Menace of Delinquent Bank Debtors

To accentuate the import of the measure, the banks are to publish not only the names of the companies but of their directors, as well as proxies. Besides such information is to appear in three national dailies and on a quarterly basis until the loans are liquidated.When the measure was announced earlier in the year, […]

To accentuate the import of the measure, the banks are to publish not only the names of the companies but of their directors, as well as proxies. Besides such information is to appear in three national dailies and on a quarterly basis until the loans are liquidated.
When the measure was announced earlier in the year, the expectation was that the affected debtors would honourably proceed to re-negotiate the terms of their facilities, in order to avoid the attendant ridicule as well as repercussions that may follow. Reports from the industry however indicate that some of suchdebtors have already embarked on the path of honour and approached their creditor banks to settle issues. However the resolve of the CBN and the banks to continue with this otherwise extreme measure is indicative that not much has changed in the circumstance.  And that is unfortunate.
Non-performing loans are credit facilities that are in default or about to be so. Borrowers of such loans neither pay the interest nor repay the principal sum as provided for, after a period of three months or as the case may be. In the case under consideration some of the facilities are as old as ten years. They arise out of weakly packaged loan transactions or deliberate action to defraud the system. This contention is buttressed by the realization that a large proportion of the odious NPLs are actually from the accumulation of interest charges and other operational costs.
This newspaper had earlier condemned the situation whereby the banking sector would allow itself to fall victim to NPLs to the extent of assuming their presently dangerous level of 3.7% of total loan portfolio in the economy. According to the CBN, the present level is dangerously close to the critical level of 5%which should be out of bounds. A major cause of concern about NPLs is that they constitute a major factor in  bank failures through their effect of weakening the financial base of the lending institutions.
The primary bone of contention is that whereas loans derive from contractual agreements between the banks and their customers under statutorily defined terms and conditions, banks usually execute them with public funds; which put otherwise is other people’s money. It is therefore beyond the discretion of the lending bank nor the borrower to deploy the affected funds outside the strict prescriptions of lawful processes and ends. In that context therefore NPLs qualify to be seen as issues that are more than mere outcomes of professional misjudgments by bank officials. They could also have been conduits for syphoning public funds by unscrupulous elements working inside the banks, and operating in cahoots with equally criminally minded agents from the outside.
This is why the menace of delinquent bank debtors falls outside the exclusive preserve of the CBN and the banking sector, as the imprint of criminal collaboration are patently manifest. The situation invites the interest and intervention of the nation’s security and anti-corruption agencies such as the police, Economic and Financial Crimes Commission (EFCC) and the Independent Corrupt Practices Commission (ICPC).  
The imputation of criminal intent and corruption into the matter of NPLs and delinquent bank debtors is premised on several grounds. Firstly the NPLs should not have occurred in the first place if due diligence by bank officials was observed. Bank officials have been fingered severally for concealing or distorting vital information on delinquent debtors and their indebtedness during inspection of the books by the regulatory authorities.
Secondly the widespread nature of the NPLs clearly points to an industry-wide malaise which the government needs to address with the dispatch it requires. Evidence from the operations of the Assets Management Corporation of Nigeria (AMCON) points to a distribution of these IPLs across all banks.
Thirdly and perhaps most critical is the treatment of culprits whose enterprise lead to bad debts, and eventually go scot free. This group who are mostly bank officials often escape with little or no penalty for engaging in practices that produce NPLs. The situation dictates that sterner penalties be meted out to whoever is confirmed to have contributed to the nation’s present problem of NPLs.
Eventually the entire scenario indicts the CBN itself for poor supervision of the banks, especially in the area of credit administration. It needs to be noted that the issue of NPLs is not new in the nation’s banking sector. It has remained endemic and therefore requires fresh thinking to terminate it or at worst reduce its incidence. We are not impressed with the manner the banks handle the NPL issue in the first place, only to turn back and embark on the gimmick of blackmailing the debtors and at public expense.
It is in that context that the initiative of merely publishing the names of delinquent debtors, without associated punitive measures may not be the best response to this malady, if the country is to secure tangible dividends from the enterprise. Given the patent breaches of extant laws in every case of NPL, penalties for the offences are already defined under the nation’s penal system.
Granted that the administration of  President Muhamadu Buhari is intent on fighting corruption, the circumstances of the NPLs offer it another window of opportunities to place a handle on its mission. Hardly can the government make a headway if it fails to accord bank related frauds, including the seemingly innocuous NPLs the regulatory attention they deserve.