With less than a fortnight to the expiration of the August 1, 2015, deadline that the Central Bank of Nigeria (CBN) gave banks to publish names of chronic debtors, concern is growing in industry circles that the exercise could lead to lawsuits, thereby making it harder for lenders to recover their funds. New Telegraph’s findings reveal that as most banks are finalising arrangements to go ahead with the publication of the names of recalcitrant debtors, such borrowers are also raising an alarm that the exercise could negatively affect the economy. For instance, in a press statement last Sunday, the Lagos Chamber of Commerce and Industry (LCCI) urged banks not to proceed with the publication as many debtors defaulted due to factors that could be linked to ill-thought out government policies. The Chamber said: “It is important to avoid sweeping generalisations and examine the context of default on a case by case basis.
There are varying causal factors for loan default, which has to be taken into account in matters of this nature.” Also, the Federation of Construction Industry (FOCI) recently faulted the planned publication of the debtors’ list, arguing that its members owed banks because they, in turn, were owed over N500 billion by the Federal Government, a development, it said, had resulted in many construction firms in the country being close to shutting their shops. Specifically, the FOCI President, Mr. Solomon Ogunbusola, said: “All construction companies in Nigeria are being owed huge sums of money amounting to over N500 billion.
We all are being owed, the one that is not interesting to me at all is the threat from the Central Bank telling the commercial banks to publish names of our members who took loans from the banks for projects that they had long completed but not paid, as chronic debtors.” He contended that the name of the Federal Ministry of Works, and other government corporations owing its members should be published alongside as chronic debtors because if they had paid his members, they would have been able to repay the banks.
In a chat with New Telegraph, a legal officer at an old generation bank, who declined to be named, said that although lenders backed the CBN’s stance on the issue, they were also getting ready for the adverse publicity and expensive lawsuit that some of the affected debtors would launch against financial institutions as a result of the exercise. He said: “Of course, these bad debtors can be very stubborn. Despite the fact that we have given them several notices to pay up their debts they would ignore you until you are forced to take a drastic step, which is what the publication of the list is meant to achieve. Just like in 2009 when the CBN published a similar list, we expect that after August 1, many of the debtors would also tell journalists that the list is not accurate and some of them would even go to court to ask for damages.”
He said that the debtors would be hoping to exploit the nation’s slow judicial system to either put off repaying the debts for as long as it is convenient for them or, in extreme cases, not to repay at all. Similarly, while restating the bank’s commitment to publishing the debtors’ list, Executive Director at Sterling Bank, Mr. Abubakar Suleiman, stated that the move was necessary because of the attitude of some recalcitrant debtors who believe that they could exploit the country’s slow judicial system to enable them delay repayment of their debts for as long as they want to.
He noted that Sterling Bank was in court with several of such debtors, pointing out that although the process was expensive and time consuming, the lender took the step so as not to send the signal to other bad debtors that they could obtain huge loans that they had no plans of repaying. In a bid to curb what it said were increasing cases of Non-Performing Loans (NPLs), which were in region of between N390 and N420 billion as at May 2015, the CBN had directed banks to give bad debtors a three month grace period beginning from May 1 to July 31, 2015, to repay. It further directed lenders to submit to it the names of debtors that failed to beat the deadline and to also publish the names of such debtors in at least three national newspapers. The regulator also stated that the affected debtors would be banned from the country’s foreign exchange and bond markets.
