6 June 2014

Nigeria: Emefiele Declares Zero Tolerance On Fraudulent Borrowers

New Central Bank governor Mr Godwin Emefiele yesterday in Abuja unveiled a 10-point agenda for the apex bank and the Nigerian economy during a maiden world press conference. He declared zero tolerance for fraudulent borrowers while ruling out the option of devaluing or depreciating the naira in the near future.

He also promised to maintain exchange rate stability and strive to build up and maintain a healthy external reserves position and ensure external balance.

Emefiele, who made good his earlier promise to utilize development banking to the benefit of the people, said the apex bank will soon design a programme for Nigerians who need as low as N50,000 without collaterals. Through registered and accredited local cooperatives.

In dealing with serial debtors, Emefiele promised to strengthen the sanction system in the banking system to include blacklisting of companies/individuals that have been found to be serial loan defaulters.

These names, he said, would be circulated in the banking system to guide banks in identifying bad borrowers and denying them access to credits.

In the banking system. Also, stringent loan provisions and penalties for banks that lends to blacklisted persons and companies would be implemented.

The new CBN helmsman also stopped with immediate effect the charges imposed by banks on customers' deposits in excess of N500,000 for individuals and N3 million for corporate clients, which have hitherto attracted charges of two and three per cent on the excess, respectively.

However, the three per cent charge on withdrawals in excess of N500,000 for individuals, and five per cent for corporate clients' withdrawal in excess of N3 million. But the charges would no longer be fully for the commercial banks as some percentage will now be remitted to the CBN.

Emefiele, hinged his agenda on the vision of the CBN which is to "be the Model Central Bank delivering price and financial system stability and promoting sustainable economic development".

In order to realise the CBN's vision, he said: "We must start with championing policies that promote the sustainability of our hard-earned macroeconomic stability. We will collaborate with commercial banks to significantly improve the credit culture in the Nigerian banking system. The CBN's focus would be directed at serial debtors who access loans from different banks and default on all of them even when they have the means to pay. Going forward, the CBN will work towards reducing the effect of information asymmetry in the credit market.

"In this regard, we shall do the following: Enhance the operation of Credit Reference Bureaus; Establish Secured Transaction and National Collateral Registry; Strengthen the sanction system to include: blacklisting of companies/individuals that have been found to be serial loan defaulters. Indeed, these names would be circulated in the banking system to guide banks in identifying bad borrowers and denying them access to credits in the banking system; implement stringent loan provisions and penalties for banks that lends to blacklisted persons and companies; intensify our collaboration with relevant agencies, and in particular, the Justice Ministry, to strengthen banks' ability to enforce contracts and recover matured debts.

Emefile said the CBN would also renew a vigorous advocacy for the creation of commercial courts for quick adjudications on loan and related offences and also establish a National Credit Scoring System that will improve access to information on borrowers and assist to make good credit decisions.

On his agenda for the payment system, he said: "We hope to better align the Cashless Policy. Over the course of the pilot, we have become aware of complaints by customers particularly regarding the charges being imposed for cash deposits. "This has resulted in customers devising various means to avoid the charges through opening of multiplicity of accounts and other disingenuous behaviour all aimed at undermining the objective of this policy.

"Given these outcomes and to better reflect our goal of having more cash under our control, all charges on deposits are hereby stopped with immediate effect. Charges on withdrawals, in view of their eventual elimination, remain sustained at the current 3 percent for individual transactions exceeding N500,000 and 5 percent for corporate transactions exceeding N3 million. Currently, these fees go entirely to the commercial banks. However, going forward, the Central Bank shall determine what percentage of these fees on excess drawings that will be redeemed by the bank while the rest shall be remitted to the CBN."

On the issue of Naira devaluation, Emefiele said that was not an option in view of the import-dependent nature of the country.

"Nigeria is a predominantly import dependent country, where we import rice and practically everything, importing refined petroleum products when we have crude oil. We import rice, wheat when our land is fertile. We import sugar, fish when about 60 per cent of our environment is water. We need to do something about it."

"It is not possible for us to talk about devaluation or depreciating our currency at this time until we are able to look into some of the structural problems that is making our import bill to be as high as it is today. We need to look at how to begin to produce some of these goods we import that we can produce. When we are able to do that and we see a situation where we have transformed from import dependent economy to export oriented economy, we can begin to look at the advantages of depreciating or devaluing our currency. For now it is not an option. But we will continue to see what we can do in the short run to see how to hold strongly on to our exchange rate. Luckily, oil prices are still above $100 per barrel, luckily we still have reserves level that can support up to eight months of imports. These are enough in the meantime for us to continue to hold on to so that we don't go the route of devaluation," he said.

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