THE Central Bank of Nigeria (CBN) has directed all commercial banks in the country to stop extending credit facilities to 113 companies, including their directors, shareholders and owners. The apex bank, according to reports, took this decision as a result of the failure of the affected debtors to pay back their loans despite the purchase of their debts at an agreed price by the Asset Management Corporation of Nigeria (AMCON). IT will be recalled that in 2009, the Central Bank of Nigeria (CBN) bailed out some banks deemed to be so abysmally capitalised, compounded by poor corporate governance as revealed by the auditors' report on their insider abuses and over exposure to the oil and capital markets during the global economic melt down. These variables catalysed the banks' inability to meet their obligations to customers without CBN's financial leverage.THE AMCON, therefore, was primarily established to absorb the loans of the troubled banks in order to restore the public confidence in them and in effect, prevent their collapse which could have resulted in a major financial crisis and, by extension, economic catastrophe.THESE debtors, who got their loans appropriately factored to the AMCON at a soft and mutually agreed rate, reneged on the agreement by failing to pay their loans through the banks to AMCON. Most important, however, is that the failure of the debtors to service their loans will frustrate the strategic plans of the bailout package, as the injected funds which are expected to be recouped from the rescued banks may afterall become illusive, thereby signaling another retreat to financial doldrums.CONSIDERING the enormous quantum of the amount involved in the AMCON transaction i.e. N679 billion in 2009 ' N285 billion into Mainstream Bank, (formerly Afribank), N283 billion into Keystone Bank (formerly Bank PHB) and N111 billion into Enterprise Bank (formerly Spring Bank) ' it is preposterous to even visualise that it took the intervention of the CBN before commercial banks in the country could stop granting of facilities to the loan defaulters. One of the cardinal rules for granting credit to a customer is the financial history of the loan applicant, which of course, takes prominent cognisance of the operational mode of accounts in other banks. To have ignored this vital aspect of loans' processing clearly reveals why many banks in the country reel perpetually in the murky waters of very bad debts.THE decision of the apex bank to bar commercial banks from granting credit facilities to the defaulters may not only have thrown a spanner in the works of the National Council on Privatisation (NCP), particularly in the sale of power generation and distribution companies, it may also precipitate a chain of decision problems and reversals. If this happens, then it is an unfortunate and avoidable hitch.FROM available records, it has been discovered that some of the erring and blacklisted companies by the CBN are the apple choice of the NCP. Aside the attendant credibility crises faced by the indicted companies, they are, in addition, blocked from enjoying any credit facility from the commercial banks in the country to finance the power assets, let alone raising the working capital. This implies that it will be very unlikely for companies that are already blacklisted at domestic base, due to monumental repayment default, to get favour from foreign banks, which, as we all know, are stricter in their prudential administration.THE NPC and the bankers to the blacklisted companies which finally won the bids for the PHCN unbundling cannot exculpate themselves from this peculiar mess.IT is saying the obvious that one of the technical requirements for any standard bid is the endorsement of the financial capability of the bidder by its banker or, better still, authorising the contract offer or to have direct access to information at the bidder's bank in order to authenticate its financial capability. We are convinced, therefore, that the current report, which revealed the indicted loan defaulters as the major bid winners for the five electricity generation companies in Nigeria definitely exposed the lacuna in the NPC bidding procedure. Should the NPC, however, claim to have got a clean bill of health about the bidders from their banks despite the grievous indictment by the CBN, then we have cause to suspect an unholy alliance among the dramatis personae in the power bid saga and their bankers. It is pertinent to advise the bid winners who were mentioned in the CBN blacklist to clear their names. WHILE commending the CBN for its quick intervention, we are surely not at ease with the brewing controversy between the regulatory authority and the AMCON. As the guarantor of deposits in all AMCON'run banks, the CBN, in our view, ought to have been properly briefed about the financial status of the affected customers through efficient rendition of accounts. That the AMCON could come out to de-list some companies already indicted by the CBN shows a vivid lack of synergy between the two financial bodies.IN waiting for the authentic list of the blacklisted loan defaulters, according to AMCON, we sincerely hope that this case will not metamorphose to another fuel subsidy list, which has become the familiar mantra for describing high scale fraud in Nigeria.Power corporation right from the days of Electricity Corporation of Nigeria (ECN) to the present day Power Holding Corporation of Nigeria (PHCN) has languished under the shadow of poor management and morbid corruption. It will, therefore, be tantamount to jumping out of the frying pan into the fire if it should now be unbundled to private investors that are already enmeshed in controversy.
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