SEVERAL banks, discount houses and the Asset Management Corporation of Nigeria (AMCON) are complying with the directive of the Central Bank of Nigeria (CBN) to have the names of their loan defaulters published in newspapers with effect from this August. The amount involved is about N13trillion.
The “name and shame” strategy came against the backdrop of apparent failed attempts to recover the outstanding loans over a long period of time, far beyond their tenors.
The failure of the recovery options is also evident in the fact that only few of the 113 bad debtors that the Central Bank of Nigeria (CBN) barred from further borrowing from banks two years ago have been able to repay their loans taken over by the Asset Management Corporation of Nigeria (AMCON).
Some observers have noted that this is not the first time the CBN will be publishing a list of bad debtors. It did same in the early days of Sanusi Lamido Sanusi’s regime as CBN Governor in 2009. It didn’t achieve its objective. Rather it ended in controversy as the list turned out to be lacking in credibility and thoroughness. But this time the apex bank is not doing it. The banks are doing it directly.
Statistics of the bank debtors show that those affected are the big borrowers who are less than one per cent of the borrowing population but which actually hold over 70 per cent of the total N13 trillion bad loans.
The resort to “name and shame” has attracted some criticisms as much as it has been hailed amongst industry stakeholders. Some argue that “name and shame” is unorthodox and unprofessional. Other opponents also warn that due consideration should be given to the legal implications. Yet others note that some defaults came as a result of genuine, irreversible business failures.
While we appreciate the shortcomings of the “name and shame” strategy, we are seriously concerned that failure to do something might plunge the financial sector into a great disaster. The cost of the possible collapse of the financial sector is far heavier on the populace than the reputations of a few recalcitrant, chronic debtors.
The truth is that some defaulters have simply decided not to pay their debts. This group, when identified, must face criminal prosecution after being exposed.
The right of lenders to recover their money must be upheld in the overall interest of the economy. Entrepreneurship is about risk taking. If you fail you bite the bullet.
We expect both the lender-banks and the CBN to approach this drive to recover loans with the greatest respect for the banker-customer contract, and also take into account the overall interest of the economy in penalising defaulters.
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