CBN to publish names of ‘chronic’ bank debtors

The Central Bank of Nigeria on Thursday expressed deep concerns
about the growing amount of Non-Performing Loans in the books of Deposit
Money Banks and said it would publish the names of chronic debtors.

The Director, Banking Supervision, CBN, Mrs. Tokunbo Martins, who
stated this at a press briefing after the 321st meeting of the Bankers’
Committee in Lagos, said the central bank, in collaboration with the
committee, had also decided to stop the serial debtors from buying
foreign currencies at the official interbank foreign exchange market.

Also to be stopped from buying foreign currencies, according to her,
are members of the board of directors of debtor companies as well as
their subsidiary firms.

She recalled that the Asset Management Corporation of Nigeria had
spent a fortune to buy toxic assets from the banks’ books in the past
and that it was important to stage timely interventions to forestall a
repeat of past mistakes.

Martins said, “So, it was decided that going forward, one thing that
we will do is to stop them (chronic debtors) from getting access to
foreign exchange. Another thing that we also considered doing is to
publish the names of the borrowers that refuse to pay up. This is to
ensure the continuous safety and soundness of the banking industry.

“It is not all debtors, it is the bad and chronic debtors; those
ones that have deliberately refused to pay; those are the ones we are
talking about. Now, in the industry we have a standard, we don’t want
the NPLs to be more than five per cent of the total loan in the
industry.

“The total loan in the industry is in the region of N13tn to N15tn.
Right now, we have not reached the upper limit of five per cent, but we
don’t want to get there. That is why we decided that we need to come out
with this measure. Currently, the industry average of non-performing
loans is at 3.3 per cent and we don’t want to get to five per cent; that
is why we came up with this measure.”

She said the CBN, in collaboration with the Bankers’ Committee, had
laboured to keep the banking industry safe and sound, and that there was
a need to ensure the continued safety of the banks.

The Managing Director and Chief Executive Officer, Union Bank Plc,
Mr. Emeka Emuwa, said the amount spent by naira debit cardholders
overseas was rising fast and the banks were beginning to notice some
arbitrate in the segment.

Consequently, the CBN and the Bankers’ Committee will slash the
annual allowable drawdown for each bank customer, according to him.

The current annual allowable drawdown is $150,000 per customer but Emuwa did not specify the amount it would be slashed to.

He said, “We did find that in a number of cases, people were using
the cards in manners that were not expected of them and there have been
some arbitraging going on. So, in order to sustain stability, what was
agreed by the committee was that the limits for the use of the naira
debit cards would be reduced.

“As a customer, if you have a dollar account, you will still have
unfettered access to it; but for naira debit accounts, the limits will
be reduced to more judicious levels. This specifically refers to the use
of these banks’ products abroad, because when they are used abroad, the
merchants have to be settled.

“Even if it is the Automated Teller Machines, the service provider,
Visa or MasterCard has to be settled in foreign currencies and we find
that it is a drain on the foreign resources available to finance our
industries. So, there is going to be a reduction in the annual allowable
drawdown using naira debit cards abroad.”

The Managing Director, Standard Chartered Bank Nigeria, Mrs. Bola
Adesola, said the foreign exchange market was safe and sound, and was
already moving towards a near convergence of rates in the various
segments.

This, she said, was as a result of the positive actions taken in the past by the central bank and the committee.

“As you are all aware, in the last couple of months, several methods
have been taken by the CBN and the banks to try and attain some
stability in the foreign exchange market. This has been achieved because
the demand for foreign currencies by businesses has been continually
met. All genuine demands for foreign currencies have been met by the
CBN,” Adesola said.

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