Fear has gripped chronic debtors of banks over the Central Bank of Nigeria’s CBN threat to deny them access to foreign exchange at the interbank forex market. Deposit Money Banks (DMB’s) have also thrown their weight in support of the move which definitely affects them most as victims.

Aside from this development affecting their businesses, bank debtors are more uncomfortable with the idea of making their names public, especially at a trying time like this. There is also a threat by banks to slash the amount spent by Naira debit cardholders overseas.

Chronic debtors analysts say are those debtors who are unwilling to repay their loans to the banks.

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 last week 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 loan 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.

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.

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.

While experts appear to condemn the act of borrowing and refusing to repay the loans, they are more afraid of the bad implication it could have on the macro economy.

Managing Director/CEO at BIC Consultancy Services, Dr Boniface Chizea, believes that since the CBN has autonomy it can take decisions in the best interest of the economy.

He however said the idea was good for the banks, but advised that caution should be applied in order to publish only names of those who actually owe.

”The autonomy of the Central Bank should have instrument autonomy which implies that the Central Bank should have unhindered freedom to decide on how best to achieve its mandate without any dictation from any quarters. If the Bankers’ Committee which the CBN chairs decides to publish the names of debtors so be it.

We just hope that in embarking on this name and shame approach that due care is exercised so that the names of actual debtors are published.

” We had an experience during the immediate past administration when a deluge of rebuttals and retractions followed an attempt to embark on similar exercise. We must avoid such embarrassments this time around.

If names are to be published due care must be exercised to ensure the names of only those culpable are published. It is embarrassing and unfair otherwise considering the potential damage to reputation such a move will occasion. It is not good for the creditors for their names to so published as most of these recalcitrant debtors are the juggernauts in our midst; the movers and shakers; the financiers of electoral campaigns who often think that because of their access to the powers that be they remain beyond the law.

” This is a last resort desperate measure meant to stem the wind of distress overtaking the banks leading to a harvest of bank failures. It is good for the banks generally as it has the effect of sanitizing the banks to restore them to sound health to continue to provide banking services, sustain the going concern and continue to return dividends to their many shareholders and stakeholders.