Economic slowdown deepens banks’ woes as debtors property can’t find buyers

In what seems a desperate determination to recover their money from  loan defaulters, some commercial banks in Nigeria have put up for sale, a number  of houses, hotels, petrol stations, schools and other property used as collateral for the loans.

The sale of these property is the second leg of  this desperation, coming after the banks had, a couple of weeks ago, published the names of debtors in the national dailies in a ‘name and shame’ strategy aimed at cajoling the defaulters to pay up their debts.

This present move is adding to the woes of the banks, as many of the foreclosed property cannot find ready buyers due to the slowdown in the economy which has kept the high end property market,  where most of these property belong,  struggling.

“Some of the creditor banks  are coming informally to the market and they are bringing their property under forced sale. Most of these properties are high-end and the market here is struggling”, Rogba Orimolade, an estate surveyor and valuer, confirmed to BusinessDay in a telephone interview.

Orimalade explained that most of these property cannot find buyers because those who drive that segment of the market are mostly politicians and oil companies, adding that these buyers were being cautious, waiting for government’s policy direction on the economy.

A marketing manager with a major international property vendor, who spoke to BusinessDay on condition of anonymity, also confirmed that the market has been flooded by new assets.

“The situation we have now is such that supply  has far outweighed demand and this is why some of the property are going for prices that are way below their market value”, the marketing manager affirmed.

Bismarck Rewane, the CEO, Financial Derivatives Company Limited, had earlier this month noted that the real estate market was experiencing downtimes resulting from over-supply and other factors that have pushed up vacancy rate at high-end locations in Nigeria to as high as 54 percent in July this year, up from 48 percent in June.

Confirming the supply glut in the market, Chudi Ubosi, an estate surveyor, however, expressed doubt that they were foreclosed properties as a result of bank debtors and sale of their collateral assets.

“The banks have consistently passed to us properties for sale and we have regularly worked on them. It is an on-going process. They hardly wait until the CBN forces them to”, he said, adding, “the interesting thing too is that many times, as soon as the debtors realise that the banks are serious about the sale of their collateral assets, they begin to take the issue a lot more seriously and enter into negotiations with them to reconcile the accounts and work out fresh terms of repayment”.

Other property vendors, mainly estate surveyors who spoke to BusinessDay on condition of anonymity, also confirmed receiving instructions from some of the banks to help them dispose of foreclosed property which are scattered in major cities of the country.

While some of these vendors disclosed that they had received the property lists directly or indirectly from the banks, others said some of the banks had contacted them to do same, even before the names of debtors were published, pointing out that the exercise started long before now.

Though majority of the agents/vendors were very protective of the identities of the banks that have approached them for the sale of their assets, BusinessDay checks reveal that almost all the 17 banks which have so far published names of their loan defaulters are in the market with foreclosed assets.

CHUKA UROKO