resident Olusegun
Obasanjo recently asked the Economic and Financial Crimes Commission (EFCC) and
other security agencies to assist the Nigerian Deposit Insurance Corporation (NDIC)
to recover debts owed liquidated banks.
Between them, the 36 banks the NDIC liquidated in the last
ten years are being owed more than N24 billion. For some of these banks, bad
debts were part of their undoing. For others, various management inadequacies
and professional shortcomings contributed substantially to send them under.
Whatever the cause of the liquidation of the banks, it is very important on many
grounds that the debts owed the banks should be recovered.
The impetus to recover these debts surely goes beyond the
distinct fate of the banks. At the root of the initiative is the need to
maintain the soul and the core value of business transaction in the Nigerian
economy.
The debts that went down with the banks were depositors’
funds that were given out to those who sought loans from the banks to execute
various economic proposals. While the reasons advanced for taking some of the
loans must have been genuine, there is no doubt that some of the borrowers did
not have any genuine intention for seeking and securing the facilities in the
first place.
Among the genuine borrowers, some may have found it
impossible to repay their debts because the businesses into which they invested
the funds failed to yield expected dividends for one reason or another.
As for the category of borrowers that had no plans of putting
the funds into productive uses from the onset, the liquidation of their creditor
banks must have been a very welcome development
For the two categories, it is clear that the loans they
secured did not have adequate collaterals hence the difficulty in recovering
them, ten years after. Whether the loans were secured for genuine purposes or
not is however, beside the point now. The loans need to be recovered. Not to do
so will send out a rather dangerous signal in the economy .To allow debtors of
liquidated banks to walk away with loans given to them by the banks will
tantamount to a message that what a borrower needs to escape repayment of a loan
is to help ensure the demise of the lending institution. No financial system can
survive with such a belief and culture.
Besides concern for banking system and the values guiding the
larger economy, there is the matter of personal loss of individual depositors
who were left high and dry when the affected banks were liquidated. These
depositors whose money were loaned out are the major victims of the collapse of
the banks. They did not do any wrong to deposit their money in their banks. For
these very depositors and others, it is important that they are protected and
made not to lose confidence in the banking industry and the economy. One way to
achieve such retention of confidence is to ensure that those who borrowed their
money in the banks repay them accordingly.
It is necessary for the average small and medium sized
depositors to have confidence in the sector because most of the time, it is the
totality of the funds saved by these depositors that go a long way to create the
pool of funds that are loaned to investors for productive activities. If these
depositors are scared away from banking the economy will be worse for it.
The NDIC should therefore take advantage of the assistance
and collaboration of the EFCC and other security agencies, which the President
has availed it of, to track down debtors of the liquidated banks. Recovery of
the debts will give depositors and all other stakeholders in the economy the
assurance that whoever borrows from the banks must pay back in due time.
When this assurance exists, the banking culture will be
boosted and fact of a substantial percentage of money in the economy being
outside the banking sector will reduce.
The effort to bring the debtors to pay their debts must also
involve fishing out their collaborators in the banks for appropriate sanction.
This will serve as deterrent to other bankers who may want to approve unsecured,
incredible and unprofitable loans on selfish ground. All those involved in the
serious economic crimes that contributed to ruin many banks should be duly tried
and punished.
As these efforts are being made to recover the debts owed
liquidated banks, greater energy must be directed towards closer monitoring of
the banking sector and the procedures for granting loans. Safety valves must,
indeed, be put in place to ensure that borrowers no longer walk away with
depositors’ monies and refuse to pay back several years after the loans are due
for repayment.
The on-going reforms in the banking sector holds out a
promise of better control of the sector that is encouraging. Hopefully the
stronger and more professionally anchored banks that will emerge out of the
reforms will make such nightmare as go with liquidation of banks a thing of the
past in the country’s banking system.
