Neither a Lender nor a Borrower

After examining some of the lists of chronic debtors that have been published by some Nigerian banks so far, I have become more convinced that many banks are hurting instead of helping the nation’s economy. It’s not likely that anything good will come out of the “naming and shaming” of “delinquent” debtors as directed by the Central Bank of Nigeria. Similar publications done some years ago achieved little. The first reason is that Nigerians are not shamed when they are named. The second is that Nigeria’s justice system is too weak to enforce debt recovery. The average debtor would not bother to cover his shame; he would prefer to keep enjoying the money while the supposed creditor keeps chasing shadows. Is this not Nigeria?

Indeed, the best way to rob a bank is to set up one. And some Nigerian “entrepreneurs” understand the game very well. As in the era of “wonder banks” and finance houses, the tested path is to set up a bank, carefully collect the deposits of millions of customers, give loans to yourselves and then allow the bank to collapse. Several crooks of the 1990s turned billionaires in that way. They fled the country and awaited a change of government, a change in policy or a change of the regulators. Then, they quietly re-entered the country and set up new businesses.

Over the years, this familiar path has been obstructed by anti-laundering laws in Europe and America as well as the establishment of the EFCC and the ICPC. Criminals like 419 fraudsters and drug barons have seen the need to set up genuine businesses in the country with their dirty funds. And so have government thieves – those who plundered the public treasury by awarding overinflated contracts to their cronies or diverted public money to their accounts outright.

Those who set up businesses could even be forgiven; at least, they employ many people and therefore help to put food on the table. The actual buccaneers simply enjoy their loot in foreign countries. Some pretend to work by importing useless items into the country. Lazier ones are into organised crimes: armed robbery, piracy, oil theft, 419, gunrunning, drug trafficking.

CBN says that the total debts owed deposit money banks is about N14trillion, the equivalent of the federal government’s annual budgets for three years. Less than N500billion is non-performing, that is, not being serviced. Since the cost of borrowing from Nigerian banks is between 18 and 35 per cent, it means the borrowers of the balance (N13.5trillion) have been working for the banks. For it’s not easy to find a business that makes a profit of up to 20 per cent of its capital base, after paying salaries, overhead and other liabilities.

You don’t need a soothsayer to know that the banking system would be in deeper trouble if the balance of N13.5trillion became non-performing also. Remember: there are just 24 deposit money banks in the country. Yet, unless something dramatic happens to the economic climate, the figure of non-performing loans is likely to keep rising until it surpasses N14trillion. It’s only a matter of time.
Only once have I approached a bank to seek a loan. I was given forms running into 60-70 pages to fill. After two or three days, I returned the forms intact because I couldn’t see how I would qualify for the loan. You had to bring your grandparents to testify that you had more money than what you were seeking from the bank. You had to agree to pay an interest rate of 33% per annum and surrender the original certificates of occupancy of your landed property. Ordinarily, one would think that, by adopting such stringent measures, the banks are too careful in lending money. Big lie. Otherwise, why do they now have to contend with N500billion bad loans? What’s the sense in lending a fruit-processing company N2billion?

The truth is that Nigerian banks do not really perform their core functions of lending and borrowing. They are not sustained by the difference in their lending and borrowing rates but by illegal transactions. One of such is round-tripping, a process of buying foreign exchange from the CBN under the pretext of importing items but returning the dollars and pounds to bureaux de change and currency hawkers in Broad Street, Lagos, or near a popular hotel in Abuja. They hardly support genuine businesses. Many of the people that secured the loans that seem to have been trapped did so without intending to pay back. Many are part-owners of the banks or friends of important officials of the banks.

I borrowed two of my life-guiding philosophies from Shakespeare: Neither a lender nor a borrower be. Never envy any man until he has lived and died. Though it’s near-impossible to take the former advice, it pays to do so. When someone tells you to lend him money, he wants you to give him money but only trying to redeem his ego by being euphemistic. It’s better to give him a fraction of what he seeks, as a grant and not a loan. The second Shakespearean advice is also meant for honest Nigerians: Do not envy those who flaunt riches, who boast, who maintain luxurious lifestyles. As the debtors’ lists being published have shown, most of them live on borrowed funds.

I’m almost sure that “naming and shaming” bank debtors won’t solve the problem. Nor will threats to ban them from participating in forex transactions and send their names to foreign embassies. Let the banks seize collaterals (where they exist) or seize assets traceable to the debtors and their collaborators. The banks could also help them to run their businesses better, make money and then take their money. I see no other way. Debts are not paid inside prisons.

When banks are ready to lend to the real sector of the economy, we would know. The interest rate would not exceed 3 per cent per annum. There would be regular power supply. Corruption in public and private life would be eliminated.


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