Unlike a similar exercise in 2009 where names of some chronic bank debtors made their way into the public domain in the Central Bank of Nigeria's name-and-shame policy of compelling bank debtors to meet their obligations, the recent directive barring some companies and individuals from accessing further credits until full liquidation of the agreed indebtedness seemed to have stirred the hornet's nest, writes Festus Akanbi
Ever since the list of alleged chronic bank debtors issued by the Central Bank of Nigeria (CBN) to money deposit banks made its way to the public domain a fortnight ago, the media has been awash with claims and counterclaims as some of the companies listed among the debtors continue to fault the CBN list. The CBN had, in a move aimed at ensuring financial stability and instilling discipline in the banking sector, blacklisted 113 companies as well as their principal shareholders and directors where the outstanding value of the loans purchased by AMCON amounted to N5 billion or more from taking further credit from banks, until full liquidation of their agreed indebtedness.
Prominent on the list of blacklisted companies are those belonging to renowned businessmen including Mr. Femi Otedola, Alhaji Sayyu Dantata, Dr. Wale Babalakin, Sir Johnson Arumemi-Ikhide, Mrs. Elizabeth Ebi, and former Minister of Power, Prof. Bart Nnaji.
Working with an Outdated List
However, a twist was introduced into the drama when Assets Management Corporation of Nigeria (AMCON) came in defence of some of the indicted organisations and personalities in the CBN list, explaining that the list it submitted to CBN had become obsolete, prompting the corporation to update the list of debtors to be barred from banks facility. In reaction to the objections raised by specific debtors and the need to make its position clear on the subject, AMCON confirms that it supplied the list of its debtors to the CBN in the course of its compliance with due administrative regulation. As at date of transmission to the CBN, the list was accurate. Since then, however, there have been changes to the debt positions of few specific debtors to AMCON due to restructuring and/or repayments.
"Given changes that had occurred during the intervening period, certain names which ought not to have been on the list were circularised to the banks. We have identified these names and have recommended to the CBN that they be removed accordingly. This list will continue to be updated whenever concrete settlements with AMCON are reached," AMCON said, adding that the corporation is committed to ensuring that every indebtedness that had culminated in the hitherto unhealthy state of the nation's banking industry is repaid irrespective of the personalities involved.
The CBN list had generated controversy among industry players who saw the latest initiative in the mould of the name-and-shame tactic adopted in 2009 when names of chronic bank debtors were published in major Nigerian newspapers in an exercise that triggered a flurry of denials and negotiations on the facilities which had become toxic in banks. It was a measure adopted by the CBN following the failure of nine banks to pass the stress test jointly conducted by the CBN and Nigeria Deposit Insurance Corporation (NDIC) in 2009.
However, economic analysts say the recent crackdown on debt defaulting firms could be counterproductive unless the apex bank moves in quickly to douse the tension generated by its failure to harmonise its list with that of AMCON.
Threat to Power Sector Privatisation
There were fears last week that the apex bank's action on those considered chronic bank debtors could affect the position of some of the firms currently participating in the privatisation of the Power Holding Company of Nigeria (PHCN). The AMCON was said to have last week, written to the CBN recommending the removal of Geometric Power Limited, Ascot Offshore Nigeria Limited, NITEL/M-Tel, Nestoil Nigeria Limited and Cross River State Government from the list of debtors barred from being granted further credits by banks in the country. The corporation also gave Nestoil a clean bill of health. In the original list, Geometric was shown to be indebted to AMCON to the tune of N18.6 billion, Ascot - N17.532 billion, NITEL Plc/M-Tel - N52.318 billion, Nestoil - N10.335 billion, while Tinapa owes the corporation N13 billion.
One of the affected firms is Rockson Engineering, which was pre-qualified to have its financial bids opened for Benin, Ikeja and Port Harcourt Distribution Companies. This development, a source said, might pose a serious challenge as Rockson and its directors, which submitted stand alone bids for the three distribution assets, was on the CBN list.
Another company which fought to have its name removed from the controversial list is Bi-Courtney Limited. The company insisted it is not indebted to AMCON; rather, it stated that it is a net creditor to the corporation. Bi-Courtney Limited is the concessionaire of the Murtala Muhammad Domestic Airport (MMA2).
According to Bi-Courtney, it has a judgment debt in its favour against the Federal Government, Federal Airports Authority of Nigeria (FAAN), Ministry of Aviation and two others, which shows that it is the Federal Government that is indebted to it and not the other way round.
Bi-Courtney, in March 2009, had obtained a judgment in its favour at the Court of Appeal against FAAN and others for a breach of contract after they had refused to hand over the General Aviation Terminal (GAT) to the company as stipulated under the concession agreement.
A former bank director, who craved for anonymity, said the clumsiness of the whole process is already sending negative signals with critics of the exercise insinuating that an agenda is being pursued. He wondered why it was difficult for the apex bank to harmonise the list submitted to it a long time ago first before directing banks to bar the indicted organisations and individuals from loan facility.
The list showed the worst-hit by the directive as Zenon Petroleum, owned by Otedola, and indebted to banks to the tune of N192.4bn; MRS Holdings Limited, belonging to Dantata (N119.98bn); Seawolf Limited (N98.32bn); Arik Air Limited, belonging to Arumemi-Ikhide (N85.481bn); NITEL Plc/M-Tel (N71.547bn); and Capital Oil and Gas Limited, belonging to Ifeanyi Ubah (N48.014 billion).
Also affected are Falcon Securities (N162.9bn); Rockson Engineering Limited, also owned by Arumemi-Ikhide (N60.475bn); BGL Securities (N6.44bn); Rahamaniyya Oil & Gas Limited (N46.38bn); Bi-Courtney Limited (N20.214bn); Geometrics Engineering, owned by Bart Nnaji (N19.76bn); Aero Contractors Company, belonging to the family of Olorogun Michael Ibru (N32.579bn); and Tinapa Business Resort (N18.509bn). In addition, Nestoil Limited, owned by Ernest Azudialu (N13.506bn); Dorman Long Engineering (N9.667bn); Ascott Offshore Nig. Ltd, belonging to ex-banker, Henry Imasekha and the Berkley Group (N64.728bn); Gitto Constuzioni (N11.838bn); and Dansa Foods (N14.880bn).
Commercial banks were also prohibited from granting further credits to Cross River State and Zamfara State owing to the refusal of the Tinapa Business Resort and the accountant-general of the Zamfara State Ministry of Finance to pay back their respective loans.
As proof of its determination to ensure compliance, CBN warned that "any DMB that is in breach of these guidelines shall be required to make an immediate provision of 100 per cent of total principal and interest outstanding in the account of the customer and related parties, in addition to whatever regulatory penalties the Central Bank of Nigeria may decide to impose."
Former minister of aviation, Mr. Babatunde Omotoba, was one of the critics of the policy, saying it was ill advised. According to him, the decision would make the companies go down rather than revive them. "The CBN governor, Mallam Sanusi Lamido, is a brilliant man and I respect him for that; but he got it wrong on this one. I don't think he was well advised."
Omotoba explained that when a company is weighed down by huge indebtedness, the rational reaction is not to starve it of funds because that would mean killing it off completely and taking away several jobs in the process. "That decision is an indication that the Asset Management Corporation of Nigeria (AMCON) has failed".
Some of the operators who spoke with THISDAY also expressed concern that the guideline may frustrate the operation of the market makers that were introduced to the market last week.
CBN said it arrived at the decision as a result of the reluctance by the debtors to pay back their loans despite the purchase of the debts at an agreed price by AMCON.
The Managing Director/Chief Executive Officer, Maxifund Securities Limited, Mr. Okechukwu Unegbu, faulted the directive by the banking sector watchdog, saying that it portends bad omen for the Nigerian stock market.
Unegbu who is a former managing director of the defunct Citizen International Bank insisted that the action was in bad faith. "For this to be coming out at a time when we are talking about the market can recover is too bad. Some of those affected are capital market operators. We also have a firm that was appointed as a market maker on that list, which does not augur well for the stock market because it is going to affect the companies which they are expected to market.