Tension in AMCON as banks’ bad loans rise to 78%

The non-performing loans (NPLs) in Nigerian banks rose from 68 per cent in 2015, to 78 per cent in May 2016.

According to the Central Bank of Nigeria (CBN) governor, Godwin Emefiele, this has left the system with N649.63 billion bad debt.

This has created a lot of concerns to all the regulatory bodies, especially, the Assets Management Company of Nigeria (AMCON), which is statutorily bound to buy up such debts as toxic loans.

Already, it is battling with more than $5 billion of such debts with value of the collaterals on them having reduced to more than half, following the economic recession, which has seen Nigeria in its worst form in decades.

Disclosing this at the third National Credit Reporting Conference, organised by the Credit Bureau Association of Nigeria (CBAN) in Lagos, Emefiele described the trend as worrisome.

But more disturbed is the management of AMCON, with the NPL from Skye Bank yet to be sorted when buyers of the bank are not forthcoming.

Read also: Why CBN authorised banks to write off 25% of $1.9bn bad-debts

The far reaching implications of the development include operating a system that is on the verge of total collapse if no immediate solution is found, said an economist.

Though Emefiele said as a stop gap, CBN is now making it mandatory for all financial institutions to have data exchange agreements with at least two credit bureau before loans are dispensed, banks are known to have been under pressure to issue loans without resort to obtaining credit report from any of the credit bureaux.

The CBN had earlier introduced some other measures, which could ensure proper clearance of collaterals and other instruments before banks’ customers obtain loans, but abuses are periodically dictated as 60 per cent of banks’ loans are said to have been taken by their directors and board members.

However, CBN has also linked continuous issuance of dud cheques by customers as part of such abuses in finance management and has directed that cheque booklets of defaulting customers be henceforth withdrawn by their banks.

According to the CBN boss, “since it is difficult to prosecute serial dud cheque issuers, the right thing for banks to do is withdraw the booklets from such offenders.”

He said after the defaulting customer records the third dud cheque issuance, it would have become clearer that such a person is unfit to have cheque books and will have the booklets withdrawn – in line with the provisions of the Dishonoured (Dud) Cheques Act of 1977.

CBAN Chairman Mrs. Jameelah Sharrieff-Ayedun said the group will continuously project the use of credit information as a viable tool for access to finance.

By Emma Eke…

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