• Saturday, March 02, 2024
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BusinessDay

Bad debtors list puts lenders under scrutiny

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As banks continue with the publication of names of non-performing debtors, indications have emerged that lenders were aware of the poor credit history of the debtors and yet went ahead to advance loans to them, BusinessDay interactions with industry operators’ show.

The development may have put the operations of the banks under scrutiny as some industry operators call for strengthening of corporate governance to forestall further insider abuses.

This is even as the Credit Bureau operators, custodians of the credit history of potential borrowers, from which banks were supposed to clear before advancing facilities, have absolved themselves of any blame.

Analysts say the trend suggests that deposit money banks will eclipse the Central Bank of Nigeria (CBN)’s minimum non-performing loan ratio target of 5 percent limit, in their 2015 year-end financials.

The analysts further argue that the deteriorating macro – environment could mean that some loans may go sour for lenders, especially in the oil and gas space, where some of the companies, especially in macro small and medium scale enterprises (MSMEs), are believed to be moribund.

“It is not true that credit bureaus were not effective. Credit bureaus have encouraged information sharing in the lending industry.

“Credit bureaus would have failed if lenders were not aware that these borrowers were already exposed to other institutions when they were granting their own loans to them. All the published lists are information in the credit bureaus.

“We have discharged this duty very well. The decision to lend is in the hands of the lenders who have to take a final decision, within the context of the information they obtain from credit bureaux on the potential borrower and considering other vital factors, especially capacity to repay.

“Credit bureaus help lenders in dimensioning the willingness of borrowers to pay, by providing the credit history, and the capacity to pay by giving information on existing exposures..” says Tunde Popoola, managing director, CRC Credit Bureau limited.

But some analysts said last night, that the current development calls for more vigilance on the part of the Central Bank of Nigeria, (CBN) to avoid a reoccurrence of  the sector crisis of six years ago, when some banks were taken over by the CBN while others were forced to merge.

They wonder for instance, why facilities of higher volume would be advanced to some individuals who are believed to have interest in the same institutions or organisations, whose board of directors are virtually family members.

Friday Ameh, an energy analyst, told BusinessDay last night that the nature and caliber of directors on the boards of the debtor companies and the individual borrowers showed that the CBN needs to strengthen its corporate governance principles.

“CBN should be on the lookout, as publishing names of debtors alone is not an end in itself, as the emerging claims and counter claims mean that more work needs to be done by both parties, (banks and their debtor customers,” Ameh said

Bolade Agboola, executive director Cashcraft Asset Management, said, “We must be careful in publishing the names of debtors .Its not a novel strategy to recover debts, as the euphoria will fade out the next day.We must avoid criminalising borrowing .Did it work in 2009.CBN needs to do research on efficacy of the name and strategy.”

Popoola further said, “But the publication is to achieve name and shame, which is not the objective of having the information in the credit bureaus. Our responsibility is to promote informed decision making through responsible information sharing among creditors.”

Nigerian banks are currently grappling with the biggest surge in bad loans since at least 2011 after half – year results showed weak profit growth, amid a struggling economy.

John Omachonu