THE decision by the Central Bank of Nigeria (CBN) to bar banks from granting further loans to 113 companies and their directors/shareholders is a measure that brings into fore, the high-level irregularities in the banking sector. It has also highlighted the skewed nature of the country's economy, considering that the companies involved account for a huge part of the economy. The questions that are thrown up are: How did the banks get to the state of giving out loans of such huge value without fully or adequately guarding against default' There would have been no need for the Asset Management Corporation of Nigeria (AMCON) to take over the loans in the first place if the transactions had gone through the required financial diligence. Are the affected banks or some of their officers guilty of underhand dealings in which due process was compromised' And if so, what is the Central Bank doing to redress the situation and apply legal sanctions' Shouldn't the Federal Government be wary that many of the companies involved are winners in the bidding process to privatise the Power Holding Company of Nigeria (PHCN)' What is the import of their involvement on efforts to improve power supply in the country' And if the companies and their directors/shareholders are found not to be credit-worthy, as the CBN's direction implies, should they continue to be active participants in the formulation of policies for the national economy' Do they deserve the national honours bestowed on some of them, and which they flaunt to secure benefits that they don't deserve'It is encouraging to hear that some of the debtors have started paying back their outstanding debts. The company identified as the biggest of the debtors has paid off its N140,999,620,395.80 owed AMCON. That should provide a relief to the corporation and perhaps motivate the other debtors to respect their obligation. It, however, remains curious that the debtors had to wait for the CBN's drastic directive before performing their financial obligations, an action that presupposes the possibility of unwillingness rather than incapacity, to pay the debts.The Central Bank's directive was reportedly aimed at strengthening financial stability and instilling discipline in the banking sector. It specifically ordered banks not to grant credit facilities to the organisations and their owners following their reluctance to pay back their loans, despite the purchase of the debts at an agreed price by AMCON. According to the CBN's directive, the restrictions apply to individuals, organisations, companies, as well as principal shareholders and directors of firms where the outstanding value of loans purchased by AMCON amounted to N5 billion or above, as at the day of purchase, without regard to the actual amount paid by AMCON. The CBN listed the various companies and the amount of indebtedness. To ensure compliance, the apex bank warned that any bank that flouts the guidelines would be highly penalised.The CBN is courageous to have published the list, given that the persons involved are influential and cronies of the ruling government. Nigerians however expect nothing short of this from the government agency, because, ultimately, the money involved, particularly that used by AMCON to purchase the debt, is public fund. No measure should be too much to protect such money, especially against the huge loss posted by shareholders of banks that were rescued by the Central Bank not long ago.The Central Bank, as the foremost regulatory body of the banking sector must show more concern about the huge fraud that banks' loan procedure has become. How else can one explain the approval of huge loans apparently without the collaterals to back them' Although AMCON is officially available to bail out banks and perhaps prevent their going into distress as happened a few years back. It is worrisome that the financial system allows the loopholes in the first place.Before giving loans, the banks are required to know the applicants, their businesses and financial capacity. The unpaid loans are a result of lack of proper banking procedure for which the CBN should hold bank officials liable. Therefore, it is not enough to stop the granting of loans; the people blacklisted by the CBN should also be blacklisted by government. The present government is putting its credibility on the line by doing business with people with high debt profile, who hover around government for money to service their debt or sustain their ostentatious lifestyle.It is important for the Central Bank to explore more options of sanitising the industry. Banks should be able to protect themselves, shareholders' interest and depositors' funds. This will entail that they observe due diligence before granting loans, no matter how influential the applicants are. It is clear from facts and circumstances of the unpaid loans that the promoters of many of the indicted companies are part of a fraudulent scheme. The directors and banks found wanting in this regard should be duly penalised. In the event of the loans becoming non-performing and AMCON is invited to protect the banks, the debtors should face damming measures both as penalty for their default; and to prevent other banks from falling into the same debt trap.On its part, government should take a cue from the Central Bank's action. If the personalities involved are found not to be credit-worthy, their names should be expunged from the list of business partners or economic advisers to the government.
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