CBN, Shareholders in face-off over banks’ N1.85trn bad debts



Shareholders’ groups are blaming the Central Bank of Nigeria (CBN) for the rising Non-Performing Loans (NPL) or bad debts in banks which are eroding returns on capital and also affecting the economy of the nation.

Both Progressive Shareholders Association of Nigeria and Renaissance Shareholders Association said brazen violations of regulatory thresholds by the banks has exposed the regulator as a weakling and ineffective.

In 2016 alone, the total loan portfolio of the 25 banks was N18.53 trillion of which N1.85 trillion or 10 percents was bad debts. Of the bad debts, N740 billion was insider/Directors related loans.

These are far above the regulatory threshold of five percent for the lenders.

The Shareholders alleged the CBN was looking sideways while lenders persistently and deliberately flout the regulatory threshold.

CBN has pegged NPL ratio for the industry at five per cent but which commercial banks have brazenly flouted, with some recording an average of 10 per cent in 2016 alone.

The unabated rising bad debts in the industry has eroded returns on investments and diminished the economy according to the shareholders’ groups.

The shareholders further said the CBN has not been helpful by not blacklisting those debtors and enforcing policies that mandate debt recovery.

Managing Director, Nigeria Deposit Insurance Company (NDIC), Umaru Ibrahim, had early this year told federal lawmakers of the inherent danger in the rising incidence of non-performing loans (NPL) in banks.

The CBN, however said the rising bad debts in the industry has exposed Annual General Meetings (AGMS) of shareholders and the banks as mere rubber stamps where inducements have blinded the former from thorough scrutiny of the financial statements and not saying the truth.

Isaac Okorafor CBN spokesperson said the shareholders should stop blaming the regulator for economic crisis as the CBN was not responsible for granting those loans.

“Shareholders ought to hold their respective managements responsible but they are failing to hold those who run their businesses accountable”.

Okorafor noted that the regulator has insisted on adequate provisioning to protect the entire system as part of its macro prudential requirements.

“If the shareholders failed to hold their managements accountable for granting delinquent loan, then the shareholders will ultimately pay for it by way of having their capital eroded by such loans”.

“Rising bad debts is a failure of AGM action, regulators do not grant loans” he said.

Analysis of banks’ loan portfolios show preference for the oil and gas sector at the detriment of other sectors at a time the government is planning diversification.

InsideBusiness’ checks on operations of some banks in 2016 showed that First Bank of Nigeria Holdings Plc’s NPL ratio recorded 24.4 per cent in 2016 from 18.1 per cent in 2015.

Union Bank of Nigeria in 2016 reported 6.91 per cent NPL ratio as against 6.67 per cent in 2015 while Unity Bank Plc’s NPL ratio was the highest in the banking sector last year.

Unity Bank had 97 per cent NPL ratio  in 2016 as against 77 per cent in 2015

In addition, Stanbic IBTC Holdings Plc reported 6.6 per cent NPL ratio in 2016 from 8.5 per cent in 2015.

The President, Progressive Shareholders Association of Nigeria, Boniface Okezie said, Shareholders of the above banks cannot do anything because they were not there when those loans were given.

“In the first place banks are meant to give loans to customers but they don’t service these loans because they see it as national cake. For you to grow the economy, you need to give loans because without loans, you cannot grow your business.

“If you don’t pay these loans, banks may not be in business. Don’t forget that these loans are from depositors and shareholders’ fund. At the end of the day, there is nothing to appropriate to shareholders in form of dividend”.

He alleged that CBN was allowing the rots by not blacklisting those debtors.

“For instance, if you borrow from Unity Bank and have not paid, there is no way you can go to UBA to get loan again. CBN should make it mandatory that a customer that is indebted to one bank cannot go to another bank to access facilities.

Equally, Chairman, Renaissance Shareholders Association, Olufemi Timothy, said, “When you are talking of this issue, you have to talk about the regulator. They have more power to do things than the ordinary minority shareholders. Minority shareholders are powerless, we may have voice but the management and major shareholders always have their ways.

“The CBN is aware of the limited powers of minority shareholders, and it has the records because it inspects the banks’ books being the inspectors”.

“The problems of shareholders today are the regulators. If they are doing their job, the minority shareholders will just be like the whistle blower and when you blow whistle but nobody is listening, there is nothing we can do.

“We have complained but you know with the Nigerian system, we don’t have the power to remove Directors. The power we have is just on paper.

“That is why investors have lost confidence in the market. The market is only thriving on manipulation and the regulators have collaborated. And once they have been settled, they will be manipulated. So, where do you get the Corporate Governance?” he added.