In the 1990s till late 2015, entrepreneurs who operated current accounts for their businesses paid returns on such accounts, it was called Commission on Turnover (CoT).
That has changed as the Central Bank of Nigeria (CBN) replaced CoT with Account Maintenance Charges (AMC) or Account Maintenance Fee in its Revised Guide to Bank Charges that came into effect in April 2013.
Why should small business owners who mostly operate business account should be worried? A guide on how to setup one for your business is available at: https://infomediang.com/corporate-bank-account-nigeria
From CoT to AMC to CAMF:
To even make banking more favourable to business owners in Nigeria the apex bank issued another guide called Current Account Maintenance Fee (CAMF) which takes effect from January 1, 202, subject to review “to reflect changes in the business environment
Significance of the CBN CAMF on SMEs
While some of the small-scale entrepreneurs complain about charges after opening a corporate account for their business, a lot of others shut such accounts before what some of them described as ‘unbearable charges’
We’ve compiled in this post what you need to know about Account Maintenance Charges in Nigeria:
- Negotiate charges
- It is a monthly debit
- Not applicable to savings account
- VAT is paid on CAMF
- Credit transactions are not affected
- CAMF is imposed on customer induced transaction
It’s very important to do your due diligence before opening a corporate account for your business
Negotiate Charges
Account maintenance charges are not final, they can be negotiated. You have a say in how much you want to be paying for the bank to maintain your business account.
If bank A turns down your request, bank B may be obliged to have fair charges on your account, it’s a win-win.
If bank x tells you to maintain a certain monthly debit turnover to enjoy lower than 1 per mille AMC, try bank Y.
Don’t allow any bank to tie you to exorbitant charges, you have to put into consideration what comes in a month as profit.
A friend who also maintains a business account with Access Bank says he enjoys a lower fee after negotiating with his account officer.
NOTE: Per mille means is an expression that means parts per thousand. It is also used to mean 0.1% in relation to interest rates (source: oxfordreference.com)
It Is a Monthly Debit
The total amount on current account maintenance fee is monthly, depending on the bank you are dealing with.
There are some financial institutions that would charge you on every eligible transaction you performed on the account.
For instance, Stanbic IBTC Bank charges N1 per mille if you operate a BizSmart Account for Enterprise Banking Only.
“CAM fee of N1 per mille if the daily balance is less than N50,000 and more than 4 over-the-counter withdrawals in a month. “This does not include transfer via internet banking, NIBSS, NEFT etc,” Stanbic IBTC
The bottom line is to do your due diligence, don’t jump into opening a business account if you are just starting off a business. As a starter, you need more funds, not a bank that sucks your finances.
Credit Transactions Are Not Affected
If you continue to build your balance through a deposit, your account will not be charged since the current Account maintenance fee is calculated on the total amount of debit transactions or withdrawals on your account at a given interval.
When there is no withdrawal electronically or instant transfer, online or physical withdrawal via cheques, your account will not be affected.
For instance, Stanbic IBTC allows you to enjoy zero current account maintenance fee if you keep a minimum balance of N50,000 in the account and do not withdraw more than 4 times per month at a branch.
Not Applicable To Savings Account
Not all SMEs in Nigeria operate current accounts most especially those whose business transactions are not up to N500, 000 in a month.
It’s very important to let you know that CAMF is charged only on the current account, it is not charged on a savings account.
NOTE: Some financial institutions cunningly charge saving accounts by calling it card maintenance fee or other strange names that aren’t unpopular. They do this monthly.
But CAMF isn’t charged on the saving account.
VAT is paid on CAMF
VAT means Value Added Tax is a form of tax or levy imposed by Nigeria’s government on the purchase and consumption of goods and services in Nigeria. The current rate of VAT in Nigeria is 7.5 percent of the total value of the goods or services purchased.
As at the last check, VAT paid on the current account maintenance fee was 10% of the amount charged as CAMF which is remitted to the federation account
For instance, if you make a cumulative withdrawal amounting to N20,000,00 in eligible CAMF in a month, a total of N20,000 is debited against your account as CAMF plus an additional N2, 000 as VAT remitted to the federal government as VAT.
CAMF is Imposed on Customer Induced Transaction
Customer-induced transactions are one of the features of a corporate account. They are transactions that are initiated by the owner of an account their account.
These include withdrawals, data purchases, transfers, direct debit orders, airtime purchases, and bills payment
However, transactions like loan repayment are not eligible for current account maintenance fee.
Takeaway:
- Bank charges on a business account are different from a saving account
- Current account charges is negotiable
- VAT is charged on CAMF
References:
- CBN official document on charges: cbn.gov.ng/Out/2019/CCD/Guide%20to%20Charges%20by%20Banks%20Other%20Financial%20and%20Non-Financial%20Institutions%20eff%20Jan%201%202020.pdf
- Stanbic IBTC Guide on account charges: stanbicibtcbank.com/static_file/Nigeria/nigeriabank/Downloads/Pricing%20Guide/Stanbic%20IBTC%20Bank%20Pricing%20-%20October%202020%20V3.pdf
