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CBN closes in on banks' debtors

Posted by By Emma Ujah, Asst Business Editor on 2006/06/26 | Views: 591 |

CBN closes in on banks' debtors


ABUJA - THE game is up probably for chronic bank debtors as the Central Bank of Nigeria (CBN) and other stakeholders close....

ABUJA - THE game is up probably for chronic bank debtors as the Central Bank of Nigeria (CBN) and other stakeholders close in on loan defaulters and work out a road-map for the immediate establishment of a credit bureau in the country.

CBN Deputy Governor, Mr. Tunde Lemo told stakeholders at a workshop on 'Credit Bureau: Foundation for Growing Business and Managing Risk," in Abuja, yesterday, that the apex bank's Credit Risk Management System (CRMS) indicated that banks were being owed N1.5 trillion by 35,787 borrowers.

Only a portion of total credit portfolio of the banking sector was captured in the CBN database as some banks refused to send information regarding some 'special customers" to the bank. Besides, only loans of N1 million and above are meant to be reported under the system.
According to Mr. Lemo, the CRMS 'was established with the objective of checkmating the activities of chronic debtors, who went from bank to bank, borrowing funds without the slightest intention to repay. At as June 22 the database of the bureau held 35,787 borrower records; 59, 812 credit profiles and a total outstanding balances of N1.5 trillion."

He added that the system provided a platform for financial institutions to strengthen their credit appraisal procedures with a view to enhancing credit quality and responsible credit behaviour in the nation's financial system.

Mr. Lemo observed that the establishment of a credible independent Credit Bureau in the country would be faced by two main challenges: infrastructural and behavioural.
His words: 'The establishment of Credit Bureau necessitated wide local and international consultations, development of software, and acquisition of hardware and communication gadgets, as well as their maintenance."

On behavioural challenges, he said 'this is far the biggest challenge in the operation of the bureau, touching on the willingness of contributors to provide accurate, complete and timely records to the database. Many contributors were discovered to have failed to capture the credit records of their special customers most of whom were directors or shareholders in their institutions. In many cases where such were captured, the actual status of the credits were not correctly indicated."

In his remarks, the President of the Risk Managers Association of Nigeria (RIMAN), Mr. Femi Ogungbayi, said the earlier Credit Registry arrangement in the nation collapsed when banks adopted 'jungle tactics" by providing false information on their customers in other to out-do one another.

He added that even the CRMS of the CBN, though well-intended, was very limited in scope, particularly given that only banks could contribute and source information from the system, even it was a well-known fact many other organisations in the mortgage, communications, small and medium enterprises and other sectors were providing loans to customers.
According to him, the workshop was key because even though there had been various efforts at establishing a functional Credit Bureau in the country, over the years, there were largely uncoordinated and therefore did not yield desired results.

Also contributing, constitutional lawyer, Mr. Olisa Agbakoba (SAN), described the inability to establish a Credit Bureau in Nigeria, over the years, as a legal failure. According to him, there were no laws in the country to support that type of business.

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