Nigerian Bank Nigeria Afribank Nigeria Plc – Bad Loans – Credit Bureau To The Rescue

Source sunnewsonline.com: Chima Titus Nwokoji, 12 January 2010

At the last count, over N1.5 trillion additional provisions on non-performing loans and other known losses were made by the eight stressed banks. Intercontinental Bank Plc. made bad loans provision of N436 billion and loss of N328 billion; Wema Bank made bad loan provision of N116 billion and N29 billion loss as at 30 th September 2009.

Others are, Bank PHB with bad loan provision of N232.16 billion and N438.65 billion for the period of 15 months. Oceanic Bank International plc, had bad loan provision of N315 billion and a loss of N286 billion, FinBank made a bad loan provision of N95 billion and a loss of N121 billiuon, Spring Bank made a loss of N16.3 billion and a bad loan provision of N123.3 billion, Afribank plc made N84 billion bad loan provision and a loss of N71 billion while Union Bank made a bad loan provision of N148 billion and loss of N223 billion.

Many players in the industry believe that the presence of credit registries, could have minimized the huge losses that have eroded shareholders funds in these banks. Aside poor corporate governance practices, lax credit administration processes and the absence or non- adherence to the bank’s credit risk management practices were the major undoing on the banks.

To help banks in the assessment of affordability and credit worthiness of borrowers, the need arises for a credit bureau that will pool all available data capable of influencing a credit decision and ensuring the integrity and accessibility of the data. Thus, on Thursday, January 7, 2010, the Central Bank governor, Mallam Sanusi Lamido Sanusi unveiled CRC credit bureau. At the launch, he expressed happiness in welcoming a new member into the financial system especially one that will play a vital role in assisting the CBN to manage risk effectively.

According to the apex bank helmsman, the establishment of credit bureau in Nigeria is a welcome development and one that the CBN supports for the following reasons: Credit bureau facilitate access to finance by providing relevant information that will enable lending institutions make good lending decisions; they allow for more effective risk management such as risk-based pricing and also allow for improved credit risk portfolio analysis and reporting.

Group managing Director and Chief Executive Officer, UBA, Mr. Tony Elumelu agreed that a credit Bureau is an effective tool in improving the efficiency and stability of the financial system, reducing overall default in credit markets, and building a pool of good borrowers. He further stressed that credit bureaus helps in shaping borrowers’ behavior, assisting in managing down systematic risk that might be caused by uncoordinated lending, and in helping to attach an appropriate price for bad credit behaviors and obligors.

A credit bureau report will include: Basic individual profile such as name, Identity card number, Company registration, date of birth, address, occupation and marital status. Other information includes: monthly record on how prompt repayments were made in comparison to due dates, records of bad debts if any, bankruptcy if any, information on outstanding court cases, if any, the credit limit, amount of loan granted, actual amount repaid each month, turnover of the company, value of assets and list of related companies among others.

It goes without saying that if these information were available, such people as Mr. Peter Ololo, the stockbroker who borrowed over N80billion from various Banks that was frittered away at the stock market, might have been turned down by the second or third Bank.

However, despite a myriad of benefits to key stakeholders in a credit bureau, there exist a lot of challenges. According to Blaau “This is easier said than done because the credit bureau infrastructure requires significant investment in technology, data platforms, interfaces to users, data contributors e.t.c”. Lack of unique customer identification will make consolidation of credits and credit information from various credit bureaus on a customer difficult if not impossible. This challenge can only be overcome if the rot in the National Identity Management Commission (N.I.M.C) is cleared, such that every Nigerian has an authentic national identity card. Another possible challenge is the need, according to Sanusi, to get the buy-in of a key number of stakeholders who will sign up to using the bureau given the conservative nature of most Nigerians.

A second credit bureau in Nigeria to commence business after XDS credit bureau, CRC credit bureau is made up of a consortium of 12 Banks/Investors, arranged in alphabetical order namely: Access Bank, Bank PHB, Diamond Bank, FCMB, First Bank, GTBank, Intercontinental Bank, Oceanic Bank, Stanbic IBTC, Standard Chartered Bank, Union Bank, and UBA. Analysts are of the view that ownership of a credit bureau by Banks will lead to a certain level of compromise because there is the tendency for information manipulation to package a non credit worthy customer as credit, top to avoid loosing a potential net worth customer. At the end of the day maximization of shareholders value is paramount.

Nigerian Bank Nigeria Afribank Nigeria Plc, Bank PHB Plc, Diamond Bank Plc, FCMB, Finbank Plc, First Bank of Nigeria Plc, GTB Guaranty Trust Bank Plc, Intercontinental Bank Plc, Oceanic Bank International Plc, Spring Bank Plc, Stanbic IBTC, Standard Chartered Bank, Union Bank, Wema Bank