The Central Bank of Nigeria (CBN)’s directive to all Deposit Money Banks (DMBs) to publish the names of chronic debtors, beginning from August 1, is creating anxiety in the banking industry and among depositors, writes Assistant Editor Nduka Chiejina.
In the build up to the general elections on March 28 and April 11, the Central Bank of Nigeria (CBN) threatened to publish the names of those it classified as chronic, serial and bad debtors.
Shortly after the polls, the apex bank renewed its threat, all in an effort to forestall Non-Performing Loans (NPLs) in the banking industry. There is no going back in the plan to unmask the debtors, the CBN said.
Last week, it (CBN) gave an August 1 deadline for the banks to begin the publication of the names of chronic bank debtors.
Mrs. Tokunbo Martins, CBN’s Director of Banking Supervision, who gave the deadline, lamented the rising trend of NPLs in the banks and instructed them to publish the list of debtors in at least, three national newspapers and the companies they represent, their directors, subsidiaries and associates.
Besides naming to shame such “serial debtors” as the CBN described them, Mrs. Martins spoke of a plan by the CBN to bar the defaulters from accessing foreign exchange through the interbank foreign exchange market.
At the 322nd Bankers’ Committee meeting in Abuja, Mrs. Martins put the total credit from the DMBs at between N13 and N14 trillion. Three per cent of the figure (about N390 billion) stand as NPLs.
According to her, the banks are already compiling the names of the chronic debtors for publication. The maximum limit of NPLs statutorily allowed is five per cent of the total credit.
Mrs. Martins told her audience that the disclosure of the debtors’ identities will check “another banking crisis, since the CBN has managed to keep the banking industry healthy in collaboration with all members of the Bankers’ Committee.”
Her audienece included: the managing directors of United Bank for Africa (UBA) Plc. (Phillip Oduoza), Unity Bank Plc. (Henry Semenitary) and Ecobank Plc. (Jubril Aku).
She suggested that the incidences of NPLs were trending upwards and stated that “there was a time we had NPLs at 2.5 per cent, then three per cent and now 3.3 per cent and so, it is important that we take action and not wait till it is too late.”
The CBN was further spooked by what she described as “some data showing that it is increasingly becoming difficult for some debtors to pay up their loans. So, it was decided that to going forward, one thing we must do is to stop them from having access to foreign exchange, publish the names of the borrowers who refuse to pay up and ensure the continuous safety and soundness of the banking industry.”
The action, she explained, was not directed at all borrowers, but at “the bad and chronic debtors, those ones that have deliberately refused to pay; those are the ones we are talking about.”
The bank has no control over any bad debtor, who chooses to bypass the banking system to source for foreign exchange.
Mrs. Martins said: “There is no way we can stop bank debtors from purchasing forex at the parallel market. But, that will come to them at a cost because it is more expensive there. The concern of the CBN is with the official market.”
There may not be legal action taken against the debtors as was the case in the past.
Referring to past experiences and the consequences of the menace of debtors, Mrs. Martins said Nigerians should “recall how much was spent by the Asset Management Company of Nigeria (AMCON) to clear up toxic loans and so, we just want to make sure we are proactive and that we don’t go back to a situation like that.”
The credit bureau
The credit bureau idea was initiated by the administration of former President Olusegun Obasanjo to warehouse basic information about all bank customers and determine their eligibility or otherwise to access credit facility from the financial system. But, more than eight years after Obasanjo’s tenure, the bureau has not taken off fully.
The CBN and the commercials banks have been foot-dragging, making weak appeals to customers to be captured in the bureau’s data base.
Nigerians have been subscribing to the Know Your Customer (KYC) initiated under the Sanusi Lamido Sanusi leadership of the CBN and the Bank Verification Number (BVN). Both attempts, aimed at capturing bank customers’ information over the years, have not eliminated the incidence of bad debts.
Those classified as serial, chronic and bad debtors can refuse to repay their loans from one bank and proceed to another for more facilities. Such practices can be effectively checked with a functional credit bureau.
With all bank customers’ data effectively and efficiently captured, no borrower, with a bad repayment record, can access loans from any financial institution again.
The absence of such data base, it was learnt, contributed to the capital market crash that eventually affected commercial banks.
The Nation learnt that the CBN’s directive to commercial banks to list their debtors has unsettled the financial institutions. Some of the debtors are the banks’ biggest depositors.
Alhaji Gbadebo Olatokunbo, an active shareholder said: “The information we got is that the banks do not want carry out the CBN directive. But, when Sanusi did a similar thing, instead of the government to support him, it did not. Time has changed and that is corruption. How can you collect other people’s money and you are spending it and anybody who wants to talk about it, you shut them down because of the power you wield.”
Who are these debtors
It is not the first time that the list of bad debtors will be made public. Ironically. It is generally acclaimed and applauded that the poor (especially women) have a near-perfect laon repayment tradition, the most guilty are the wealthy politicians, industrialists and even banks owing other banks.
In 2009, former Economic and Financial Crimes Commission (EFCC) chairperson Mrs. Farida Waziri led the agency’s operatives to Lagos on a mission to recover NPLs granted by four banks. The affected banks that fell under the CBN hammer for non-compliance to banking principles were: PHB Plc., Spring Bank Plc., Equitorial Trust Bank Ltd and Wema Bank Plc.
Following the release of the debtors’ list by the apex bank in 2009, the anti-graft agency’s chief had no choice than to lead the team herself because on the list were the high and the mighty in the society.
Mrs. Waziri’s primary concern was the recovery of the toxic loans and to re-inject the recovered funds into the system, rather than the arrest, detention and eventual prosecution of the guilty.
On the list of debtors were: former Vice President Atiku Abubakar, one-time Lagos State governor and former High Commissioner to South Africa, Brig-Gen. Mohammed Buba Marwa (rtd), immediate past chairman of the Peoples Democratic Party (PDP) Board of Trustees (BoT), Chief Tony Anenih and other influential Nigerians.
Alhaji Atiku admitted owing “some money to a bank and pledged to immediately liquidate the debt.”
A statement by his media aide gave an insight on what led to inclusion of the former vice president among bad debtors.
The statement blamed it on an “old dormant account”, on which he was not updated by his staff.
“I have since resumed talks with the bank on the issue and the matter will be resolved. We will pay the outstanding sum as soon as it is agreed upon,” Atiku said in the statement. and threw his weight behind the banking sector reform.
On his part, former chairman of the Board of Trustees (BoT) of the Peoples Democratic Party (PDP), Chief Tony Anenih, petitioned the EFCC, alleging a N2 billion fraud under his name which he claimed was unknown to him.
In a statement issued concerning the inclusion of his name, Anenih disclosed that he discovered that some yet-to-be identified elements linked him as a director and shareholder of Mettle Energy and Gas Ltd, a platform he supposedly obtained a N2.065 billion loan from Spring Bank Nigeria Plc.
Chief Anenih denied any linkage with the company, claiming he had never stepped into any branch of Spring Bank in his life.
The Edo-State politician said in the statement: “As early as 7 O’clock, telephone calls from friends and members of my family drew my attention to the list of bank debtors published by the Central Bank of Nigeria (CBN) in most of the national dailies and on the CBN website.
“I read most of the newspapers and I was deeply embarrassed that my name appeared as owing Spring Bank N2.065 billion. The CBN in the same publication stated that I am a director in a company called Mettle Energy and Gas Ltd.
“In the last eight hours, I have carried out investigations and I can firmly say that records in the Corporate Affairs Commission (CAC) show that I am neither a shareholder, nor a director in Mettle Energy and Gas Ltd.
“Spring Bank records, including the Memorandum and Articles of Association, Form CO7 and Board Resolutions with the bank do not have my name in any of the documents.”
In his defence, former Yobe Senator Alhaji Usman Al-Bashir, lamented the inclusion of his name in the list of debtors and said it was politically motivated.
He was quoted on the debtors’ list, as the Chairman of Savannah Airlines that owed Unity Bank N574 million.
But Al-Bashir said: “I do not owe anybody anything anywhere in the country.”
The senator disclosed it was the second time his name would be dragged into the debtor controversy without evidence.
“The first time was in 2007 – on the eve of my gubernatorial ambition – when someone alleged to owe Bank of the North N14 million and the EFCC went after him,” he recalled.
Addressing reporters in Abuja over the controversy, the Group Managing Director of Savannah Airline Ltd, Abdul Ringim, affirmed that, though Al-Bashir was the chairman of the Savannah Airlines, “the airline was a limited liability company.”
Expectedly, shareholders have pitched tents with the CBN and the banks on the plans to disclose the identities of bad debtors.
Alhaji Olatokunbo advised the CBN management against wasting time before going public with the list even as he appealed to debtors to begin the repayment of their debts to avoid embarrassment.
“Because we can’t afford not to collect our money, since they’ve refused to follow the line of honour in-order to restore our banks back to the risk-free-bracket, while we call on CBN to extend the recovery exercise to the attention of the almighty AMCON, master of bad debts collector,” he said.
According to him, the CBN and the banks should go a step further by including the names of the bad debtors’ companies.
He said: “The last time, those big wigs said they will go to court because the CBN published their names. All they eventually did was to negotiate with the banks and began gradual repayment to AMCON.”
But Sunny Nwosu, National Coordinator of the Independent Shareholders Association of Nigeria (ISAN), urged the regulators to apply caution.
He said: “There is a relationship between a bank and its client and therefore, they must employ all available opportunities within the relationship to know why the customer is defaulting in repaying whatever he/she has taken.
“If it is a deliberate thing, there is nothing wrong in publishing it, so that shareholders and customers will know who is deliberately owing and weigh the value of such debts and why they are unwilling to pay.”
However, if a customer is defaulting because of some economic problems, Nwosu believes that “this same bank that has a relationship with the client should go in and advise the customer on the way out.
“In some cases, the bank will have to put in additional money to save the company, depending on the discussion that they are going to have and depending on what the outcome of the discussion is.”
National Chairman of Progressive Shareholders Association of Nigeria (PSAN) Boniface Okezie, argued that NPLs in Nigerian banks have adverse effects on shareholders. He urged the CBN to go the extra mile in publishing the names of the defaulters.
Okezie noted that shareholders always suffer and bear the brunt of the chronic debtors in the banking industry because the NPLs affect the returns on investments.
He said: “If the names of the chronic debtors are published today, heaven will not fall because they are the people causing problems for the banks. The fact is, the names should be made known so that they can quickly pay. They shouldn’t stop them from doing business with those banks.
“In all the banks, ghosts never borrow money. It is human beings that do so for their businesses. So, it is up to them to repay the monies because they are owned by shareholders.
“Otherwise, shareholders will continue to bear the sins that they do not commit. And at the end of the day, the government will nationalise the banks and take over them through the NDIC or AMCON.”
However, a senior banker said that publishing the names of bad debtors will definitely have adverse effect on most banks because “the names, when eventually published, will definitely include big names in the country who may likely withdraw their savings with the banks which might not be too good for the banking industry.”
In the same vein, two managing directors/chief executive officers, Mr. Yemi Adeola (Sterling Bank Plc.)and Mr. Semenitari (Unity Bank), recently declared the readiness of banks to fight debtors.
They assured that the names of debtors will be published is doing so will to make them to pay their debts.
Already those indebted to Unity Bank have been served notices on the bank’s intention to publish the list of bad debtors, beginning from the middle of this month.
Semenitari, said his bank has resolved to start publishing as a measure to compel the customers to pay back the loans and that the timing was within the approval limit.
The Bank of Industry (BoI) attested to the efficacy of the publication of debtors’ names. It said it recovered huge non-performing loans in the last quarter of 2014 after the establishment of its Hall of Fame and Hall of Shame for customers.
The BoI Hall of Fame was inaugurated in October 2014 to reward customers who did not default on loans repayment and a Hall of Shame was also established to punish loan defaulters.
No crime in owing
Speaking on the development, Mr. Peter Amah, Head of Research and Corporate services, DEAP Capital, who reacted on behalf of Mr. Emmanuel Ugbo, Managing Director, DEAP Capital and Trust Plc, said “there is nothing wrong with owing money and there is no law that states somebody should not owe.”
He commended the CBN, for its effort at recovering debts owed to banks but cautioned the apex bank to “do a thorough job on the list of debtors by ensuring that people who borrow money by following due process are not treated in the same way as those who acquire loans through fraudulent means, because no economy can survive without credit facilities from the banks. The banks are in existence to lend money to people or corporate entity that needs it.”
Members of the Federation of Construction Industry (FOCI) expressed serious concern over the threat by the CBN to publish names of chronic debtors to banks in the country.
Speaking at a news briefing, President of FOCI, Mr. Solomon Ogunbusola, a builder, expressed discontentment over the CBN’s threat.
He said the inability of his members to repay their loans was due to governments’ indebtedness to them.
Ogunbusola lamented that his members have spent the facilities they on projects like as roads and construction with the hope of getting reimbursement from the government, which he claimed has not lived to expectation.
FOCI members are made up of big construction companies, including Julius Berger Plc, C&C Construction, Costain West Africa, Hitech, Brunelli Construction, Jagal Nigeria, G. Cappa Plc, PW Nigeria Limited, Dantata and Sawoe and RCC, among others.
According to Ogunbusola, the Federal Ministry of Works alone presently owes its members over N500 billion, while one of the firms is being owed N70 billion by the Federal Government.
He added that both the state and local governments are also involved in what he described as a “show of shame.”
The FOCI President urged the CBN to equally publish the names of government ministries, departments and agencies (MDAs) that are indebted to FOCI members.
He said: “We are indebted to banks and CBN is threatening our members, saying that it will publish their names as chronic debtors. How can you explain it that someone borrowed money from the bank for two to three years and government refuses to pay for the contract done with the money?
“What will CBN do to the government that refuses to pay the contractors? The names of such government agency must be published too.”
The FOCI chief raised the alarm that construction companies in the country are currently working below 30 per cent capacity, as they have been incapacitated by lack of payment for jobs already executed.
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