…Eliminate Toxic Assets, Loans
By Shakirudeen Bankole
Contrary to reservations expressed by some stakeholders against the Banks and Other Financial Institution (BOFIA) Act 2020, academic scholars and financial risk management experts have insisted that it would help strengthen the nation’s Financial institutions and reduce toxic assets and Non-Performing Loans.
Upon the passage of the BOFIA Act 2020 by the national Assembly last week, President Muhammadu Buhari wasted no time in appending his signature two days ago, thereby making it a law.
This development has infuriated some stakeholders, who argued that some contentious parts of the law, has made it counterproductive to the nation’s economic revolution dreams.
Their argument stemmed from some sections that empowers the Central Bank of Nigeria to invoke the operational license of any Bank(s) at anytime, and without the governor or officials of the Apex bank being answerable in any court of law; and the creation of Credit Tribunal for loan recovery, a duplicate of what Asset Management Corporation of Nigeria (AMCON) and Economic and Financial Crimes Commission (EFCC) currently do.
One of the antagonists of BOFIA 2020, is Prof. Godwin Owoh, a professor of Applied Economics (banking and finance), and an advisor to the former Governor of CBN, Charles Soludo, who said the new law flies in the face of the country’s aspiration for increased corporate governance practice and the Company and Allied Matters Act (2020).
But speaking on NTA Good Morning Nigeria Wednesday, the trio of Professor Uche Uwaleke, President, Capital Markets Academics of Nigeria, Professor Yishau Anglo, a Professor of Banking and Finance from the University of Kaduna State, and Mr. Ayodeji Edun, a Financial Risk Management Expert, insist BOFIA 2020 Act is in the larger interest of the country.
They said the law is more timely because of the increasing rate of Non-Performing Loans, which is driving lenders away from making loans available to the real sectors.
According to Uwaleke, for instance, BOFIA 2020 Act will greatly help strengthen corporate governance in the nation’s financial sectors and help stabilise financial operational systems.
He says, “for especially, the Credit Tribunal dimension will help reduce existing toxic assets, and Non-Performing Loans, for it will subject debtors to judiciary process over their renege to the obligation of repayment of loans.
“I understand AMCON has over N5Trillion to recover, currently. That wouldn’t have been there, if there had been system like Credit Tribunal in place,” he added.
Anglo, in his submissions, insisted that BOFIA 2020 will further encourage banks and other lending institutions to pay proportionate attention on lending to the real sectors, unlike the current trajectory.
According to latest report from the Nigeria Bureau of Statistics, Agric, Manufacturing, MSEs, are currently receiving insignificant lending ratios from banks, compared to high-yielding sectors like Oil and Gas, Real Estate, and Employees loans.
Anglo lamented that the current trend is that, “Banks are now moving to areas assumed to be safe to them. The major sector of the economy where funds are needed to develop, now lacks the necessary oxygen.
“Oil and Gas, Real Estates and Employer Loans receive more loans from banks now, at the expense of the manufacturers, Agriculture and Small Scale, but the BOFIA 2020 has further incentives the lenders to balance the act,” he said.
In his remarks, Ebun, who encourages the banks to widen their lending windows, said one of the best days to mitigate against the inherent risks is by introducing Specialised Loans.
“This is a clarion call as the adherence would help grow and stabilise the nation’s economy. It is very obvious that some of these risks will not go away, but specialisation will help banks to understand inherent risks and grow in it
“If you want to focus on the SMEs, Health, Education, Housing, and Domestic Emergency, for instance, you may loose money initially, but you will eventually come to understand the dynamics of the market and becomes well grounded and make more money thereafter.
“This is what BOFIANOT2020 seek to address, including the need for a good credit rating, that will qualifies people for better loan,” he added.