Negotiable	Industry practice	Most banks reported the market rate as applicable.

		CHARGES FOR CONSORTIUM LENDING
12	Agency Fee	Agency Fee	Negotiable	Negotiable	Industry practice	Most banks indicated that the fees are negotiable.
13	Management Fee	Management Fee	Negotiable	Negotiable	Industry practice	Most banks indicated that the fees are negotiable.

S/NO	DESCRIPTION IN THE EXTANT GUIDE	PROPOSED DESCRIPTION	RATES IN THE EXTANT GUIDE	RECOMMENDATION (RATES)	JUSTIFICATION	REMARKS
14	Commitment Fee	Commitment/Non-Drawing Fee	Negotiable	Negotiable subject to a maximum of 1% of the amount.	To avoid double imposition of similar charges (commitment and non-drawing fees).	While one bank reported a fee of 1.75%, others indicated that the fee is negotiable.
15	Appraisal/ Renewal Fee	Appraisal/ Renewal Fee	Negotiable, subject to a maximum of 0.25% flat	Negotiable, subject to a maximum of 0.25% of the principal.	Industry practice	Most banks indicated a range of 0.25% to 2.75%.
16	Commission Charges for Underwriting of Debentures	Commission charges for underwriting services	Negotiable	Negotiable	Industry practice	Most banks indicated that the fee is negotiable.
17	Participation Fee to be shared by Banks	Participation Fee to be shared by Banks	Negotiable	Negotiable	Industry practice	Most banks indicated that the fee is negotiable between customers and the banks.
18	Non-Drawing Fees (for consortium lending)	Non-Drawing Fees (for consortium lending)	Negotiable, subject to a maximum of 1% flat of the amount	No charge	Interest and commitment fee have already been charged	To reduce incidence of double charge; this fee was considered to be same as commitment fee.

SECTION 3: COMMISSION ON TURNOVER

S/NO	DESCRIPTION IN THE EXTANT GUIDE	PROPOSED DESCRIPTION	RATES IN THE EXTANT GUIDE	RECOMMENDATION (RATES)	JUSTIFICATION	REMARKS
1	COT applies to all debit transactions. It is chargeable on all instruments and on all renewals and rollovers thereof, including discountable instruments such as Bankers’ Acceptance, Commercial Papers, Promissory Notes etc.	COT applies to customer-induced debit transactions. The banks should not charge COT on returned outward clearing cheques, reversal of transactions and all bank-induced debits.	Negotiable subject to a maximum of N5 per mille	Negotiable subject to a maximum of N3 per mille	N3 is considered reasonable for banks to operate profitably.	Most of the banks reported COT of N5 per mille.
1.1		Loan repayment from current or savings account.		COT free	The fund is still within the bank	Repayment of loans from current/savings accounts should be COT- free.
2	Debits representing transfer to other accounts in the same name, in the same branch or at another branch of the same bank.	Debits representing transfer to other accounts in the same name, in the same branch or at another branch of the same bank.	Free	No charge.	Industry practice

COST OF CHEQUE BOOK

S/NO	DESCRIPTION IN THE EXTANT GUIDE	PROPOSED DESCRIPTION	RATES IN THE EXTANT GUIDE	RECOMMENDATION (RATES)	JUSTIFICATION	REMARKS
3	Cheque Books	Cheque Books	Full recovery of cost plus stamp duties	Full recovery of cost plus stamp duties	Industry practice	The range of the cost of cheque books reported by the banks fall between N15 and N30 per cheque leaf.
4	Counter Cheque	Counter Cheque	N200 per leaflet	N200 per leaflet	Industry practice	The range of the cost of cheque books reported by the banks fall between N200 and N500.

SECTION 4: COMMISSION ON BONDS GUARANTEES & INDEMNITIES, ETC.

S/NO	DESCRIPTION IN THE EXTANT GUIDE	PROPOSED DESCRIPTION	RATES IN THE EXTANT GUIDE	RECOMMENDATION (RATES)	JUSTIFICATION	REMARKS
1	Bid/Tender Bonds	Bid/Tender Bond (Bid Security)	Negotiable subject to a maximum of 1% per quarter	Negotiable subject to a maximum of 1% of the Bond value (one-off charge)	One-off transaction	Most banks reported charges ranging from 0.25% to 2%.
2	Performance bond (chargeable from date of contingent liability)	Performance bond (chargeable from date of contingent liability)	2% per half year	Negotiable subject to a maximum of 2% of the Performance Bond value per half year.	Highly specialized and often involves high value contracts	Most banks reported charges between 1 and 2%.
3	Advance Payment Bond	Advance Payment Guarantee (APG)	1% per half year	Negotiable subject to a maximum of 1% of the APG value (one-off charge)	Industry practice.	Most banks reported charges between 1 and 2%.
4	Cheque Indemnities	Third-party Cheque Indemnities	1% of the amount of Indemnity	To be discouraged except for institutions not in clearing e.g Micro-finance Banks	Third party cheques are prone to fraud
5		Bank Guarantees	Nil	Negotiable subject to a maximum of 2% one-off charge	The proposed charge is considered reasonable for the service.
6	Other Bonds, Guarantees and Indemnities	Other Bonds, Guarantees and Indemnities	2% per half year, minimum N5,000	Negotiable subject to a maximum of 2% per half year, minimum N5,000	Industry practice.	Majority of the banks reported a charge of 2% per half year.

SECTION 5: FOREIGN EXCHANGE COMMISSION

S/NO	DESCRIPTION IN THE EXTANT GUIDE	PROPOSED DESCRIPTION	RATES IN THE EXTANT GUIDE	RECOMMENDATION (RATES)	JUSTIFICATION	REMARKS
1.1	All purchases from CBN auction and inter-bank	All purchases from CBN	1%	1% of the value involved - flat (or as may be reviewed from time to time by the CBN).	Income is already earned from COT and other charges, e.g. Form M, Form A and LC charges	This is a CBN charge.
1.2		Inter-bank purchases	Not specified	Negotiable subject to a maximum spread of 50k per Dollar	To cover additional cost of inter-bank transactions	Maximum spread of 50k is allowed by the CBN.
2	a) Inward Telegraphic Transfers, Mail transfers, and Drafts expressed in Naira	Inward Telegraphic/SWIFT and other transfers expressed in foreign currency	Free	No charge	Industry practice.	Most of the banks reported that the service is provided free of charge.
	b) Inward Telegraphic Transfers, Mail transfers, and Drafts expressed in foreign currency Handling Commission.		0.5%, minimum N400	Merge with 2a above
3	Travellers Cheques, Cheques and Sight Bills for negotiation:	Travellers Cheques:		As advised by CBN	TCs for pilgrimage are specially arranged for by the CBN.	For hajj operations.

S/NO	DESCRIPTION IN THE EXTANT GUIDE	PROPOSED DESCRIPTION	RATES IN THE EXTANT GUIDE	RECOMMENDATION (RATES)	JUSTIFICATION	REMARKS
3.1	a) Handling Commission			To be expunged	To avoid duplication of charges
3.2	b) Minimum charge for Cheques	Cheques	Minimum N1,000. Maximum 1%	Minimum N1,000 subject to a maximum of 1%	Industry practice.	Most banks indicated a minimum charge of N1,000 and a maximum of 1%.
3.3	c) Minimum charges for Sight Bills	Sight Bills	Minimum N1, 000. Maximum 1%	Minimum N1,000 subject to a maximum of 1%	Industry practice.	Most banks indicated a minimum charge of N1,000 and a maximum of 1%.
3.4		Usance Bills		Minimum N1,000 subject to a maximum of 1%	Adequate to cover handling costs as the bills are not discounted.	Most banks indicated a minimum charge of N1,000 and a maximum of 1%.
3.5		Sight Bills for negotiation
4	Usance Bills purchases as in (3) plus interest at local rate	Usance Bills purchases as in (3) plus interest at local rate	As in (3) plus interest at local rate	To be expunged	Taken to section 2, item 7.
5	Foreign Currency Notes: To be purchased at the Bank's sight rate plus Handling Commission (no minimum charge)	Foreign Currency notes: Purchases from customers	Negotiable up to a maximum of 1%	At the banks spot rate.	Handling commission should not apply in order to encourage FX inflow to the banking system.	The bank's spot rate should capture all costs.

S/NO	DESCRIPTION IN THE EXTANT GUIDE	PROPOSED DESCRIPTION	RATES IN THE EXTANT GUIDE	RECOMMENDATION (RATES)	JUSTIFICATION	REMARKS
6	Repurchase of Travellers' Cheques by the issuing bank will be at the T.C buying rate for appropriate currency plus Handling Commission		Minimum N1, 000. Maximum 1%	To be expunged	No need for repurchase because TCs are no longer in use.

	SALES
7	Commission on Outward Telegraphic Transfers, Mail Transfers and Drafts	Commission on Outward Telegraphic/SWIFT and other transfers	1% (minimum N250)	Negotiable subject to a maximum of N3000	To cover cost of SWIFT and other charges	Banks charge different fees to cover the cost of SWIFT.
8	Foreign currency notes at the normal selling rate plus handling commission	Foreign currency notes (sales to customers)	0.5% (minimum N250)	Bank's spot rate	All costs should be built into the spot rate.
9	Travellers' Cheques. Rate applicable to Authorized Dealer plus Handling Commission		0.5% (minimum N250)	To be expunged	T/C is no longer in use.
10	Transfer paid for in cash - Handling Charge	Transfers for non-account holders (subject to enhanced due diligence)	1%	Minimum of N3,000 subject to a maximum 1.5% of transaction value(subject to enhanced due diligence)	To encourage transactions through accounts.	Banks are encouraged to ensure enhanced due diligence.

S/NO	DESCRIPTION IN THE EXTANT GUIDE	PROPOSED DESCRIPTION	RATES IN THE EXTANT GUIDE	RECOMMENDATION (RATES)	JUSTIFICATION	REMARKS
11	Transaction Charge	Commission on cash withdrawals/Withdrawals from deposits other than cash:	US $0.5 or its equivalent will be allowed per transaction	Negotiable subject to a maximum of 0.5% of transaction value	The proposed charge is considered reasonable for the service.	Banks input range from 1% to 2% of the transaction value.
11.1		Current account		No charge
11.2		Savings account		No charge	To promote savings/financial inclusion.	Banks are required to comply with relevant sections of the MLPA 2011 and the CBN AML/CFT Regulation.
12		Charges for cash lodgment
13		Foreign cheque purchase		1% of the value of the cheque + the standard charge for clearing cheques (Offshore charges+ courier + VAT)	One-off transaction	A bank reported a charge of 1% of the transaction value plus the cost of clearing.

Exposure Draft of the Guide to Bank Charges