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Wednesday 27 December 2017

Why President Buhari Should Revoke The Licences Of Our Banks For Economic Sabotage, By Anayo Nwosu

Do you know that all the commercial banks in Nigeria regard the federal government as a roguish bad debtor that should no longer be touched with even a long pole? All the bank MDs and their chief risks officers murmur about this to themselves but lack the courage to voice it out.

President Buhari should know that Nigeria banks have resolved not to lend money to any federal government contractor for execution of any job no matter the economic importance of such projects.

Does it not call for revocation of their banking licences for economic sabotage?

This is a very dangerous reaction to government economic programmes.

It is also a vote of no confidence on a nation probably sponsored by opposition elements.

This blacklisting of government as a dangerous bad debtor is a bad development that is worrisome because, banks are meant to support the economic growth of their host countries.

For now, Nigerian banks are only willing to issue Bid, Performance and Advance Payment Guarantees to government contractors and would never ever lend money to government contractors to execute the any projects.

And this position may remain until something happens.

This unpatriotic act of banks resulted from the inability of federal government to pay local contractors trillions of verified debts for job done thereby messing up the loan books of the banks that financed such jobs.

The banks are having to deduct the resultant bad loans from their profit earned within the year or from the retained profit made over the years. The technical term for such hurting requirement is known as provisioning for bad loan.

If the federal government fails to pay a genuine contractor over a long period, the bank would be forced by the central bank who supervises the banks to classify the loan as bad and deduct it from its profit or capital hence reducing the capacity of the banks to lend to other customers or may eventually fold up due to the weight of the bad loans.

Ironically, the central bank is an agent of the federal government who even with full knowledge of the reasons for the bad loan would still insist that the banks take financial or accounting punishment due to the refusal of federal government to pay debts to bank customers.

Unfortunately, Nigerian banks are under obligations to sell off the assets of innocent loan defaulters to replace the depositors funds used to create the loans.

The banks however are aware that the borrowing customers are willing to pay but are unable to pay due to the refusal of the federal government to settle its obligations to them.

Many people wonder why the central bank and the ministry finance would not let the politicians running the federal government know the implications of nonpayment of contractors to the health of the banks in Nigeria.

The CBN would rather question the banks’ credit wisdom in lending to federal government’s contractors for the development of Nigeria to the surprise of young bankers who couldn’t reconcile the irony.

Does it really bother the government that its recalcitrant records of not paying its debts has made local contractors not competitive in bidding for public contracts? Many of them have also sacked workers or are owning salaries.

Only foreign companies, especially the Chinese, could manage the repayment risks as they have a way of getting their payments either through padding or by intergovernmental diplomacy.

The result of the bad credit reference or rating is the high interest rates Nigerian banks or companies are charged by international institutions for foreign financial intermediations.

On the 11th of July 2017, the Federal Executive Council while President Buhari was “resting” in London approved the payment of about N1.93 trillion to these contractors but bureaucracy has not allowed this to happen.

Hope was raised and the banks were ready to help the government trade out any bond or bill it would choose to raise to settle the debts but the since our dear President Buhari returned from the long rest abroad, other issues of national importance have rendered the matter less important or urgent.

Prof. Osinbajo, the Vice President, who initiated the move in the absence of the president seems to have been convinced by an alternative fact that the settlement of the local debts is no longer a national priority. He doesn’t talk about it any longer.

It was a pitiable sight at the offices of the local contractors as the hopes of their workers to be paid at least their December salary was dashed. They are being owed up to 8 months salaries.

Federal government doesn’t have give loans to private sector to pay salaries as it did for state workers; just settle their verified receivables.

Notice that I didn’t include state or local governments in this discourse. Almost all of them are even worse and are not touched by lenders.

The unintentional recalcitrance of the federal government in nonpayment of verified debts seems not to bother politicians. They don’t see the connection between their criminal negligence and the economic growth of the country.

Still federal government proudly prosecutes issuers of dud cheques and tax defaulters.

Don’t our politicians know that federal government is the yardstick from where the integrity of a country is measured?

I feel that we have got it wrong somewhere. The nation seems to be working in silos.

Where are our developmental economists?

Does the government no longer have political economist as advisers?

How can we willfully be destroying our financial institutions and stunting the growth of our local contractors?

Our federal government doesn’t know that many of the foreign institutions it plans to borrow from to finance certain infrastructural projects or to support the national budget rely on the local banks for information as per the government’s credit worthiness.

If our federal government cannot willfully pay its debts to its tax paying contractors or citizens, where lies its moral authority to enforce good behaviour or to prosecute economic saboteurs? This too is an act of corruption.

Many big bank customers are borrowing a leaf from federal government by refusing to repay their loans.

The big borrowers now feel that they too can borrow and not pay and should be treated the same way banks treat the federal government.

The “Change” must begin with federal government! This bad debtor behavior has to stop.

“Chronic bad debtor” is not a good image for a sovereign power that should show examples.

President Buhari needs to find a way to sort out the verified debts to local contractors especially those linked to bank loans.

By paying the verified debts by cash or through bonds, a systemic collapse of the lending operations or the health of Nigerian bank would be prevented.

Such remedial action would also redeem the battered image of the federal government as a leprous debtor or a liquidator of patriotic local contractors.

President Buhari should treat this as a national emergency.

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