CBN: N1.66bn Cases Treated under New Debt Recovery Initiative

· Recovers N50m in nine days
· Mulls extension to corporate accounts

Dike Onwuamaeze and Nume Ekeghe

The Central Bank of Nigeria (CBN) has said that between August 1 and 9, 2020, when it commenced the implementation of the Global Standing Instruction (GSI) it introduced to checkmate the growth of non-performing loans (NPLs) in the Nigerian banking system, it has handled cases involving 26,057 accounts valued at N1.660 billion.

The GSI, whose implementation commenced this month, gives banks the power to debit loan and accrued interest due from bank accounts of loan defaulters across the Nigerian banking system.

The Nigerian Interbank Settlement System manages the entire operations of the GSI on behalf of banks using customers’ Bank Verification Numbers (BVN).

CBN Director of Financial Policy and Regulation, Mr. Kevin Amugo, said yesterday at a virtual conference with the theme: ‘Non-Performing Loans and Global Standing Instruction Policy: Impact and Insight for Financial Stability,’ that the implementation of the policy in the first nine days in August led to the recovery of N50 million.

Amugo, in his keynote address during the Chartered Institute of Bankers of Nigeria (CIBN) third advocacy dialogue, added that the level of recovery would grow significantly when corporate accounts and other deposit financial institutions are included in the GSI protocol.

Amugo said: “This recovery today may appear small but it is not little because it will grow when we include corporate accounts.

“What we have done is the first tranche of the GSI policy, which is limited to individual accounts. We will soon release the operational guidelines that will extend it to corporate accounts. Then the level of recovery will be quite huge.”

He added that from the recovery so far recorded, loan recovery under the GSI might not be 100 per cent.

He said: “But the good thing about it is that there are no hiding places any longer for the predatory borrowers. Wherever their accounts are, as long as they are in the banking system, they are open to being accessed if they have defaulted on their loan obligations with their banks.

“The GSI only mirrors what we have in banks’ loans documentation records and enables a bank in the case of loan default to aggregate all the accounts of the customer in other banks that are not loan accounts to be able to offset the debt of the customer to it.

“But in doing this, we provided safeguards so that the operators will not be reckless in recovering their debts. So that at the end of the day there will be integrity in the system.”

He explained that the mandate to trigger an account must be initiated by the lending bank only on non-performing accounts that must have been existing in the CRMS for a minimum of 90 days in line with the prudential guideline classification.

“It is only the loan amount and the accrued interest that will be triggered without including the charges,” he added.

Other participants in the policy dialogue that were drawn from the organised private sector, the legal system and operators of the Nigerian financial system, described the GSI policy of the CBN as a welcome development that would boost availability of credit facilities for the growth of the Nigerian economy.

The President of the Chartered Institute of Bankers of Nigeria (CIBN), Mr. Bayo Olugbemi, noted that the scourge of bad loans has been a long-standing menace to the Nigerian banking sector and described the introduction of the GSI as a new dawn in credit management and debt recovery process in our clime.

Olugbemi said: “The issues of NPLs, particularly those emanating from the attitude of serial and unrepentant debtors will be more efficiently resolved as a result of this policy because a lot of these debtors move like herdsmen from one bank to the other leaving bad debts in their trail.

“Let me at this junction state that the CIBN is fully in support of the GSI policy, which will not only enhance the loan recovery process and financial system stability but also promote economic prosperity because when borrowers repay their loans funds will be made available for others to encourage shared prosperity.

“We needed to curb the cake sharing culture mentality of people that take loan and not use the money for specifically what it was meant for. The theme of this series is very apt in view of the experiences in the Nigerian financial system.”

Also, the President of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Mrs. Saratu Aliyu, who was represented by Mrs. Margaret Orakwusi, commended the CBN for introducing the GSI policy, which will improve credit repayment culture and reduce the volume of NPLs in the Nigerian banking system by watchlisting chronic loan defaulters in the system.

Aliyu said: “As the voice of the Nigerian businesses, the NACCIMA is of the opinion that the GSI policy has the capacity to promote a stable financial system and enhance loan recovery across the Nigerian banking system.

“The objective of the GSI may not be achieved if it is limited to personal accounts given that majority of bad debts in Nigeria, according to reports, are corporate loans rather than individual loans.”

The NACCIMA, however, noted that the guideline did not provide for sanctions against banks that might wrongly debit customers’ accounts under the GSI.

The Managing Director and Chief Executive Officer of the First Bank of Nigeria (FBN), Mr. Adesola Adeduntan, who was represented by the Chief Credit Officer of the FBN, Mr. Olusegun Alebiosu, said the introduction of GSI was a relief to the banking sector because it provided a coordinated approach to addressing the NPLs’ issues in the industry.

“You will agree with me, that bank failure is not ordained but result from the negative behaviour that we have in our environment. So, it is important that the GSI will deliver. About N50 million has been recovered and I am sure that after one year the number of recoveries will increase as the SMEs and corporates come in.

“It cannot discourage depositing money with the bank. You can keep N10,000 under your pillow but you cannot keep N100 million or more, otherwise armed robbers will visit you more than the banks would,” Adeduntan said.