Several bank chiefs and board of directors are afflicted by fear and indescribable dread of what grief may come in the wake of their liaisons with chronic billionaire debtors by whose bidding they plunged the financial sector in its current mess. In the wake of the Central Bank of Nigeria (CBN)’s directive that banks in the country reveal the identities of their chronic debtors in a “name them and shame them” exercise in the media, several bank chiefs have resorted to very desperate measures to protect the culprits from ridicule and prosecution.
No sooner than the CBN issued the directive than chronic billionaire debtors in the country engaged in a fierce hustle to prevent their names from getting published. The culprits, predictably, moved to prevent their names and pictures from making the front pages of newspapers as chronic debtors responsible for the banking industry’s financial woes. And contrary to widespread expectations and the CBN’s purpose for issuing the directive, banks in the country have conspired with their billionaire debtors in an elaborate plot to hoodwink the CBN and the general public into believing that their billionaire friends and clients do not belong to the list of debtors. A cursory look at the lists published by the media establishes the fact that those whose names have been published are barely known to the public and hardly fit into the CBN’s categorisation of ‘chronic debtors,’ according to a source within a new generation bank.
The Capital findings revealed that, the banks have painstakingly left out the names of their billionaire debtors after the latter reached out to the banks’ executives, persuading them through financial inducements and outright blackmail, to leave their names out of the list of chronic debtors. Many billionaire debtors of the various banks are worried that if their names get published in such lists, it would affect their businesses negatively as they would be deemed insolvent and financially unstable by current and prospective business partners or investors. And to protect themselves, these chronic billionaire debtors have deployed the use of threats where financial inducements fail them, to cow their senior accomplices in the banks to submission. Sources within a new generation bank that prides itself as the most stable bank for business men revealed that at least three senior directors of the bank are currently running helter-skelter to do the bidding of billionaire friends and chronic debtors who have decided to blackmail them from revealing their identities as chronic debtors following the CBN “name them and shame them” directive to banks.
No rest for the guilty
More worrisome is the fact that, no bank director or manager has been able to call the bluff of the billionaire debtors because they are scared that the culprits might make good their threats and reveal details of questionable loans among other shady deals they had jointly perpetrated in the past. Sources in four very popular new generation banks revealed that, at the moment, senior executives in their banks are engaging in random meetings within and outside the boardroom to decide on how to dodge the ricocheting bullets of financial crisis and legal prosecution if found guilty of any wrongdoing. Besides meeting with colleagues in the same establishment, many of the banks’ executives are also meeting with colleagues in rival banks who are in similar predicament. Given that some of the billionaire debtors owe more than one bank non-performing loans (NPLs), there is need for directors of affected banks to agree on the best explanation to give in order to save their hides if the situation ever gets out of control.
While the public marvels at the banks’ effrontery in publishing lists that do not reflect the actual names of their chronic debtors, economic analysts are of the opinion that the situation could degenerate to the detriment of the country’s economy and general wellbeing of the citizenry.
A dreaded intervention
The decision to publish the names of serial bank debtors was taken at the 322nd meeting of the Bankers’ Committee in July. The conference set a deadline of August 1, for every bank to publish the names of its chronic debtors but according to a senior CBN official, many of the banks’ directors who were present at the meeting virtually scoffed at the CBN directive thinking it was an empty threat. The bank chiefs rather than advise their debtors to pay up loans taken by them, collaborate with them (the debtors) to devise means of shirking the loans’ repayment.
According to Tokunbo Martins, CBN’s Director of Banking Supervision, the measure is in response to mounting non-performing loans, which he said had risen to N490 billion sector-wide. It is reassuring that the CBN has spotted danger in the figure, though it amounts to just three per cent of the N13 trillion total bank credit.
It would be recalled that the CBN had initially told banks to give bad debtors three months to settle their accounts otherwise they would be named in the media and barred from taking part in Nigerian currency and government debt markets. At the initiation of such measure, chronic debtors are expected to be denied access to foreign exchange while their names are published to ensure safety and soundness of the industry.
Martins said: “It will not only be the bad debtors but their companies, directors, subsidiaries and members would be denied access to foreign exchange.”
Bank directors silenced by luxury gifts and threats
Oftentimes, a billionaire debtor would give a bank director the gift of a new car, apartment in a highbrow area or return vacation tickets to exotic spots anywhere in the world, to induce the bank director to provide illicit cover for them – consequently, rather than ensure that their billionaire friends refund loans taken, senior bank staff actually teach them to avoid repayment even as they provide the culprits protection from any sort of backlash from within the bank.
In more desperate cases, chronic billionaire debtors urged their friends in government to harass and force bank directors to grant them multi-billion naira non-performing loans. This was always the last recourse for prominent billionaires whose efforts to access outrageous loans from banks are rebuffed by a seemingly conscientious director or bank manager. The latter eventually cows to the harassment or bullying tactics of the billionaire’s friends in government, the presidency for example, or he gets fired or forced to make an unceremonious exit.
The Capital investigations however, revealed that more often than not, senior bank directors are always willing to play ball and thus do the bidding of their billionaire friends cum chronic debtors, for a fee. This was the situation until very recently when the CBN set this year as deadline for chronic bank debtors to start meeting their loan repayment obligations or be disgraced by media advertorials exposing their financial debts to the public.
As their desperation mounts, banks ‘attack ‘ poor, helpless customers
However, the apex bank’s “name them and shame them” measure has failed to produce the desired impact as the country’s banks have refused to publish the actual names of its chronic debtors and friends in Nigeria’s billionaire club.
To make up for their deceit, several banks have resorted to publishing names of people who do not fit into the classification of chronic debtor. In several cases, the names published have been found to be fictitious; sources in major banks affected by chronic debts, revealed that several names and companies are not even in their records.
Another desperate tactic adopted by the banks is increase the interest rate on lending. For instance, several banks have increasing with impunity interests on loans taken by its struggling, less privileged customers. A customer whose loan attracted an interest rate of 22 per cent at the time it was taken, is currently paying 25 per cent interest on the loan in the wake of his banker’s arbitrary hike in interest rate. Many banks afflict their helpless, loyal customers with such ridiculous charges in desperate bid to raise money and make up for losses suffered by bad and non-performing loans they had granted their billionaire friends.
Implications of skyrocketing NPLs
There is no gainsaying Nigerian banks are currently grappling with the biggest surge in bad loans since 2011; half – year results showed weak profit growth amid a struggling economy. The nine lenders: FBN Holdings, Stanbic IBTC, Unity, FCMB, Diamond, Fidelity, Skye, Union and Wema Bank that initially released half year results showing a N30.1 billion jump in provisioning for soured credit.
Stanbic IBTC, Fidelity and First Bank were the most affected with loan loss expenses surging by 449 percent, 275 percent and 239 percent respectively. Analysts say the trend suggests banks will eclipse the CBN’s minimum non-performing loan (NPL) ratio target of five percent at the backdrop of random fears and speculations that the NPL ration could increase to seven per cent by full year 2015.
The deteriorating macro – environment among other ills, indicate that some loans may go sour for lenders, particularly in the oil and gas sectors. This argument is premised on the fact that apart from the fact that some of the debtor firms whose names appeared on the list are moribund, some of the affected local governments may find it difficult to repay, given their transient nature and the states’ financial stress.
Former CBN governor and incumbent Emir of Kano Emirate, HRM Sanusi Lamido Sanusi , had raised significant concerns about the transparency around contracts awarded to several oil companies including concerns about non-remittance of oil sale proceeds to the Federation Account. The price of the commodity (oil) which makes up 70 percent of government revenue and 95 percent of exports is down some 50 percent in the past year. The naira also depreciated significantly against the U.S. dollar by about 15 percent over 2014.
The uncertain macro – economic environment may lead to a rise in credit losses for banks in 2015, according to Standard and Poor’s analysis.
Credit losses for the industry could increase, as loans begin to season in 2015, and pressure mounts on lending in natural resources, public utilities, and foreign currency, according to Matthew Pirnie, director of Financial Services Ratings at Standard and Poor’s (S & P).
Banks’ reduced profitability will consequently lead to rapid loan growth in sectors where risks are not fully understood, including small and midsize enterprises, retail, energy, and foreign currency lending, according to economic pundits.
Taming the apocalypse
The situation no doubt calls for urgent remedial steps; Godwin Emefiele, the CBN Governor, should follow through to ensure that NPLs do not reach the 5 per cent ceiling of total credit in the market set by the apex bank advised industry analysts.
The recent publication of debtors’ names in the media defeats the purpose of the CBN’s “name them and shame them” directive to banks. The apex banking institution should follow through by painstakingly poring through the records of the banks to ascertain the veracity of their claims and the authenticity of names published as the banks’ chronic debtors.
The “name them and shame them” measure should be preface to greater punitive actions. Experience has shown that merely publishing the list of debtors has neither shamed the chronic debtors nor induced them to pay their debts. Punitive measures including arrests and threat of criminal prosecution compelled many repay loans owed by them when the CBN under Sanusi sought to sanitize the banking sector in 2009. The former CBN governor dealt with chronic debtors and their reckless accomplices within the nation’s banking halls decisively.
For instance, he denied such billionaire debtors access to more loans by instructing banks to desist from granting them additional loans but the former CBN governor’s measure, progressive as it was, got thwarted by the machinations of the immediate past administration which serially revoked the ex-CBN governor’s directive by conniving with banks and certain chronic billionaire debtors to acquire more multi-billion naira non-performing loans for the latter.
The onus falls on the current CBN governor, Emefiele, to prevent NPLs from escalating out of control as it did in the 2008 and 2009 financial clime when bad loans piled up to N4.3 trillion, rendering several banks bankrupt and prompting strong regulatory actions, including CBN takeover of eight banks, injection of bail-out funds and creation of AMCON to buy up bad debts.
Similar measures to those employed by Sanusi are no doubt required by the current administration of the apex banking institution if it is truly committed to ridding the nation’s banking industry of the pervasive impunity that is responsible for its various setbacks.
Until then, the nation’s banking industry and by default, the economy, will continue to groan under the burden of NPLs and shady transactions perpetrated by senior bank directors and chronic billionaire debtors.