Review bankers’ prudential guideline decree to check bad debt incidence

First, there are the associated delays in budget implementation at all levels of governance which negatively impacts on transition velocity/cycle within the economy, resulting in prolonged non-payment to businesses and other individuals dealing with governments. Second, given the impunity with which civil servants withhold due and budgeted payments to businesses and individuals that have legitimate […]

First, there are the associated delays in budget implementation at all levels of governance which negatively impacts on transition velocity/cycle within the economy, resulting in prolonged non-payment to businesses and other individuals dealing with governments.

Second, given the impunity with which civil servants withhold due and budgeted payments to businesses and individuals that have legitimate transactions with the government chiefly in their desire to earn pocket-able bank interest from the release of appropriated funds to the owners constitute an impediment to the ideal operation of prudential guidelines being used for classification of loan facilities by bankers without reference to the debtors’ capacities to pay.

Third, the due process mechanism established to check appropriate project costing and contractual procurement by public officers has, to say the least, constituted itself into a government, within a government, under the cover of their mandate, resulting in delaying, and in most cases, frustrating payees of federal government whom have used bank facilities to service government orders awarded to them, thereby causing undue delay in settlement resulting in breaches in loans repayments by businesses.

Fourth, acceptance of toxic or valueless securities as collaterals by some bank Chief Executive Officers (CEOs) from their favoured clients, whom ab initio, collected the loans with intent to defraud, in this situation the bank CEO will fully compromise their fiduciary responsibilities of recovering such loan facilities that eventually become written off as bad debt.

Fifth, non-payment of interest by government agencies on withheld settlements to the business community which disabled the bank debtors from honouring their obligations, leads to misclassification of such facilities by the banking institutions. Public officers should have their immunity from prosecution withdrawn for such obvious funds diversions, which are prevalent in some government agencies, ministries and parastatals.

 Sixth, some bank CEOs resort to immoral use of female young staff to seduce public officers to commit funds diversion through illegal depositing of project funds with a view to earning unaccountable monetary interest and personal goodwill for subsequent grant of unrecoverable personal loans. The list of abuses is endless but most are made possible by the cover of prudential guideline decree which is the reference instrument for loans classification or misclassification by bank CEOs.

The prudential guideline decree should be reviewed or repealed from the statute books and be replaced with more appropriate instruments that protect shareholders’ and bank depositors’ interest rather than continued operation of irreconcilable instrument that shield and protect the bank CEOs in their unmitigated abuse of concentrated authorities which give rise to deliberate and fraudulent misclassification of many loans that are visibly recoverable, but misclassified in favour of the debtors that are financially sound to refund their debts as the CBN list of debtors glaringly indicated.

The CBN should also establish a committee in its Banking Supervision section to regulate and fix remuneration of bank CEOs and board members’ allowances in defence of shareholders’ interests. These remunerations are, for now, arbitrary and corruptive to board members, who are sponsored by the CEOs to flamboyant holiday trips abroad to their choice destinations. All these inducements have rendered ineffective, the board’s supervisory roles over the excesses of Managing Directors (MDs) and CEOs of most Nigerian banks.

A good corporate governance practical and academic consensus recommends maximum board size of three to seven.

Dr (Brig. Gen) Aminun-Kano writes from the Department of Accounting Ahmadu Bello University Zaria, Kaduna State