17062019 - Parents now afraid to send children to school — UNICEF

34 — Vanguard, MONDAY, JUNE 17, 2019
Of debtor, law enforcer, Nigerian banking
and international perception
A
By Femi Abimbola
London-based
economic and political
risk analyst that I have known
for more than 10 years
reached out to me a couple of
weeks ago to ask this
poignant question: “What’s
going on in your country
banking industry?” I wasn’t
sure what he was after this
time as he often calls me up to
catch up on political and
economic developments in
Nigeria, whenever he was
researching to do a report for
clients.
“What are you on to this
time around?” I asked him.
“I’m doing a risk assessment
for clients who are looking at
making some money
available to the banking
industry and I have come
across a lot of reports where
the police are being used by
debtors to prevent legitimate
debt obligations being carried
out by the banks. This is odd
and is not good for your
country.” He explained his
observation.
In the last few months, there
appears to have emerged, a
new trend where the
relationship between some
banks and their debtorcustomers
goes awry over the
latter’s failure to keep up with
debt obligations. What is even
stranger, and this was what the
London economic and
political risk analyst was
alluding to, is that it would
appear that the debtors, many
of who have been established
to be chronic defaulters, take
refuge in some law
enforcement agencies, such as
the police, the Economic and
Financial Crimes
Commission (EFCC), the
courts, among others. I have
seen and followed cases of
these agencies appearing to
completely ignore the issue of
indebtedness of the chronic
debtors and then go after
banks, particularly their chief
executives; in a manner often
bothering on harassment and
criminalization.
It was only 10 years ago that
the world was hit by a global
financial crisis, which
reverberated in Nigeria and
led to some drastic measures
being taken, including the
setting up of the Asset
Management Corporation of
Nigeria (AMCON) to take
over delinquent debt-assets
from the books of banks to
keep some of them afloat.
Some banks did not survive
the crisis, and even now, the
financial system and some
parts of the economy are still
reeling from its aftermath.
The peculiarity of the
Nigerian financial crisis,
which hit the banking
industry hard, was largely due
to huge loans gone bad that
were given to customers, many
of who simply refused to pay
because they considered
themselves the untouchable in
society, who should get away
with not observing the
obligations that come with
borrowing money from the
banks.
Law enforcement agencies
cannot, 10 years later, after all
the noise that went down with
the development, claim to
have just forgotten or do not
now understand that there are
obligations tied to loans or
bank advancements that are
given to individuals and
organisations. They cannot
have forgotten the thousands
of jobs that were lost in the
banking industry because of
the crisis that resulted from the
many debt defaults on
account of this behaviour. It
would seem that the new
tactics being applied is to
create as much
embarrassment as possible
for banking executives,
especially their chief
executives, with a view to
forcing the hands of these
banks. The goal, it is now
clear, is to force the banks to
stand down from pushing
forward with collecting what
a chronic debtor owes. This
cannot be what the various
law enforcement agencies
involved in this act want to see
themselves being used for at
this time of Nigeria’s
development. It leads to
asking the question, how
much of the matter do these
enforcement agencies really
know in the cases between
banks and debtor-customers
before they step in to invite
bank executives for the
purpose of this orchestrated
harassment?
It is obvious that there is a
less than adequate
understanding on the part of
different law enforcement
agencies about the issues
involved in the matter
between the two parties,
especially the simple matter
of customer obligation over
loans taken from banks. Or
they are deliberately choosing
not to understand them with
that strangeness of the
Nigerian kind. Here is a
simple scenario. A customer
walks into a bank for a facility,
which is availed to him with
certain obligations to
perform. A loan agreement is
signed with all parties,
including lawyers present and
counter-signing, and clearly
stated actions the lender can
take to recover its money when
the debtor fails to meet the
obligation. What is now
playing out is that at the point
where the bank is exercising
these actions, some law
enforcement agencies are
showing up with a chronic
debtor to accuse, not just the
The action of the
law enforcement
agencies harassing
bank executive
in the behalf of
bank debtors
leads to international
observers
raising Corporate
Governance
questions
bank, but its executives (obviously
aimed at maximum
embarrassment), of some indiscretion.
In logic this would
fall under some fallacies.
There is something particularly
unwholesome that this
development brings for the
Nigerian economy, the banking
industry and the executives
who run banks. It is unhealthy
for the economy because
we are having law enforcement
agencies appearing
to provide a cushion and
take sides with recalcitrant
and chronic bank debtors,
providing them a platform to
avoid fulfilling their obliga-
tions on loans they obtained
with their eyes wide open. For
the economy, it is important
that this situation should immediately
attract the attention
of its managers and the
relevant authorities as it could
easily lead to a gradual build
up to the crisis of 10 years
ago.
The international financial
community feeds on
information and information
shapes perception. This new
method of handling chronic
debt matters, where the
debtors appear to enlist the
police, courts and others,
sometimes including the
EFCC, on their side so as not
to meet their obligations is
veritable ground for negative
scores on the reputation table
for Nigeria, its economy, its
banking industry and its bank
executives who are supposed
to relate with their
counterparts across the world
on deal negotiation tables.
Developing danger to Nigeria’s
economy
While we are here hyping
some banks, their CEOs and
other executives as some of the
best in the world for their
performances, the stories the
world is reading and seeing
especially on social media are
that they are routinely invited
based on some rather strange
charges raised by debtorcustomers
before law
enforcement agencies. In
many cases they are accused
of such a serious reputation
damaging act as theft of their
debtors’ goods. Some credit
scores are damaged by this
kind of information and they
come into play in different
global board rooms when
determining whether an onlending
facility should come
to Nigeria or go elsewhere. If
a CEO who has been harassed
in this manner, because he or
she has been accused by a
chronic debtor, whose
collateral has been exercised
for falling behind on his
obligation, is sitting in a board
room in London or New York
or Hong Kong trying to
negotiate an on-lending
facility for his or her bank,
how is he or she expected to
look when asked to explain a
report of theft contained in a
risk analyst’s report? He will
look small and embarrassed,
of course! And that would rub
off on Nigeria.
It is, therefore, being
advocated here that this is a
matter the relevant authorities
must look at seriously. While
the authorities are yet to wake
up to this developing danger
to Nigeria’s economy and its
reputation, the group being
directly targeted by this, the
banking industry, has an
onerous responsibility to act.
Chronic, defaulting debtors
who go from one bank to
another throwing their
political, economic
connections and supposed
business weights around to
secure loans are well known.
But the lack of cooperation
among banks, driven by the
cut-throat competition
among them, is allowing this
to carry on. It, therefore, calls
for cooperation and
collaboration to identify and
blacklist such well known
loan offenders, who think they
can use law enforcement
agencies to avoid meeting
their obligations. Cooperation
and collaboration will
allow for a list to be developed,
a black book, more or
less, with banks sharing information,
and refusing to lend
to these types of borrowers
who are fund of hopping from
one bank to another, once they
are caught out by one financial
institution or the other.
One of the strategies that
have become clear is that once
these agencies have been
brought into the picture, the
next thing is to go legal by
charging bank executives to
court, for sometimes frivolous
reasons. Banks often appear
to be caught unawares
because they seem
unprepared that the agencies
and the law courts would be
involved in the harassment
and embarrassment of their
executives, when they try to
enforce loan agreements. It
therefore calls for a deeper
understanding of the legal
framework that can be used
to tackle this matter. There
must be robust legal strategy
and approach to tackling this
matter. Banks in Nigeria, as a
group, cannot allow it to just
lie low. They must seek wise
legal counsel of an industrywide
nature.
Aligned to the above will be
engagement with the
regulatory authorities who
seem to have been silent so far
on this harassment. It is highly
important that regulators are
brought into the picture so
that this can become an
economy-wide matter given
its potential to injure the
reputation of the country and
thus damage the economy, if
it is not already doing so;
especially going by the
question put to me by the
London-based analyst. The
involvement of regulators is
important also because it
provides a strengthening of
position collectively on the
matter. The regulators need to
see this as damaging to the
credit agency concept, which
is currently in place in the
country, because it would
seem some chronic debtors
are still getting away with
deliberate infraction of the
banking system borrowing
rules with regard to their loan
obligations.
Ethical issues which need
serious attention
This matter also throws up
a lot of ethical issues which
need serious attention,
especially as they relate to
loan defaults in the system.
The action of the law
enforcement agencies
harassing bank executive in
the behalf of bank debtors
leads to international
observers raising Corporate
Governance questions. In a
world where the demand on
the banking industry for their
Corporate Governance
credentials is high, the ethical
issues that are emerging from
all this must be concerning to
the Central Bank of Nigeria
(CBN) Bankers Committee.
There are questions around
the ethical behaviour that are
coming up because of this
development; and it needs
deeper examination,
exposition
and
understanding. The earlier
this matter is tackled and
nipped in the bud, the earlier
that we can save the Nigerian
economy, its banking industry
and those who lead banking
institutions and manage the
banking industry from
international embarrassment
and damage to their
reputations.
Abimbola, an economic
analyst writes from Abuja.