AMCON and 1000 chronic debtors – Thisday

The authorities could do more to recover the debts

On the face value, the recent decision by the Asset Management Corporation of Nigeria (AMCON) to send the names of 1000 bad debtors to the National Assembly is welcome. But it is also an admission that all the measures put in place to recover these humongous debts have failed. According to the chairman of the House of Representatives Committee on Banking and Currency, Victor Nwokolo, the intervention of the National Assembly is to devise ways to recover these debts. This is to avoid a situation in which a few people would continue to hold the country to ransom.

Arsenal’s Gabriel Fought off Baseball Bat-wielding Robber Arsenal’s Gabriel Fought off Baseball Bat-wielding RobberWe recall that in the wake of the crisis that almost brought some financial institutions to their knees about 13 years ago, AMCON was established as a resolution vehicle to acquire toxic assets in the industry and clean up the balance sheet of banks. As a result, AMCON purchased total eligible banks’ assets worth N4.02 trillion at a price of N1.76 trillion with a mandate of restructuring /refinancing opportunities for borrowers. At some point, the CBN further directed banks in the country to stop extending credit to 113 companies and 419 directors/shareholders until full liquidation of their indebtedness.

Unfortunately, the failure of some bank customers to repay loans extended to them has remained a sore thumb in the nation’s financial system. As of June 2020, according to the Central Bank of Nigeria (CBN) figures, non-performing loans in banks stood at N1.2 trillion. This represented about 6.4 per cent of the N18.9 trillion gross credit of the banks to the economy during the period under review. That led to the introduction of the Global Standing Instruction (GSI) by the CBN to curb the activities of those who take bank loans without thinking of paying back. The latest involvement of the National Assembly is an indication that the GSI may also have failed.

The GSI, which encompasses an agreement between the banks and the CBN, grants authority to the former to debit loan defaulters from accounts they operate in other banks within Nigeria took effect from 1st August 2020. The policy also gives banks the latitude to debit the joint account a debtor holds with a family member or business associate. Managed by the Nigeria Inter-Bank Settlement System (NIBSS) on behalf of the financial institutions using customers’ Bank Verification Number (BVN), the objectives of the GSI include facilitating an improved credit repayment culture, reducing Non-Performing Loans (NPLs) in the banking industry, and watch-listing consistent loan defaulters. A critical element of the GSI provides that should a customer default in paying up the loan or accrued interest upon maturity and has no funds in the account being operated with the bank, the NIBSS will be instructed to debit from any other bank’s account where the customer has funds, be it joint or family account.

Meanwhile, the AMCON (Amendment) Act signed into law last year by President Muhammadu Buhari empowers AMCON “to take possession, manage, foreclose, or sell, transfer, assign or otherwise deal with the asset or property used as security for Eligible Bank Assets (EBAs), and related matters.’’ Following the takeover of the assets and liabilities of Skye Bank by the CBN in collaboration with the Nigerian Development Insurance Corporations (NDIC), Minister of Finance, Zainab Ahmed said the federal government would bring all those behind the bank’s failure to book. Her words have proved to be hollow.

Yet, until failed bankers who give out these loans without adequate security begin to pay for the consequences of their bad behaviour, there will be no end to the malaise in a country where many people have no sense of shame.

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