It will no longer be business as usual for chronic debtors as the Committee of Banks’ Chief Executive Officers (CEOs) disclosed plans to go tougher in efforts to bring blacklisted defaulters to book.
The Bank CEOs disclosed this during a meeting held in Lagos to review what it described as “harassment and criminalisation of banks’ CEOs by law enforcement agencies”. It was further revealed that the CEOs have perfected plans for all banks to cooperate and collaborate in order to fish out all defaulters.
“Chronic bank debtors were now in the habit of enlisting law enforcement agencies including police, judiciary and state securities to harass and criminalise banks’ CEO, which was unacceptable.”
Numbers Explained: As at the end of 2018, the National Bureau of Statistics (NBS) indicated that total non-performing loans stood at N8.1 trillion. Although the Asset Management Corporation of Nigeria (AMCON) has recorded some success in its debt recovery bid, reports show that AMCON only recovers about N1.4 trillion bad loans on a yearly basis.
In terms of non-performing loans ration to the total, Nigeria’s Non-Performing Loans Ratio was 13.03% in 2018, compared to 14.9% in 2018. Non-Performing Loans Ratio stood at an all-time high in December 2009 when the ratio stood at 32.8%. Its lowest was in December 2014 when it stood at 2.9%.
Further Details: According to the Banks’ CEOs, plans have been perfected to go beyond publishing the names of defaulters in national media. This time, all banks will be speaking with one voice, sharing information about those entities, and refusing to do further business with them until they settled their obligations.
Similarly, the CEO addressed smear campaigns by defaulters which are always targeted at banks and their CEOs in a desperate bid to either delay repaying loans or avoid meeting their debt obligations completely.
“To avoid the kind of crisis that rocked the banking sector 10 years ago, all agencies and stakeholders will step up and help fight the inherent menace of chronic loan defaulters.”
Optics: The move by the bank CEOs to review strategies to recover bad loans may not be unconnected to the recent Monetary Policy Committee’s (MPC) directive to the CBN to develop a comprehensive administrative, legal, and regulatory framework to speed up the recovery of delinquent loan facilities in the Nigerian banking system. According to the CBN Governor, Mr. Godwin Emefiele;
“The MPC welcomed the improvement in financial soundness indicators, but noted that although the non-performing loan ratio moderated, it remained above the prudential benchmark.”
Upshots: A non-performing loan (NPL) is a loan that is several months overdue or in default. Most analysts use 90 days delinquency to measure non-performance of a loan. A loan may become delinquent and therefore classified as non-performing because of economic misfortune.
For lenders, non-performing loans imperil the capital requirement limits and therefore make it difficult to grant new and probably more quality credits. Non-performing loans weigh down a bank’s balance sheet just as the attendant charges decrease a bank’s profitability.