BANK CHARGES AND CUSTOMER SATISFACTION IN THE NIGERIAN BANKING SECTOR (A CASE STUDY OF UBA PLC, ONITSHA)

CHAPTER ONE

INTRODUCTION

1.1      Background of the study

Customers are presumed the stakeholders of an organization and for an organization to flourish, the needs of the customers must be met. Without the presence of customers, the goals and objectives of an organization will not be achieved. It is therefore pertinent to carry out a research on the behaviors of customer, because knowledge of this will help an organization know how to deal rightly with their customers.

In the 80s, the banking sector of Nigeria did not have many policies as regards the way customers’ services should be met. During this era, the number of banks increased, there was availability of foreign reserves, the GDP increased and there was job creation. The banking sector contributed enormously to the economic growth of Nigeria (Adeoye, 2007). In 2005, 2006, 2007 and 2008 were 8.1, 9.2, 9.8 and 10.6 respectively (CBN, 2009). The truth still remains that the banking sector does not only contribute to the growth of Nigeria alone, but in a way contributes to the economic growth of surrounding African countries.

The satisfaction of customers should be the primary aim of any organization. Retail banks use customer satisfaction as a tool to measure their quality and management of customer relationship with customers (Mihelis et al., 2001). In addition, customer satisfaction as a marketing tool helps an organization know its strengths and weaknesses while offering its products and services. Customers could prove dissatisfaction of either the products or services of a bank either through complaints or raining abuses on the bank. When customers complain of dissatisfaction, it can affect the customers’ loyalists and further make them to patronage other competitors.

However, when customers are satisfied, it makes them happy, fulfilled and excited (Hoyer and MacInnis, 2001). It creates this impression that the value of their money is fully achieved and they will not think of switching banks. Also, it will make customers good referrals of their banks, subsequently bringing in new customers. There are four factors that assess the customer satisfaction in banks: optimum facilities of a branch, economic satisfaction (bank charges and interest rates), presence of e-banking and Automated Teller Machine (ATMs) (Chakrabarty 2006). Service and product quality are the measures banks need to put in place to serve their customers efficiently.

Meanwhile, banks in Nigeria through their services, most especially when it has to do with charges make their customers dissatisfied. Recently, the Central Bank of Nigeria approved some laws with regards to charges on banks’ customers. Some of those charges include: a charge of N1.00 for every debit transaction done on a current account, the N50 stamp duty on non-oil revenue transactions, N100 e-DMMS Application fee for investors, the N65 ATM withdrawals from other banks and NSE/CSCS Trade Alert. Charges of these sorts have the tendency of affecting the customers and purposively, the bank.

There are cases of bank customers storming the bank, most especially the customer service unit to find out why some certain amounts were deducted from an account. Cases like this can leave the customer angry, lost of customers’ trust, customers’ switching to other banks and the reputation of the bank being at risk.

However, Nigerians complain a lot about the charges of banks on their customers, and United Bank for Africa plc (UBA) is a clear culprit of this. This is why this study is meant to discover how bank charges affect customer satisfaction.

BRIEF HISTORY OF UNITED BANK FOR AFRICA (UBA)

UBA’s has more than 65 years of providing uninterrupted banking operations dating back to 1948 when the British and French Bank Limited (“BFB”) commenced business in Nigeria. BFB was a subsidiary of Banque Nationale de Crédit (BNCI), Paris, which transformed its London branch into a separate subsidiary called the British and French Bank, with shares held by Banque Nationale de Crédit and two British investment firms, S.G. Warburg and Company and Robert Benson and Company. A year later, BFB opened its offices in Nigeria to break the monopoly of the two existing British owned banks in Nigeria then.

Following Nigeria’s independence from Britain, UBA was incorporated on 23, February 1961 to take over the business of BFB. UBA eventually listed its shares on the Nigerian Stock Exchange (NSE), in 1970 and became the first Nigerian bank to subsequently undertake an Initial Public Offering (IPO). UBA became the first sub-Saharan bank to take its banking business to North America when it opened its New York Office (USA) in 1984 to offer banking services to Africans in Diaspora.

Today’s UBA emerged from the merger of then dynamic and fast growing Standard Trust Bank, incorporated in 1990 and UBA, one of the biggest and oldest banks in Nigeria. The merger was consummated on August 1, 2005, one of the biggest mergers done on the Nigerian Stock Exchange (NSE). Following the merger, UBA subsequently went ahead to acquire Continental Trust Bank in the same year, further expanding the UBA brand. UBA subsequently acquired Trade Bank in 2006 which was under liquidation by the Central Bank of Nigeria (CBN).

1.2      Statement of the problem

It is very obvious the way bank customers in Nigeria are switching from one bank to the other seeking for a bank with lower bank charges.

Bank charges by banks in Nigeria have left Nigerians unsatisfied with the services offered.

However, the high level of illiteracy among Nigerians contributes to the bank charges meted on them. In the sense that, Nigerians unknowingly accept to some terms without a clear understanding of its implication. For instance, some bank customers subscribe for some alerts (credit, debit and ATM alerts) without the knowledge that it will be deducted from their accounts.

In addition, customers are not well enlightened about the services of the bank and what follows, and this poses a problem at the end of the day.

Another problem bank charges can have on its customers; is that it can affect the reputation of the bank. Customers will go about complaining to friends and family members about how their bank charges and this will discourage prospective customers, thereby reducing productivity.

In conclusion, the tenet of business which refers to customers as king is being forfeited; as they are left unhappy and discouraged through the products and services of the bank.  

1.3      Aims/ Objectives of the study

The major aim of this study is to examine bank charges and customer satisfaction in the Nigerian banking sector.

Other specific objectives include:

1. To determine the significant difference between bank charges and customer satisfaction.
2. To determine how well Nigerians are informed about bank charges.
3. To determine the relationship between bank charges and the economy.
4. To determine if bank charges affect bank’s productivity.
5. To determine if the Federal government can scrape out bank charges.
6. To determine if bank charges can discourage Nigerians from saving in the bank.  

1.4      Research questions

1. Is there a significant difference between bank charges and customer satisfaction?
2. Are Nigerians well informed about bank charges?
3. Is there a relationship between bank charges and the economy?
4. Do bank charges affect bank’s productivity?

1.5      Research Hypothesis

H₀: There is no significant difference between bank charges and customer satisfaction.

H₁: There is a significant difference between bank charges and customer satisfaction.

Significance of the study/ Justification of the study

This study is meant to educate the general public, the banking sector and the government on bank charges and customer satisfaction in the Nigerian banking sector.

It is meant to bring to the knowledge of the banking sector on the need to carry their customers along in other to grant them the needed satisfaction they require. In addition, the study is meant to inform the banking sector, that many charges on their customers can affect their patronage.

However, this study is meant to bring to the knowledge of the government that they can through the CBN help curtail these chargers on customers.

This study will be of immense benefit to other researchers who intend to know more on this topic and can also be used by non-researchers to build more on their work. This study contributes to knowledge and could serve as a guide for other work or study.

1.6      Scope/ Limitations of the study

This study is restricted to bank charges and customer satisfaction in the Nigerian banking sector, a case study of UBA plc, Onitsha.

Limitations of study

1. 1.        Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
2. 2.        Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.7      Definition of terms

Bank charges: This covers all charges and fees made by a bank to their customers. In common parlance, the term often relates to charges in respect of personal current accounts or saving account. These charges may take many forms, including: monthly charges for the provision of an account.

Customer satisfaction: Is a marketing term that measures how products or services supplied by a company meet or surpass a customer's expectation. Customer satisfaction is important because it provides marketers and business owners with a metric that they can use to manage and improve their businesses.

Banking sector: This is the section of the economy devoted to the holding of financial assets for others, investing those financial assets as leverage to create more wealth, and the regulation of those activities by government agencies