Loans: Banks Put Up Chronic Debtors’ Property For Sale

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Some of the Money Deposit Banks in the country have compiled for sale the lists of houses, hotels, filling stations, schools, among other property used as collateral by debtors in a bid to recover their capital.

The banks, in a name and shame manner, had earlier in the week published the lists of chronic debtors who were unable to meet up with the July 31 deadline given by the Central Bank of Nigeria to repay their loans.

So far, 17 banks had published the names of their delinquent debtors and of the N175.61bn being owed the banks, First Bank has N43.72bn non-performing loans; Unity Bank, 45.52bn; Access Bank, N3.4bn; Diamond Bank, N47.17bn; First City Monument Bank, N17.1bn; Ecobank, N5.4bn; UBA, N9.3bn; and Wema Bank, N1.26bn.Debtors' property

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While the Assets Management Company of Nigeria, Standard Chartered Bank, Keystone Bank and others are waiting to publish their lists of debtors next week, the total number of debtors so far released by the banks, after removing some names due to litigation and last-minute renegotiation, is 606.

However, investigations revealed that apart from publishing the debtors’ names, some of the banks had concluded plans to sell real estate assets used as collateral by debtors and had already engaged the services of estate firms/agents to dispose them.

lists 43 property put up for sale by Sterling Bank with a total value of over N3bn.

The property include a five-bedroom detached house located in Magodo, Lagos, and offered for N105m; a hotel in Osogbo, Osun State, N241m; a two-wing duplex in Lekki Phase 1, N150m; a storey building in Garki, Abuja, N172m; a storey building in Ibadan, Oyo State, N30m; and a commercial/residential property in Ilorin, Kwara State, N70m.

Also, there is a storey building in Akwa Ibom State, N29m; a filling station at Owode/Idi-Iroko Road, Ogun State, N2.8m; detached blocks of flats, duplex and school halls at Asaba, Delta State, N135m; a block of flats and other adjoining property in Asaba, Delta State, N135m; a detached house in Maitama District, Abuja, N305m; and a bungalow in Benin City, Edo State, N14m.

Some estate surveyors and valuers, who confided in one of our correspondents, affirmed that they had received instructions from some of the banks to help them dispose the property which are spread across the country.

While some of the surveyors admitted that they had received the property lists directly or indirectly from the banks, some others said some of the banks had contacted them to do same even before the names of debtors were published, noting that the exercise started shortly after the three-month grace period given to the chronic debtors by the banks.

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While real estate firms guided the information pertaining to the properties put up for sale by banks in order not to erode the confidence the banks have in them, sources in top real estate firms noted that almost all the banks are selling real estate assets owned by bad debtors.

Skye Bank had also released a list with twice the number of properties on the Sterling Bank’s list with most of them being choice properties in the Lagos metropolis.

Estate agents and lawyers mentioned Keystone Bank, FCMB, and UBA as some of the banks from which they had received briefs on properties marked for sale.

Since real property is usually the most acceptable collateral by financial institutions, one of the surveyors, Olu Adeyemi, explained that due to the desperation of the banks to recover their capital within the shortest possible time, they had given their lists of property to as many firms as they could trust to fast-track the sale.

He said, “It is not like the lists of the property are in the public domain, but for those who have some of these affected banks as clients, the banks have made available lists of the properties, including the addresses, copies of the title documents, prices and some other information that a willing buyer might need.

“For example, I have lists from two of the banks that I am working on already, but the problem is that the market is slow.”

Another surveyor, who spoke under the condition of anonymity because of the confidentiality of the information, explained that some of the banks had already offered the property for sale before the lists of debtors were published.

He added that the idea of banks offering such properties for sale was not entirely new, and expressed concern that the properties would be offered below their market values and the actual sale might not come readily because of the state of the economy.

He said, “Before they started publishing the lists of the debtors, some of the banks have offered the property for sale, and once we found a buyer, we contacted them and they (the bank) informed the owner, who would be left with the option of paying them or forfeiting the property.

“As you may know, such property is offered below the market price so that the banks can recover their money after the sale. When we do valuation for banks, we give them the property’s open market value and the forced sales value, which is the price at which the property can easily sell in the open market, and it is usually the two-third of the market value of the property as of the date of the valuation.

“With the availability of these properties at reduced prices, we are optimistic that we will get buyers because the economy is not very good at the moment.”

Another estate surveyor based in Port Harcourt, the Rivers State capital, explained that apart from the commercial banks selling debtors’ property, some microfinance banks had also been doing same.

She said, “Apart from the lists given by some of the commercial banks with bad debts, I know that some microfinance banks are also in crisis and are offering their debtors’ property for sale.

“They gave us a list but we have not made much progress on the sale because people are not buying due to the economic crisis and the dollar to naira exchange.

“Even though I have not received any instruction from any of the commercial banks, my colleagues told me about it and we are working together to help dispose them. So, I can tell you that it is true. There are a number of them in the market now, including those that have been there already, but selling them is another issue.”

In the past, organisations like the Asset Management Corporation of Nigeria and some other financial institutions had offered properties used by the debtors as collateral for sale in a bid to recover their loans.

AMCON in 2013 offered for sale a private aircraft said to belong to the chairman of a popular oil marketing firm as settlement of his indebtedness to the corporation.

Commenting, the Principal Partner, Bode Adediji and Partnership, Mr. Bode Adediji, explained that the idea of selling properties to amortise a loan was a global practice and not limited to Nigeria.

Adediji, who said the affected banks would need to consult professionals to advise them on their actions and reactions to the issue, noted that not all the names on the lists published by the banks could be bad debtors, but that some could have ventured into businesses that failed.

He said, “For us, instead of jumping in to go and sell for them, we have been telling them what to do, in terms of guidelines because it is better to avoid issues relating to forced sale of property belonging to debtors through professional platform, collaboration and cooperation.

“It should also be noted that not all the people on the published lists are bad debtors. It just happened that a number of them went into business that did not thrive. For all these banks to make progress in this matter of selling assets of debtors to recover loans, let them consult professionals.”

A lawyer and rights activist, Mr. Liborous Oshoma, in a telephone interview said, “It is not the first time that debtors’ property foreclosed by the banks are being put up for sale, but efforts have only been doubled in recent weeks because of the level of bad debts and the fact that there is no money in the system.”

A former CBN Deputy Governor, Mr. Tunde Lemo, averred that selling properties used as collateral by banks was in line with global practices as long as the action is within the confines of the terms of the loan.

He also explained that there should be a legal framework and infrastructure in place that would ensure that banks would be able to realise their security with relative ease.

He said even though the list would not be able to distinguish between those who were determined to default and those helpless, the intention of the CBN to publish the names of defaulters should not be misunderstood.

He said, “Selling properties used as collateral is allowed. If someone owes and he has violated the terms of the contract, banks should feel free to realise their security, but they should act within the terms of the agreement.

“The CBN should not be criticised at this point over the publishing of the names. Its intention is understood. It has become very important to deal with serial borrowers and do something to check irresponsibility on the part of borrowers, who just think banks’ money is for them to take. That is not good enough.

“It is also important to note that perhaps there are better ways of dealing with those who don’t want to pay because some may be unable to pay due to the dire economic circumstances, which may be outside their control, while some may have fraudulent intention. Thus, a publication like this may not distinguish between the two.

“There may also be issues around clerical error and accuracy that could make someone’s name appears in the paper which ought not to be and there are also marginal customers who may be struggling to pay, but whose business would be affected by the publication. These are what we call unintended consequences.

“However, it is not about whether it is right or wrong, what we should look at is the legal framework and infrastructure as well as the official platform that will ensure enforcement of property rights and disposition of cases in court, such that banks are enabled, as it is in other climes, to realise their security with relative ease, then there may not be need for this.”

When contacted, spokespersons for Skye Bank, UBA, Zenith Bank, and First Bank, among others declined to comment on the issues. Calls, emails and text messages sent to them had yet to be answered as of the time of filing this report.

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