LCCI seeks to protect bank debtors

Lagos—In a move to possibly prevent the publication of names of chronic bank debtors in national dailies as directed by the apex bank, the Lagos Chamber of Commerce and Industry, LCCI, yesterday, cautioned against the move.

Although the chamber did not mention how the move will affect it, industry watchers say a sizeable number of the debtors may be its members.

The President of LCCI, Alhaji Remi Bello, made this call,  saying that it will be unfair to portray business failure as an act of criminality, which is what the publication of names connotes.

He said, it is important to avoid sweeping generalizations and examine the context of default on a case by case basis.

”There are varying causal factors for loan default which has to be taken into account in matters of this nature.

“The LCCI recognises two broad categories of debtors. There are defaults that have arisen as a result of genuine business failure (some of which are irreversible) which affected the capacity to repay; and there are defaults that have arisen as a consequence of deliberate intent not to repay. The latter borders on character quality, which is what the Know Your Customer (KYC) concept is meant to address. It is important to distinguish between these two categories of debtors in order to guide the choice of debt recovery strategy” he said.

According to him; ‘’Some of the possible factors in business failure in recent years include, but not limited to, shocks and dislocations which arose from the sudden depreciation in the Naira exchange rate and the attendant shocks to business, especially businesses with high exchange rate exposure, sudden drop in crude oil prices which had a significant impact on petroleum product importers.

‘’Investors in the upstream oil and gas sector are also victims of the collapse of oil prices. Many are yet to recover till date. Some banks have huge exposure to this sector, power sector investors are grappling with whole lot of issues ranging from gas availability, energy theft, billing issues quality of assets, legacy debts etc. Banks’ exposure to them is also high.’’

He said the second category of debtors have deliberate plan to default. ‘’This class of debtors took loans and from the very beginning did not intend to repay.”

‘’This is of course the more disturbing scenario which borders on criminality and impunity.  In some of these instances it may be difficult to exonerate the banks as the credit appraisal processes may have been compromised.’