By Enitar Ugwu

NOW, the die is cast. Nigerian banks' fears over the recovery of huge loans to some Nigerian companies and the threat of such unpaid loans to their operations are now in the open.

In fact, the banks have decided to frontally confront the debtors.

The development has compelled some of the affected financial institutions, notably Access Bank and Intercontinental Bank Plc, to either go to court or petition President Umaru Musa Yar'Adua asking for his intervention.

Access Bank Plc recently went to court over Africa Petroleum Plc's alleged failure to pay a debt of about N5 billion.

And in a novel move, Intercontinental Bank Plc has written a petition to President Umaru Yar'Adua to help compel a "debt cabal" to pay up.

In a petition sent on its behalf by A.O.S Practice, a firm of legal practitioners, and dated August 5, 2009, Intercontinental Bank spoke of "a plethora of personalities, otherwise called the Cabal, who have deliberately refused to make returns in respect of facilities from which they have benefited."

The bank also said: "To proceed to sue these institutions as ordinary legal dictates would suggest, is to get bogged down with the legal technicalities and slow pace of the adversarial practice of our judicial system, which these cabal would engage to wear us down.

"We are thus forced to run after loan defaulters and rabid debtors who are daily being serenaded in the media, as affluent Nigerians."

A look at the three companies indebted to Intercontinental Bank as contained in the said petition shows that their cumulative debt profile stands at about N35,788,116,159.37.

In it's petition, the bank made "a clarion call" on the President "to dismantle this cabal that is hiding under the auspices of the Federal government's fiscal and economic policies whilst gang raping our client, as with such other well meaning banks, that oil the economy of this great country. This gang-rape is obviously because we lack a credit registry or bureau in Nigeria where information and data on the credit history of persons and companies can be accessed to determine their standing in relation with other banks."

The petition also sated: "Indeed, what our client requests that you immediately do, Mr. President, Sir, is in conjunction with the Attorney General of the Federation, to ensure proposal and enactment of a legislation that will strengthen and position the financial affairs of this country, in order to cause a total overhaul of our legal system with a view to doing away with the weaknesses inherent therein."

It lamented that "facilities running into several billions of naira are made available to institutions and individuals of perceived high networth, to trade or carry out businesses having direct impact on the fiscal and economic policies of the country, yet these facilities are neither serviced not repaid in line with the terms of the contract. Not that the businesses do not yield the envisaged profits or dividends, rather the same have now been diverted for other selfish and less than altruistic purposes."

An in an open admission of the complication of the banks' dilemma, the petition indicated that the loan were not secured.

"For some of these transaction e.g. the current government's policy of deregulation of the oil sector, with its add-on effect on the distribution and sale of petroleum products, the financial outlay required is so vast that there cannot be sufficient security to collaterize such credit facilities, which run into several billions of naira, given the turn around time, to insist on the provision of adequate security as financial prudence dictates, will amount to refusing the facility, with the implication of indirectly derailing government vision and policies."

The Guardian had, on July 22, 2009, exclusively reported that a few companies and their directors have compromised funds of shareholders and customers of the financial institutions.

Already, the Central Bank of Nigeria (CBN) has opted for a full disclosure strategy to stem the tide of anxiety faced by the lending banks.

As at the time of the report, over N1.25 trillion was being owed the banks by the high profile individuals and their companies, with a significant percentage of the debt stock in foreign currencies.

But the debtors have seemingly kept the banks in suspense, forcing them to categorize the liabilities as bad debts that are being written off to cleanse the financial institutions' books.

Indeed, two of the companies and their directors have a debt overhang of $3.75 billion (N550 billion), with a further N280 billion representing the local currency component of their collective liabilities.

Another well-known group of companies, with an equally visible entrepreneur as its majority stakeholder, is allegedly owing the banks about $400 million (N58 billion).

Although some of the alleged debtors have denied that they owe the banks, hopes of the affected institutions to recover the loans are fading.

A survey by The Guardian indicated that objectives for which the loans were collected remained largely unachieved, with some of the banks strategising on how to present acceptable financials to their respective shareholders.

Some of the financial institutions, reeling under the burden of the high bad debt stocks, have even been postponing dates of shareholders' meetings, while about two have decided to hold the mandatory forum in locations far away from Lagos, to prevent attendance by critical stakeholders.

Already, three banks have written off over N76 billion in loans, thereby assailing profitability and dividend payouts.

The CBN is flooded with petitions from some of the banks, over difficulties in debt recovery, especially from the major five debtors.

Some analysts, who spoke to The Guardian, expressed optimism that the banks could eventually recover some of the debts, going by the CBN's current disposition, which favours full disclosure of transactions.

A former Managing Director of one of the defunct banks said in Lagos that chieftains of the financial institutions should discard alleged blackmails from the debtors and expose them in the interest of their respective shareholders and customers.

Imagine a country where the banks have to go to the President to beg for loan repayments from individuals. The individuals should either declare bankruptcy and forego repayments or should have their assets seized by the banks. So the power of bailiffs in Nigeria are not recognised where big men are concerned?

Again, another case of Personalities triumphing over Institutions in Nigeria.

Did anyone say failed state?

May God save the jungle called Nigeria.


On the other hand, the banks should have known what kind of nuccas they were lending money to.

It serves them right because the premise on which they lent these people the money was that these people can repay the money only because they are in a position to steal the money from the public purse.

Corrupt bedfellows deserve what they get.

Imagine those huge sum out of a banking sector, and you expect money to flow?

Nonsense!

When these banks refuse to provide loans to serious minded small businesses that may need less than N1M to turn a dream into a viable business but would chase some individuals and companies around and practically begging them to access loans what were they thinking?

I have maintained for long now that our banking industry is sick and confused. Little wonder they turn employees to beggars and prostitutes all in the name of looking for deposits without thinking of how they can assist young companies grow into stable mega companies. These guys are so short sighted.

Afam:

Nonsense!

When these banks refuse to provide loans to serious minded small businesses that may need less than N1M to turn a dream into a viable business but would chase some individuals and companies around and practically begging them to access loans what were they thinking?

I have maintained for long now that our banking industry is sick and confused. Little wonder they turn employees to beggars and prostitutes all in the name of looking for deposits without thinking of how they can assist young companies grow into stable mega companies. These guys are so short sighted.

U sure have a good point, but such money from the banking sector will affect us all.
and i think might be hard to give loan to some people too in a nation where there is no database of the citizen.
Give a loan to a yoruba man, he will go and marry another wife.
Give a loan to an Ibo man, he will buy another ride.
Give a loan to hausa man, he will marry another wife and buy more cow.
So what do we do then when they have nothing we cam get back to get the money's worth?

See why I keep saying that Nigerians are the problem of this country.

Banks have clearing problems with one another, instead of going to the independent regulatory bodies being the CBN or NDIC, they are calling on or petitioning the President of the Federal Republic.

Very soon household quarrels will require petitioning the President.

Stupidity sha is a very powerful thing.

nex:

See why I keep saying that Nigerians are the problem of this country.

Banks have clearing problems with one another, instead of going to the independent regulatory bodies being the CBN or NDIC, they are calling on or petitioning the President of the Federal Republic.

Very soon household quarrels will require petitioning the President.

Stupidity sha is a very powerful thing.

no wonder we have Yar"stupid in power

nex:

See why I keep saying that Nigerians are the problem of this country.

Banks have clearing problems with one another, instead of going to the independent regulatory bodies being the CBN or NDIC, they are calling on or petitioning the President of the Federal Republic.

Very soon household quarrels will require petitioning the President.

Stupidity sha is a very powerful thing.

They know they are corrupt, thats why they cant go to the CBN or NDIC. . . . can you go to CBN to retrieve your money from Mike Okiro?. . . . you have to put political pressure on him. . . . again, personalities trump institutions in Nigeria and this has always been our problem.

Ibime:

They know they are corrupt, thats why they cant go to the CBN or NDIC. . . . can you go to CBN to retrieve your money from Mike Okiro?. . . . you have to put political pressure on him. . . . again, personalities trump institutions in Nigeria and this has always been our problem.

Cos we have a system that has failed and leaders that will continue to fail as well

Access bank took the bull by the horns and named the defaulting company. Intercontinental Bank should name the defaulting company so that all of will know and they will be surprised at how fast the company will pay back.

otokx:

Access bank took the bull by the horns and named the defaulting company. Intercontinental Bank should name the defaulting company so that all of will know and they will be surprised at how fast the company will pay back.

hahahaha, that is if the coy still get shame.
No shame anymore in owing for Nija.

Banks will have to go the Presidency instead of the regulatory bodies because the yardstick for giving out loans in the first place as stipulated by the bodies was not strictly adhered to in the first place. I am sure the word "high networth" clearly sounds more like a collateral to the banks at the point of issuing out the loans in the first place. Now that the high networth customers have now decided to be featherweight in their business commitment, the banks wouldn't have any other choice but to run to the president.
Naming the loan defaulters i must add will definitely add fillip to the loan recovery for the banks. Remember the recent senate naming and the flurry of activities from the loan defaulters of the failed banks! An average Nigerian politician always would not to cut a picture of a financially sinking personality particularly now that the 2011 election is around the corner. So if there is any time to name loan defaulters, the time is now.
The CBN governor should also ensure constant audit of the various banks. It is quite noteworthy that banks start crying out now that the CBN has started scrutinizing the various books of the banks. A compliance unit could even be established within the CBN to constantly ensure that the banks comply to the letter, the various policies as stipulated by the CBN and the other financial regulating bodies.

Afam:

Nonsense!
When these banks refuse to provide loans to serious minded small businesses that may need less than N1M to turn a dream into a viable business but would chase some individuals and companies around and practically begging them to access loans what were they thinking?

well to me the Banks are to be blame, have you seen the crazy interest rates at which they calculate loans it sure makes it difficult for defaulters to pay up,

another factor is the whole nigerian system is faulty, lets say u borrow N2million to start a small bizness u would find with time that cost of running the bizness due to electricity and other taxes from local and state govt, cost of raw material and other hidden cost may exceeds your 2 million

meanwhile due to interest manipulations the banks are waiting for u to repay the 2million loan with 5 million, so an average bizness is still struggling to survive first b4 it considers loan repayment.

Bank debtors parading as affluent nigerians

too late for Intercontinental; let them go and join the choir singing for EFCC.

Nezan:

Bank debtors parading as affluent nigerians

there is nothing wrong in being a bank debtor, most of the billionaires uses banking fund to make it, however, they are just wrong for defaulting

otokx:

too late for Intercontinental; let them go and join the choir singing for EFCC.

What music would that be

@Afam I agree totally with you. Stupid banks,ask them for loan they will tell you interest rate that will chase you away,instead of helping and supporting small scale biz to grow na interest rate them go take kill am.

Well, only if they are telling us the whole truth.

na war ooooooooo which kind nonsence be is this not the debt that makes prof. isrisk to sack many top officials, that same pple that is calling for help.


INSTEAD OF DEBTORS TO PAY OR DECLARE BANKRUPTANCY THEY CONIVE WITH OGA SAN. TO SACK -----------TOO BAD

it's high time these banks named the debtors. i'm sure it'd go a long way in facilitating the repayments.
if dem go dull, na dem know o!!!

at times don't blame banks, customers can be so dubious too i tell you

stupid banks giving few individuals billions in loans, while upcoming biznessmen like my good self cannot get a couple of mills to loan, may them never recover the kudi .

dfanthom:

it's high time these banks named the debtors. i'm sure it'd go a long way in facilitating the repayments.
if dem go dull, na dem know o!!!

at times don't blame banks, customers can be so dubious too i tell you

CANT U SEE "DANGOTE" written all over the place

a few years ago jimoh ibrahim warned about dangotes way of business . . . . . .now reallity dawns

Ibime and Afam your "talk" hit the point. I have said it, the bankers and politicians are not different. I even prefer the politicians. You know they are thiefs upfront. The bankers project image and integrity when they are shams.

Imagine if 10% of the bad loans were given to to real entrepreneurs

cescky:


CANT U SEE "DANGOTE" written all over the place

a few years ago jimoh ibrahim warned about dangotes way of business . . . . . .now reallity dawns

There is no need mentioning these man's name because he his indebted to nearly all banks in the country

Nigeria is an absolutely useless country. Firstly, people need to understand that what is just coming to the light now has been in the works for a while. Apart from the laughable crap which these stupid banks have been trying to sell to us that they have been profitable in a worldwide recession, they need to understand that these loans will never be redeemed. This crisis is partially one of the things that led to the banking crises in the West -- a crisis which Nigerian banks have been insisting, all this time, that they are immune to while declaring phantom profits.

These banks will suffer because they will not receive any bailouts from the Nigerian government. And sadly, the lack of liquidity in the financial system will only make the business situation in Nigeria worse that it already is…

The Nigerian banking/lending model is quite different from that of developed countries. They shouldn't have found themselves in this quagmire but for their mediocrity. I ones told a bank executive when they came to offer us money; " Send one of your managers to my company for a 1yr Industrial Training period, then we can discuss the loan"

This is were our banks have missed it. They really are not working for the customer but for themselves. If they were not this selfish they'll take time to understand the customer's business and the cases of bad loans will reduce drastically. As I once submitted on this forum; the future bankers will be drawn from the other industries they(the banks) loan money to. This will pave the right foundation to remodel our financial institutions and prepare the economy (real sector) for real growth.