Naming of the shrewd

Debt copyIF the nation’s banks and their regulator, the Central Bank of Nigeria (CBN) expect Nigerians to applaud them on account of the razzmatazz of naming and shaming of debtors, what they would get at the end of the day would be excoriation. This they deserve for not taking the lessons of history seriously.

Just six years ago, the banks were hemmed in by a similar crisis of their debtors not meeting their financial obligations. This led to the banks publishing the names of the debtors, most of who were businesspeople in the oil and gas sector, in various national newspapers. The Federal Government through the CBN intervened in this crisis by rescuing the banks with $4 billion.

One would have thought that having passed through such a crucial crisis that would have precipitated the collapse of the financial sector, with its collateral damage to the entire economy, the banks and their regulator must have put in place measures to avert its recurrence. But they rather chose to wait for the past six years, lamely hoping that there would not be a repeat of this crisis. It is the same levity with which government’s activities are undertaken; without cognisance of lessons from the past and a clear-cut trajectory of action in the future. The danger is that when the same attitude is brought into private businesses as in the banking sector, the outcomes are so grim that they evidently threaten the economy and the common people. When banks fail because of the phalanx of unredeemed financial obligations to them, the calamitous consequences are borne by
both the rich with hefty accounts and the poor street hawker barely eking out a living with paltry savings.

Of course, businesses all over the world prosper through borrowing other people’s money, especially from banks. Countries borrow to meet their national obligations. It is through such borrowed money that business activities are stimulated and employment opportunities are expanded. But in publishing the names of debtors, both genuine entrepreneurs and fraudsters are lumped together . The banks do not allow the public to know those who have been genuinely doing business and who cannot meet their financial obligations to their lenders because of the economic crisis in the country and other unavoidable circumstances.

Some of these banks constitute their own bane. They are compelled to get involved in this naming and shaming exercise to avoid the wrath of the CBN which gave them a three-month deadline to do this. Some of the managers of these banks that have lent the money knew that those with whom they were doing business would not repay the loans. This is because the lenders have already got their share of the money so they never bother if it is repaid. It is like government officials who award contracts and take a certain percentage of the money. They do not bother if the contracts are not executed. And there are the borrowers whose minds are made up not to repay whatever they have borrowed irrespective of the fact that they have successfully leveraged on their loans to develop their businesses. In this regard, it is the innocent businesspeople with a genuine need for
banks’ loans that suffer as the banks do not readily oblige them.

One disturbing impression the whole development has created is that it is easy to borrow money in Nigeria. Of course, those who live in the country know that this is far from the truth. One cannot just walk into a bank in Nigeria and expect to be given a loan. Even if one overlooks the outrageously high interest rate, one would still not succeed in getting the loan. The most adversely affected are the middle class. Forget about the fact that the media are inundated with all manner of promotional reports that the banks are ready to finance consumer products for the middle class. These are often beyond the reach of the members of the middle class because of their stringent conditions. But the banks would prefer to do business with the big companies and those with big names. Of course, a big name opens a door in Nigeria.

So if a bank is doing business with a company, are there no collaterals for a loan that is given? What stops the bank from selling these collaterals to recover their money? If actually there have been collaterals, why must the bank wait until now before publishing the name of the debtor? What is clear in this regard is that the banks do not bother to ask for collaterals for the so-called big companies, men and women. So it is easy for them to get term loans, overdrafts, among others. One may not even need to make available an address, one may still get a loan.

The obvious tardiness with which the banks are publishing names of their debtors has led to a situation where there have been claims and counter-claims. While the banks are saying that some debtors are owing, the latter are insisting that they are being maligned. Such people have either gone to court to clear their names or threatened to do so. Thus, instead of getting more money through the publishing of the debtors’ names, some banks may lose money to numerous litigations. The challenge before the CBN now is to really develop a mechanism to check a recurrence of this development. For it is clear that after the naming and shaming, the CBN and the banks themselves would forget that they passed through this crisis. They would never learn any lessons. The CBN and the banks should work out a strategy that would enable them to make debtors to meet their financial obligations to their lenders without having their names published in newspapers.

While the CBN is apparently concerned with recovering unpaid loans from debtors, it has failed to tell us how serious it is in meting out appropriate sanctions to those banks which have neglected to put in place proper precautions before lending out money. The apex bank must go beyond just appearing to be working and think of more enduring measures to stabilise the banking sector. So far, it is clear that some debtors are not deterred by the threats of being blacklisted and barred from further borrowing money from the banks. Like in other sectors of the economy, such debtors have a way of circumventing the rules. They would resurface to borrow even higher amounts of money. Such debtors are either encouraged by their lenders who connive with them or they on their own know how to manipulate the financial system to get what they want. These debtors are very shrewd and while they may be named and shamed, they cannot be tamed. They are unlike William Shakespeare’s shrew that is tamed by Petruchio and becomes a compliant bride.
• Dr. Onomuakpokpo is a member of The Guardian Editorial Board

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