- A welcome move but must be well-run if not to go the way of its progenitors
The Banking and other Financial Institutions (BOFI) Act, 2020, signed into law last week by President Muhammadu Buhari, has the establishment of a credit tribunal as one of its highlights. According to the Federal Government, the tribunal will enhance the loan recovery capacities of banks, which in turn will make the banks more viable to lend to the real sector. We welcome any law that will make banks more resilient, considering the tragic consequences of failed banks on the national economy.
Speaking on the BOFI Act, the president’s senior special assistant, media and publicity, Mallam Garba Shehu, said: “This monumental piece of legislation is expected to enhance the soundness and resilience of the financial system for sustainable growth and development of the Nigerian economy.” The Act, he said: “will increase the appetite of banks and other financial institutions to channel much needed credit to the real sector to support economic recovery and promote sustainable growth.”
With respect to the creation of the credit tribunal, Shehu said the Act: “introduces a credit tribunal to improve loan recovery and address the incidence of high non-performing loans within the financial system, which has been a key deterrent to lending by financial institutions.” With the challenges faced by the special purpose vehicle, Asset Management Corporation of Nigeria (AMCON), in meeting up its responsibility, there is the need for improved credit recovery management. We hope the credit tribunal will fill the gap.
We also hope the tribunals will not operate like the regular courts, which ordinarily should facilitate recovery of debts, but have turned a dumping ground for recalcitrant debtors, who use litigation to stall recovery processes. Instead of paying, debtors prefer to approach the court, knowing that their cases will be bogged down there, for years. So, for debtors, the court became a hibernation ground to buy time, and fend off loan repayment. That is why the creation of a specialised court in form of a credit tribunal is welcome.
But, while giving thumps up for the potential of the new BOFI Act, the Federal Government must interrogate the challenges that have made the business environment very harsh. While some business owners wish not to repay their loans, some are unable to pay, due to business failure. So, while making laws to deal with recalcitrant debtors, the government must also work hard to create an enabling business environment for businesses to thrive.
It should pursue the provision of critical infrastructure that makes businesses to thrive. For instance, the electricity privatisation programme has not delivered on its expectations; and many failed businesses are victims of epileptic power supply, which is critical to modern business activity. Another major challenge is transportation. It is strange that the major means of haulage is still road transport, when fellow competitor nations are using high speed trains.
There is also the critical issue of interest rates, which is considered unbearable for survival of businesses. With many financial institutions giving out facilities at more than 20%, per annum, it is difficult for businesses to survive. So, will the new BOFI help reduce interest rates, particularly for the real sector? If the new act is really monumental, we will soon know as it kicks into operation.
Meanwhile, we look forward to the engagement of the Central Bank of Nigeria with critical stakeholders, as promised by the president’s spokesman.
Indeed, for Shehu: “This … BOFI Act 2020 is a historic and significant achievement, which is indicative of effective and productive collaboration between the Executive and Legislative arms of government.” We hope so, as we urge all stakeholders to join forces to make the Act live up to the touted revolutionary billing.