CURRENT ACCOUNT IN NIGERIA: WHAT YOU SHOULD KNOW
A current account is a businessman’s dream. It is a business account where a customer can withdraw as many times as possible to run the day-to-day operations of his/her business. If you are a business person in Nigeria and you do not have a current account, you will never be taken seriously. Having a functioning or active current or business account is a sure sign that you are ready to do business. There is hardly any business or person into business in Nigeria that does not have a current or business account. To prove credit worthiness, it would be worth it to have a current account. This is because having a current account smoothens the whole process of business transactions. Your creditors will rarely take you seriously if you do not have a current or business account. Having a current account facilitates financial transactions as well as break barriers existent or peculiar with customers operating savings accounts. All the traditional banks in Nigeria allow customers to operate current accounts including some digital banks.
More so, current accounts are not just limited to business owners. Individuals, partnerships firms associations, societies, etc can also operate current or business accounts. The procedures for opening a current account is the same as the one for savings account. Mind you, current accounts are more complicated than savings accounts. With business accounts, you need to balance your cheques every month cum withdrawals and debits. The nitty-gritties in connection with minimum balance requirements and other fees can also throw a customer off balance. To avoid unfavorable charges or fees, a customer must be sure to be careful. If you are careful, you can avoid most of the fees associated with operating a business account. Having a current account means you have to balance your cheque book at regular, stipulated times. Also, you need to keep a running balance each day as long as you have a current account.
It is advisable that you ensure that you are up for it or operating a current account is not for you. This is because maintaining a current or business account is not as easy as it is portrayed by some bank marketers. Thus, this write-up is targeted at opening your eyes to the world of current accounts. Here and now, you are going to find all you need to know and do to operate a current account.
Features of a Current Account
A current account is also known as a demand deposit account in banking terminology. Below are some of the characteristics of current accounts:
- A current account accrues no interests. It does not matter how much you have in your account.
- With current accounts, there is no limits to a customer’s transactions per day; whether deposits or withdrawals.
- A current account allows a customer to handle heavy transactions in payments and receipts on a regular basis.
- Current accounts helps an individual or business separate personal money from business money. With current or business accounts, you can handle your finances more efficiently.
- With current accounts, pay-orders, cheques, etc can be issued.
- As a current account holder, you are entitled to an overdraft at any given time.
Benefits of a Current Account
Holding and maintaining a current account overtime has its rewards. Below are some of the benefits of having a current account:
- Overdraft: you can ask for an overdraft if you operate a current account.
- Withdrawals: you can withdraw as much as you want without limitations. You can withdraw across the counter or at cash points.
- Deposits: there is no limits to what a current account holder can deposit.
- Balance: you can check your balance with even your telephone with the help of internet banking.
- Transfers: with current accounts, you can transfer money through your telephone with the help of internet banking.
- You can set up standing orders to pay your bills.
- You can write cheques to pay bills.
- You can also pay bills with debit cards.
- With current accounts, you learn to file taxes correctly and appropriately.
Implications of Owning a Current Account
Owning a current account is not enough. The hard work is keeping a current account running. Owning a current account cannot be compared to owning a Rose Royce but it is important to note that “better soup nah money kill am” (a good soup is expensive). Anywhere you go, it is usual that current or business accounts are mostly operated by business people, firms, corporative societies, etc, it is important to note individuals can leverage on the opportunities thrown at them by holding a current account. These individuals can plan and manage their funds more efficiently. Owning a current account requires religious attention to details and the memory of the proverbial elephant.
Current accounts promises its owners financial freedom unlike other types of bank accounts. Bank overdrafts, pay-orders, cheques, unlimited deposits and withdrawals make owning a current account juicy and enticing but every current or business account needs maintenance. You are required to almost always ensure that your cheques are balanced every month. While current accounts take care of customers, customers are expected to take care of their current accounts. One good turn deserves another.
How to Open a Current Account in Nigeria
All Nigerian banks are allowed to open current account for any interested customer who fits the bill prescribed by the Central Bank of Nigeria (CBN). Regular current accounts can be opened by doing the following:
- Pick a bank.
- Put your particulars in order.
- Pick and fill a form at any desired bank branch or on their online banking platforms and submit it to the relevant personnel.
- Provide two passport photographs.
- Valid means of identification: international passport, national ID, driver’s license or recent valid voter’s card.
- Producing a utility bill not more than three months old.
- Two current account references.
- For companies or firms to open a current or corporate account, they would need to provide certain documents; these documents are as follows:
- Resolution from the Board of Directors/Proprietor(s) authorizing the opening of the account and approving the account signatories
- A company seal
- Certified Memorandum and Articles of Association (MeMat)
- Completely filled corporate account opening form signed by the company’s designated signatories
- Certified true copies of incorporation documents (Form CO7)
- Residential address proof of signatories and directors
- Passports photograph of the signatories
- Bank Verification Number of directors or proprietor
- Legitimate identification document of the directors or proprietors, such as international passport, driver’s license, etc.
- Tax Identification Number (TIN) for the company
- Utility bill of business addresses such as the Power Holding Company of Nigeria (PHCN), water bill, Lagos Waste Management Authority (LAWMA), etc.
- Special Control Unit Against Money Laundering (SCUML) registration where applicable
- Special requirements such as business permit, residence permit, etc. for foreigner nationals
- Two duly filled reference forms by corporate account holders
Differences Between Current and Savings Accounts
Though both accounts can be opened with any bank, both are sharply distinct from each other. Below are enumerated differences between current and savings accounts:
With a savings account, you earn by saving but with a current account, the purpose of the account holder is financial transactions.
*What it is Meant For:
A savings account can only be opened by individuals for their use. Current accounts can be opened by businesses or firms who want to conduct various bank transactions according to the needs of their businesses. This does not negate the fact that individuals can open and operate current accounts.
Current accounts normally have higher minimum balance than savings accounts. In Nigeria, the minimum balance to open a current or corporate account is between #5,000 to #100,000 depending on the bank.
A current account holder is not entitled to interests like with savings accounts. This is because money in the current accounts are used for business transactions.
Advantages and Disadvantages of Current Account.
The advantages of holding a current account are as follows:
- Banks assists creditors of current account holder who can have access to information on the account holder’s credit-worthiness through inter-bank connections.
- Current accounts helps or facilitates the industrial progress of the country. Without its help, businessmen would face difficulties in running their businesses.
- Deposit and withdrawal of money (cash) at any location.
- Multi-location funds transfer
- Current accounts allow handling of large volumes of receipts and/or payments systematically
- With current accounts, limitless withdrawals are allowed in line with the levied cash transaction fees.
- With current accounts, there are no restrictions applied on the deposits made into the current accounts opened at the bank’s home branch. Additionally, account holders can also deposit cash at other branches upon paying small fees as applicable.
- Cheques, pay-orders, or demand-drafts can be issued through a current account for making direct payments to creditors.
- Overdraft facilities are also available for current account holders.
- Some current accounts with banks like Access Bank, First Bank of Nigeria, UBA, etc give small interest earnings on account balance. This makes a current account all the more attractive for its users.
- With current accounts, businesses are further advantaged with various other benefits in the form of free inward remittances, deposit and withdrawals at any location, multi-location transfer etc.
- A businessmen with a current account can withdraw from their current accounts without any limit, subject to banking cash transaction tax, if any levied by the government.
Having touched on the advantages of current accounts, below are the disadvantages of of current accounts:
- Opportunity costs of losing on the interest rates due to low or zero interest on money in current account is a big issue.
- With current accounts, there is an operational burden attached since most package accounts offer services at additional costs.
- Confusion or ambiguity involving paperwork and fine print.
- Sometimes extortionate charges or fees due to corporate business transactions.
- The truth is that in Nigeria, there is a limit on the amount of funds that can be withdrawn in a day.
Types of Current Accounts in Nigeria
There are many types of current accounts peculiar to different countries. Below are the types of current accounts operated in Nigeria:
- Standard Current Account: this is a normal current deposit account. It bears no interest.
- Foreign Currency Account: this is a current account that allows you do business transactions in foreign currencies.
- Packaged Current Account: this current account comes with some benefits or rewards like travel insurance, accident insurance, etc.
- Single Column Cash Book: this has no features but allows you do some little business.
There are many banks in Nigeria. But there are just a few banks best suitable to open a business, corporate or current account with. There are a lot of bank marketers who have mastered the dark arts of promising El Dorado. It is advisable to understand that not all banks can make your dreams come true if you so cherish a current account. It is worthy of note that the COVID-19 pandemic has made financial intelligence compulsory. Hence, business men and women are advised to look before they leap. Below are an orderly arrangement of Nigerian banks with the best offer in respect of creating and operating a current or business account:
- Mint Digital Bank
- Zenith Bank
- Guarantee Trust Bank.
- First Bank of Nigeria.
- Access Bank.
- United Bank of Africa.
- Fidelity Bank.
- Ecobank Nigeria.
- Skye Bank.
- First City Monument Bank
There are many banks (digital banks inclusive) that you can open a current account with. Mint Digital Bank is one of many of them. With Mint, you can even skip the strenuous paperwork, avoid charges and earn a few cash. For traditional banks, Zenith Bank is at the top of the bunch. Opening a current account is beneficial to any serious business. Any business without a current/corporate/business account is like a soup without salt. If any point in time in the past, you have had issues with your current account, do not try to open a new one even with another bank. This is because your former bank must have reported you – especially if you owe them. Thus, you must settle with your previous bank before opening another one. But once you have been reported, it will be very difficult to open another current account. You might be put on a trial with a savings account to test your integrity. A current account is not a child’s play.