- New CBN policy must be carefully implemented so as not to be counter-productive
For a very long time in the Nigerian financial sector, the biblical quote, “he who goes a-borrowing goes a-sorrowing” has never really carried the full weighty import with most bank debtors. They simply borrow from one bank, if for any reason they are unable to pay back, they simply brush off the bank debt recovery team and smile to another bank for more loans. Luckily for the chronic debtors, there are more than a dozen banks in the country, so their round robin game simply goes on while those banks struggle to serve other customers and oil the economic productive machines.
The Bankers Committee seems to have decided to play the Achebe’s Eneke the bird that swore to fly without perching since the hunters tend to shoot without missing. It has directed that borrowers henceforth sign an asset seizure agreement with their banks, empowering them to seize all their deposits across the industry if they fail to repay loans.
According to the (CBN) deputy governor (financial system stability), Aisha Ahmad, the committee is alarmed at the number of loan defaulters in the system who surreptitiously make it impossible for the banks to revitalise the economy, stimulate demand and serve the SME sector adequately.
We commend this proposal by the Bankers Committee with the support of the apex bank, the CBN. It is an action a tad too late given the number of loan defaulters in Nigeria. In the past, there had been other measures aimed at forcing debtors to pay back, like threatening and sometimes even publishing their names in the print media, with the amounts they had borrowed. However, the debtors, most of who have grown thick skin and unperturbed by such publications had simply grinned and moved on and gone to other banks to borrow more.
The often very rich individuals seem not to care about any of the past tactics adopted by banks to compel repayment. In a country where financial and or political power often signpost recalcitrant attitude, especially when funds are involved, this proposed law must be effectively executed so that those who truly are credit-worthy in terms of readiness to repay loans are able to access bank loans so as to stimulate economic growth.
However, the Credit Bureau whose job includes tracking debtors and the amounts to their names ought to have stepped into the gap before now to ensure that chronic defaulters do not take advantage of the weak system and jump from one bank to the other to collect loans without any attempt to pay back.
While we commend the new measure being proposed, we advise that the other side of the coin might be that those chronic debtors might decide to move out their funds from the country or avoid banking their money altogether in order not to have them used to pay back their loans. We want the CBN and the Bankers Committee to continue to work on alternate ways of monitoring and evaluating the capacity of borrowers to pay back because the one under review can easily be circumvented.
Most viable economies are propelled by the activities of well-funded SMEs through loans from banks. If therefore the SMEs continue to be on standby while chronic bank debtors continue to have a field day with loans, the lack of economic growth and social instability would continue to bog down the economy. We therefore suggest that more stringent and well monitored regulations in the banking sector must be employed to dissuade loan defaulters from accessing loans and denying genuine and responsible bank customers from accessing loans for their businesses.
It is equally apposite for the banks and the apex bank to re-evaluate the interest on loans in ways that make it attractive and profitable to customers. In most cases, the huge interests on loans and the proverbial hidden charges sometimes affect the profit margin for bank customers and hamper their ability to repay. The idea of taking loans for business must be made to be mutually beneficial to both the banks and the customers.
While the proposed system might seem admirable, the execution could be counter-productive because if the same customers decide to remove their money from the banks, the economy would be the worse for it. We therefore advise caution and a balancing of the punitive policy in ways that would not bring the economy on its knees. A lot of education and information management must be deployed for the overall benefit of the economy.
