The name and shame tactics cannot provide a lasting solution to the issue of recalcitrant debtors
The "name and shame" strategy which has become the norm in the Nigerian financial sector was again played up recently after failed attempts by the Asset Management Corporation of Nigeria (AMCON) to recover some huge amount of outstanding loans over a long period of time. AMCON has published in the media not only the names of its loan defaulters but also that of the directors of the affected firms. The total amount owed the corporation by all the 220 firms was put at N1.146 trillion. As expected, the AMCON debtors' list included many prominent Nigerians, though it remains to be seen whether it would be of any effect.
In explaining the rationale for the action, the Managing Director of AMCON, Mr. Ahmed Kuru, said the affected firms and directors are those that have failed to respond to the corporation's overtures for discussion on their repayment plans. Kuru said AMCON went to the Corporate Affairs Commission (CAC) to get the accurate names of the directors before the publication in order to avoid litigation. And in line with a policy of the Central Bank of Nigeria (CBN), the firms, their directors, and individual debtors, who owe AMCON up to N1 billion and above would be barred from taking loans from any commercial bank in the country. But then the question remains: will this be of any effect?
AMCON, we must recall, was set up primarily to address the financial crisis of 2008/2009, with specific respect to what the Nigerian banking system was going through. The corporation was saddled with the responsibility of providing liquidity by purchasing the non-performing loans (NPLs) of commercial banks then. With that, the bad debts were transferred to AMCON. The refusal of the debtors to pay off the N5.6 trillion liabilities, including bonds held by the CBN amid slowdown in economic activities, led to the name and shame tactic, essentially to make the obligors sit with the corporation and negotiate their repayment plans.
"We used debts to buy those assets. It is a business," said Kuru. "You (debtors) have to come and sit down with us and tell us how you intend to pay. If you don't have any plan of paying back, then you have to forfeit those assets. AMCON paid for those assets based on the marketability of the assets. If the business cannot thrive anymore, come and surrender the assets to us".
However, while making public the names of bad debtors appears to have been adopted as a way of enforcing compliance, we believe a better strategy is for AMCON to collaborate with the Ministry of Justice to strengthen the legal system. For instance, as it is in most countries, there is need for foreclosure law as well as commercial courts where these cases could be judiciously treated. This is because the name and shame tactics cannot provide a lasting solution to addressing the issue of recalcitrant debtors in the country as witnessed over the years.
In Nigeria where a lot of our 'big men' do not have shame, when the name of such debtors are published and they hold on to the loans, then no value would have been created. So, AMCON, working with the National Assembly, must come up with ways of compelling people to pay their debts or forfeit their assets that were redeemed with public funds. That, for us, is the right way to go.