CBN reads riot act to serial loan defaulters

Central Bank of Nigeria (CBN) yesterday, read the riot act to serial borrowers whose stock in trade is to move from one bank to another, borrowing money without paying. In his maiden remarks in Abuja, the CBN Governor, Godwin Emefiele said the apex bank would pursue a zero tolerance policy on fraudulent borrowers. According to him, the apex bank would focus on serial debtors, who accessed loans from different banks and defaulted on all of them even when they had the means to pay. To achieve this, CBN would enhance the operation of credit reference bureaux, establish secured transaction and national collateral registry and collaborate with commercial banks to improve the credit culture in the Nigerian banking system. Also, it will strengthen the sanction system to include blacklisting of companies/individuals that are found to be serial loan defaulters. He said that their 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. Also, the apex bank promised to pursue a gradual reduction in key interest rates, maintain exchange rate stability, strengthen risk based supervision mechanism, build sector specific expertise in banking supervision, abolish fees associated with limits on deposits and other measures. The CBN governor, who also promised to manage a central bank that is professional, apolitical and people-focused, stated that the apex bank would pursue zero tolerance policy on fraudulent borrowers. “The CBN focus will 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,” he said, adding that the bank would strengthen the sanction system to include blacklisting of companies and individuals that had been found to be serial loan defaulters. He said that would provide complementary developmental functions by creating an environment for Nigerians to live better and more fulfilled lives, adding that he would start with championing policies that promote the sustainability of hard earned macro economic stability. On high interest rate, the CBN new helmsman promised that the bank would carry out a gradual reduction in interest rates. To enhance financial access and reduce borrower cost of credit, he said the bank would pursue policies targeted at making Nigeria’s Treasury Bills rate more comparable with other emerging markets and by extension, pursue a reduction in lending and deposit rates In view of the high import dependent nature of the economy and the significant exchange rate pass-through, which would exert pressure on the naira and considerable inflationary pressure, the governor said the CBN’s policy now would be to maintain exchange rate stability. In the goal of maintaining a Financial System Stability, Emefiele said CBN hoped to sustain the effective management of potential threats to financial stability and create a strong governance regime that was conducive for financial intermediation, innovative finance and inclusiveness concerning reserves. He said the bank would engage the fiscal and political authorities and other stakeholders with a view to improving the policy buffers, which will further create space for the CBN to implement monetary policy using limited instruments. On the second aspect of his policy, which he christened Development Banking, the governor said additional measures would be required towards identifying productive sectors of the economy and channeling credit towards these sectors while imposing proper monitoring and performance measures to ensure that the goals of increased employment and poverty reduction are attained . Unfolding the Bank’s agenda for development finance, he noted that funding for SMEs in Nigeria had largely been viewed from a social development perspective with the goal to reducing poverty through job and wealth creation and which has put the responsibility on government. According to him, a business approach for funding SMEs is being proposed. “The new framework proposed will combine the profit motives of the private sector and the development objectives of the government” he said.