Tougher times may soon be coming the way of recalcitrant businessmen and women who survive on loans they refuse to repay when due.
The Central Bank of Nigeria, CBN, tired and angry over the havoc these defaulters it has since named chronic debtors are capable of causing the banking industry if not checkmated, is launching a far reaching move to stem the tide of non-performing loans, NPLs or toxic assets.
Already, discussions are already in top gear on the best way to punish debtors of financial institutions besides publishing their names in the public and stopping them from accessing foreign exchange.
Already, discussions are already in top gear on the best way to punish debtors of financial institutions besides publishing their names in the public and stopping them from accessing foreign exchange. While the spokesman of the CBN, Ibrahim Mua’zu did not respond to our calls and text messages , an insider at the apex bank, hinted to Hallmark, that the probe would not only be a very thorough-going one to completely root out enemies of the economy but added that there would not be any sacred cows during the exercise.
”The apex bank is determined to mete out severe punishment to the culprits”, he explained.
Chronic debtors, experts say are those debtors who are unwilling to repay their loans to the banks and to the economy at large.
The decision which the apex bank and the DMB’s are ready to implement to the letter, is aimed at forestalling the growing amount of non-performing loans, NPLs, in the books of financial institutions to avert another crisis in the country.
The Director, Banking Supervision, CBN, Mrs.Tokunbo Martins, had three weeks ago at the 321 Bankers Committee Meeting threatened that names of “chronic debtors” would be published alongside the companies they represent, their directors, subsidiaries and other associates.
Martins said, “So, it was decided that going forward, one thing that we will do is to stop them (chronic debtors) from getting access to foreign exchange.
Another thing that we also considered doing is to publish the names of the borrowers that refuse to pay up. This is to ensure the continuous safety and soundness of the banking industry.
“It is not all debtors, it is the bad and chronic debtors; those ones that have deliberately refused to pay; those are the ones we are talking about. Now, in the industry we have a standard, we don’t want the NPLs to be more than five per cent of the total loans in the industry.
“The total loan in the industry is in the region of N13tn to N15tn. Right now, we have not reached the upper limit of five per cent, but we don’t want to get there. That is why we decided that we need to come out with this measure. Currently, the industry average of non-performing loans is at 3.3 per cent and we don’t want to get to five per cent; that is why we came up with this measure.”
She expressed sadness that the effort of the CBN, in collaboration with the Bankers’ Committee, to keep the banking industry safe and sound could be destroyed by these chronic debtors if nothing was done to stop them from plunging the financial sector into another distress.
She further explained that some data shows that it was increasingly becoming difficult for some debtors to pay up their loans.
Aside the bad image it will give these debtors and their companies, they are deeply afraid that the policy may throw them out of business, especially for those of them who need foreign exchange to operate.
Whereas the CBN is not comfortable with the rising non-performing loans and insists on ensuring that culprits do not go unpunished, analysts are in fact, on side of caution. They instead advised the apex bank to punish banks under whose watch the chronic debtors perpetrated the offence.
However, a financial analyst, Dr.RichardMayungbe who said it was CBN’s duty to maintain financial system stability, explained that the apex bank can use its tools to achieve its objective. According to him, aside preventing the debtors from getting access to forex, it could blacklist them and stop from obtaining further loans from banks.
Tightening the noose around them, he said could make them refund or service their loans.
It would be recalled that the immediate past CBN Governor, Emir Kano SanusiLamidoSanusi, had published names of those indebted to some of the banks that failed the second phase of the apex bank’s stress text in 2009.
”In furtherance of the efforts of the Central Bank of Nigeria (CBN) to assist the banks affected by the outcome of the recent CBN/NDIC Special Examination, we publish herewith the list of non-performing loans of N100 million and above for Bank PHB, Spring Bank, Unity Bank, Wema Bank and Equatorial Trust Bank as at June 30, 2009”, CBN had said.
A total of N348.409billion was owed the banks while the minimum capital requirement for banks in Nigeria stood at N25billion. For instance; firms such as Zenon Petroleum, Absa Nigeria Limited ,Cogipar Nigeria Ltd, Ojemai Farms , GittoConstruzioniGenerali, Patosan oil among other big names were then listed by the CBN as owing banks huge funds.
Equally, the Asset Management Company of Nigeria, AMCON had in court in 2013 called a governorship candidate in one of the South South States of Nigeria a chronic debtor for his unwillingness to liquidate his debt to some banks.