03 Sep 2009 |
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Between the CBN, Banks and Loan Defaulters Jimoh Ibrahim’s defense! How (Un)Believable? Its no longer news that CBN has published the list of chronic, major, defaulting Debtors of Nigerian banks, its no longer news that six Bank CEO’s have been axed or even undergoing prosecution. Along the line, issues were raised! Some raised the issue of “Ethnic Cleansing” within the banking hierarchy, from the observed view that those ‘axed CEO’s’ were all “Southerners” and that the North (represented by the CBN Chief) is only trying to weaken the financial strength of the Southerners!
Some also opined and asked why the CBN did not do a complete Audit of ALL BANKS at the same time but just limited itself to six “southern” banks, knowing the panic such “Red Card” could cause among depositors (who quickly withdrew their deposits from the accused banks and moved it to the other banks!) and the “Advantage” it would give to the other “un-audited Banks”? Some asked whether this was fair, from a father-figure CBN? Some also asked whether the CBN followed “Due Nonsense and Ruse of law” in sacking the bank chiefs, in declaring that some loans are “non-performing” and in declaring the list of Debts and defaulting bank Debtors. Some debtors have cried foul. Some conspiracy theorist have also said that the current bank reform is a prelude to the hijack of the Nigerian banking system, by foreigners serving as fronts for some “Nigerian Mafia”, as the CBN chief was quoted as saying that he does not mind if foreigners come and take-over these ailing banks! They say the modus-operandi is to first allow the government take control of such bank, by sacking the “Southerner-CEO’s” under the pretext of mis-management, appointing a “favorable CEO” under the pretext of injecting Government bail-out-money for a failing bank so as to be able to exercise firm control and then selling the bank to one of its “preferred owners”! Such is the “rofo-rofo” and street-thinking, you could conclude that every Nigerian has become a financial-voodooist and crystal-ball gazer! In all these theories, and you can believe whichever you like among them, a few things are VERY CERTAIN.
Thus, anyone and everyone should be happy when CBN decides to wake-up to its responsibilities, but NDIC and other relevant agencies must also wake-up at the same time. Therefore it becomes so strange to hear “accused Debtors” granting interviews and some members of the public giving the CBN knocks on what and how its going about its duties? Since Mrs Cecelia Ibru collapsed in court, Erastus Akingbola is AWOL, some CEO’s docked in the shit-can and some Debtors bitterly gnashing their teeth publicly, one is forced to wonder whether what we see/hear is actually “the truth and the whole truth and nothing but the truth” or is it a case of “the more we look, the less we see”? A case in point is that of Jimoh Ibrahim, the Chairman of Global Fleet Inc. who has been described as “Arrogant, Loud, Boastful, Fronting, mindless elite-crook, e.t.c” by some members of the Public! Nice appellatives, depending on one’s internal motives! His case is particularly curious and interesting because he actually granted an Interview, http://www.economicconfidential.com/sept09 interviewjimoh.htm and is walking around a free-man! Two questions struck me: Is he guilty and why is he a free man? Is he innocent and he is just being rubbished by overzealous CBN operatives and some envious, certified PhD (Pull Him Down) miscreants? Though he has challenged “CBN’s Claim” in a law court, l was all the same curious about what he has to say (most Nigerian “big-men” often ignore the public and ask them to go swallow an egg, for all they care!) and l will quote some excerpts of the interview for further analysis. He was accused by the CBN, of being a “Loan Defaulter”, a borrower that refuses to service his loan as at when due. In the U.S and Europe, this accusation will actually ruin anyone’s credit worthiness and might spell doom for that person’s business and political eligibility! Very serious allegations!! The question therefore is: Is it true that Jimoh Ibrahim has not been “SERVICING” his loans and is a “Loan Defaulter”? He responded thus: “Not too long ago, we wrote a cheque of N25 billion to the Federal Government for some of the enterprises it sold to us. People should also understand that every loan that we took is secured, properly collateralized……In any case, a loan has duration; it is not granted perpetually. The loan is guaranteed. If you default, the bank can foreclose on the guarantee. ……..They can foreclose on my collaterals. What I am not happy about is the inaccurate figures credited to me. But I want to say that anybody owing any bank and has been served a notice should pay back. I will not defend any loan defaulter. They should pay back and lodge their complaints later. To me, failure to repay money taken from the bank after appropriate notice had been served amounts to corruption. But CBN must follow the due process.
There is no specific law in Nigeria that says a loan shall perform provided credit input every other day or whatever. The interpretation could be objective or subjective. In fact, there are three ways of interpreting the statutes. You have the literary rule, the golden rule and mischief rule. CBN could have relied on literary interpretation in determining which loan is performing or not.
For example, if a customer's account is over-charged by a bank for almost N2 billion and the bank, by its own admission stated so in writing, the customer can suspend activities on that account until the account is audited.
Most painful facts is that they tagged the loans as non-performing when in actual fact they are performing as most of the published debtors have been paying money into their respective accounts, like in my own case with detailed bank drafts and the amounts on three different occasions, not on the same day, the bank is saying the they have been cleared and it is reflecting in the ledger.
It is an embarrassment of the highest order to take the balance sheet of a company and judge it only on the basis of liability without looking at assets and draw a conclusion.
As a businessman, I have borrowed money from banks and fully repaid and most of them not only issued us discharge letters but also appreciated our prompt payment even when we have a lot of deposits in the banks.
Like I said reducing some people's loan by margin of computer error is not the best for this country. I know somebody, who owes about N12billion in one transaction in Oceanic Bank, another N2 billion in another transaction, but where the name was published, the figure one was missing and it reflected just about N2 billion. How can that be?
Like I said, there are no defaulting clauses in most of these loan agreements. Secondly, CBN does not understand the components of the loan given to us. Some were given loans in form of overdraft to be used for day-to-day business activities. That can never be non-performing. For example, I collect money/sales from my over 200 filling stations across the country every day, which is paid into my account with the some bank, so, how can my loan be non-performing? Some people's loan is for a five-year term, which may not have expired. So, how does that become a non-performing loan?
My point is that if CBN had realised that some of the banks were not doing the right thing, the best thing to do is to go check thoroughly before accusing customers of defaulting in loan repayment, because it is possible for them to have wrong returns. Some banks could keep three accounts- one for the customer, one for CBN and one for the management. In that case, if CBN relies on the one given to it, there is no binding contract with the one they gave to the customer.
Now, we are taking almost half a trillion naira from the national treasury to rescue banks problems. Are we not in recession? Most of those that borrowed money to finance their oil businesses actually lost a lot when the Naira depreciates against the dollar and the prices of the oil crashed. The money was wisely invested but the economic meltdown affected the business and expected profit but a debtor must find a way to pay back to the bank.
It may interest you to note that my companies have offset most of our indebtedness with Nigerian banks and which they acknowledged and in several occasions they wrote us letters of appreciation. For instance Oceanic Bank wrote to acknowledge receipt of value of N3bn on our outstanding facilities with the bank as at May 18, 2009 before the additional N3bn we paid in August; Union Bank sent a letter conveying management decision to allow our fixed deposit of 126mn pound sterling to run at 5% interest after I rejected 0.75% per annum. The deposit in Naira value is over N35bn in cash as at August 3, 2009. We also received a letter of non-indebtedness from various banks that we have dealt with which shows our unblemished records in financial probity. Skye Bank sent us a letter of appreciation upon payment of N3.7bn to clear our indebtedness; Intercontinental Bank too issued us a letter of non-indebtedness upon payment of N9.5bn as at February 2009; FCMB too on payment of over 2.2bn in April 2008. So far we are not indebted to 21 banks, while the outstanding indebtedness in the remaining 3 banks are performing loans.
We thank the general public for their concern over the misinformation that was circulated by the CBN. We have also instituted a case against the CBN to seek redress over the wrong publication and the incalculable damage the said publication has done to our company’s integrity.
At Global fleet, we have taken advantage of this method to grow our business and have been paying the banks’ funds as and when due. And before we approach a bank for funding, we make sure that we have 150% security for the loan in the bank. “ The summary of the above responses, from Jimoh’s interview are that: a) He, like any Nigerian or Foreign businessman, borrows from banks on agreed terms which includes submitting verifiable collaterals for the loans, in case of default (non-servicing or non-performance). b) He has been paying back on his loans, as at when due, at the amounts due to date. c) The Banks has the right and the ability through the Nigerian Deposit Insurance Corporation (NDIC) to legally ask for the liquidation of the “Collaterals” should his loan be found to be non-performing/Serviceable. Since the bank has not taken this option and has not denied the claim that he is servicing his loans, do we have a choice or reason to believe otherwise? Does the Lender (Bank) not know its debtor than anyone else? d) Even when forced to “Pay all outstanding loans within one week”, against the terms of the loan he took and against any known banking, economic and legal practice for a performing loan, he has made effort to pay an additional 3Billion naira (not from one Nigerian bank account to another as most will do, thereby reducing or even distressing that bank right away!) from “Offshore funds”. e) His Bank, Oceanic in this case, have made errors in calculating “chargeable interest” on his account to the tune of 2Billion naira (having worked in a bank, l know this happens, even without human intervention, due to some “box that should have been ticked and was not! Since interests are “system generated” and as we say in I.T parlance, “Garbage-in results in Garbage-out”). The Bank has not denied this as a fact and have issued him letters to that effect, which we all know, would reduce his indebtedness to the bank. But the CBN has nottaken this into consideration in arriving at its own figure of Jimoh’s indebtedness! f) Business concerns may “normally” default on business loan servicing if and when the Business itself is experiencing shortfalls is projected earnings and the current global meltdown has further made nonsense of all projected sales, incomes and revenue streams so much so that “BAIL-OUT” has become the norm, by Business wishing to avoid bankruptcy and a government wishing to stimulate the economy! Its thus mutually beneficial to the Government and the Business (including Banks) to “recognize, understand and accept” that in this current situation, non-performance is not out rightly as a result of mismanagement or criminality. Nigerian companies and Global Fleet for that matter can not be an exception but the Governments Economic Advisers owe it a duty to the “Nigerian people and Economy” to assist these Businesses to stay afloat, so as not to cripple an already wobbling economy through unemployment and loss of purchasing power among the populace. g) But that is a NORMAL situation, not a situation when a loan borrower intentionally refuse to payback, if when he/she has the means or when a borrower mismanages/diverts the loan into a different use and now exhibits an inability to payback. Its is also a different kettle of fish when a Bank recklessly grants a loan without adequate cover in terms of “viable collaterals” incase the borrower defaults. h) In both cases above, Jimoh Ibrahim can not be accused of mismanagement or diversion of any loan he has obtained since his Businesses (Oil, Retailing, Insurance, Hotellier, Publishing e.t.c ) are actually very viable and flourishing. Jimoh Ibrahim’s loans are also well “collaterized” by the bank and as the Landlord of Oceanic Bank’s H/Quarters and other branches (this is a fact also), he buildings are enough and viable collaterals for his loans with the bank (and the bank also pay “Rentage” to him, directly or by deduction from his loan balance. i) If there are “reconciliation issues” on a bank account, the proper and sensible thing to do (and this is the bank’s responsibility!) is to sort it out as quickly as possible, even if it requires a few Bank officials to come to work on the weekend, while both parties maintain the “status quo”. An over-charge of 2Billion naira (25%of loan balance!) in accruable interest is not something to gloss over and while this is being sorted out by the bank, in agreement and cooperation with the customer, while maintaining the “Status Quo”, can not be viewed as “non-performance/servicing” by the customer. The onus is on the Bank to resolve the issue as speedily as possible and come out with the correct figure, for the customer and even in the event of a disagreement, there are regulatory bodies set-up to deal with such dispute. j) There are also evidence that he is paying back part of his indebtedness to the bank, as shown by letters and Drafts issued by and to the bank, not just to Oceanic but other banks. Global Fleets is also a major shareholder of Oceanic bank and has a sizeable chunk of Cash deposit in the bank! In addition, the Bank also hosts the Monthly Salary account of its close to 15,000 employees nation-wide.! All the above can only point to one thing: Jimoh Ibrahim’s loan facilities can not be declared as not performing or un-serviced. Jimoh Ibrahim might not only be “loud-mouthed” as claimed by some of his “angered friends”, he is actually loud in his actions too! He is a man that actually puts “his money where that his mouth is”! Its no mean task to just flick your finger and 3billion naira gets paid at under a weeks notice! Some banks would go distressed if that happen to them! There is actually a very thin line between being “self-assured” and being “arrogant” and the difference might just lie in the amount of “bile” one’s opinion! So, how did the CBN arrive at its own declaration? Mind you, borrowing from a Bank, irrespective of the amount, is one thing (and this is perfectly legal and acceptable), its is the “not paying back”, regularly as at when due, (non-performing/ un-serviced) that is unacceptable. That Global Fleet, owned by Jimoh Ibrahim has a debt balance of 8Billion naira (or more, or less, does not really matter) does not make him a “LOAN DEFAULTER” as long as he is paying back in bits, at the agreed rate and time frame. This he has demonstrated (unlike some other big-time debtors) factually. He has kept fate with the agreement he has with the bank. Thus we can safely conclude that the CBN was hasty, did not exercise diligence, misleading and therefore wrong, in “declaring and publishing” Jimoh Ibrahim and his Global fleet as a “Loan Defaulter”. If CBN has PROOF, apart from the stumping and strutting accusations on the pages of Newspaper/TV/Radio, let it lay out the facts publicly (as it has done with the announcement!) and let those facts be corroborated by the bank, which is the lender. This is the only honorable path left for the CBN. Again, like l mentioned earlier, the Bank itself, has a lot of explaining to do:
Finally, the CBN has to be more transparent in its actions, to avoid unnecessary rumors, insinuations and glances that ultimately discredit the banking system and thus, make the naira go gaga on the forex market. Its recent response to the current “sanitation exercise” by CBN is all too evident for all to see. The CBN must also be seen as impartial, in its oversight functions and the recent putsch which gives some banks an opportunity to “properly cook” their books in anticipation of an impending Audit, project themselves as being healthier, to the public, than the ‘hammered six’ banks, does not lead credence to its role of impartiality and putting all its ‘bank-wards’ on the same level, playing field without adopting double-standards. Checks and Auditing by the CBN must be unannounced, all-encompassing, thorough and focused. Auditing Inspectors must be properly equipped and trained to be a step ahead of the “whoodinii magicians” within the bank! The Banks must be given the benefit and opportunity to defend itself, in camera and the results verified and vetted properly before being made public, if need be. Since the ultimate aim of the CBN is not to “kill Banks or Business”, but to make them viable and operate under the law using best practices, the result of such Audit should be delicately handled with the interest of the nation’s “economy and currency” at heart. Information management is key and if it is not of any immediate benefit, running to the Press to announce that a bank is distressed is counter productive as it only causes panic amongst the banking Public. Sanctions like relieving a bank of its CEO can be “documented” and announced long after the “Transition” has taken place since the “seismic shocks” would have died down by then. We need to shun sensationalism, state facts as facts and avoid the “military mentality” of “acting first and thinking later”. We also need to respect laid down procedures and follow the much abused “due process and rule of law”, in letter and spirit , in managing our financial system as one slip of tongue or one overzealous action by the regulatory authorities can spell doom for the nation’s financial system. Mr. "Deji Saanu is an I.T. Specialist and ‘Digital Security’ Consultant. Email: mysaanu@yahoo.com |
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