In deference to the directives of the Central Bank of Nigeria (CBN), several Nigerian banks on Monday published the names of hundreds of loan defaulters who have failed to service the loans they borrowed from the commercial banks, according to a report by Reuters.
The list of names and the amounts the debtors are owing are published on full-page newspaper pages – largely on newspapers with a national reach.
The CBN was forced to take the drastic step when it became evident there might be a repeat of what happened six years ago – when the apex bank issued $4 billion to bail out the banks so as to avoid a collapse in the financial sector.
The CBN had earlier in April issued a three-month deadline, urging all bad debtors to pay up their debts or be exposed on national newspapers and be reported on national news services; and also prohibited from accessing currency and government debt markets.
The CBN ordered all commercial banks to publish bad loans that range in excess of N50 million or $251,320, and that has not been serviced in the past 365 days – the time-limit after which the CBN rules that a loan has become a bad debt and possibly lost forever.
In 2009, several commercial banks in Nigeria had lent out huge funds to businesses within the oil and gas sector – and then boom! the prices of crude oil collapsed and the stock market went bad – causing a near collapse of about 8 commercial banks. But the CBN quickly rushed to their rescue and then bailed them out. The apex bank won’t allow that to happen again.
Fidelity Bank, Skye Bank, Zenith Bank, Enterprise Bank, Sterling Bank, Stanbic IBTC Bank and Guaranty Trust Bank (GTBank) published as required the names of those who owed money, along with details of the sums outstanding.
Fidelity Bank published bad loans of N6.13 billion while revealing it has about N21 billion non-performing loans – meaning N15 billion bad loans were not published on Monday till maybe later. GTB published N4.02 billion as bad debts and disclosed most of this was owned by private businesses, civil servants, and trade unions. Other banks equally did the same.
“This is an action taken by the banks supported by the central bank,” said Ibrahim Muazu, a spokesman for the central bank, adding that many more debtors will be published in the next few months and this exercise will be a quarterly show of shame for loan defaulters.
The CBN is convinced publishing a list of bad loaners will help to steady the economy given the huge sums owed commercial banks by the defaulters.
Meanwhile, the access of importers to dollars was restricted last month in a calculated move to save reserves. And this has encouraged commercial banks to stop accepting dollars as cash deposits because this might trigger speculations on the naira, which has dropped lower and now N242 against the USD.