Director, Bank Examination Department at the NDIC, Adedapo Adeleke, who made the call said the banking sector will be better if state governments can pay workers’ salaries.
“This is because some people working for the government have taken consumer loans and are being owed for up to nine months. These people have no money to pay back their loans and the banking sector suffers,” he stated.
Adeleke, who spoke at the weekend in Kano during a media workshop organised by NDIC for finance reporters, said banks cannot go about confiscating television set and tables from people’s homes in the name of loan recovery.
“So, one expects that as the economy improves, government should pay its workers so that those that borrowed from the banks can pay back,” the NDIC director submitted.
A consumer loan is an amount of money lent to an individual (usually on a non-secured basis) for personal, family, or household purposes. These loans are usually used to acquire household items.
Speaking on the theme: Curtailing the Growth of Non-Performing Loans in Banks: The Role of Regulators and Supervisors, he said that delay or non-payment of workers’ salaries by government and private companies is worsening the level of non-performing loans in the industry.
The rate of non-performing loans he said, is in excess of 20 per cent as against the 5 per cent regulatory threshold.
“If people working in companies that are troubled borrowed from banks, it is important that the loans be provided for when their employers can no longer pay salaries,” he said.
He also revealed that Bank directors with non-performing loans (NPLs) risk being sacked as contained in a new Code of Corporate Governance approved by the Central Bank of Nigeria (CBN), which bank directors are expected to sign.
According to him, the code was instituted to address the rising cases of insider bad loans, which not only represent a conflict of interest, but are against the prudential guidelines for the industry.
Banks’ assets have depreciated in the last three years, with provisions for NPLs hitting N856.9 billion, due to the drop in crude oil prices. A large part of these bad loans are owed by bank directors and are in most cases unsecured.
Besides, the economic recession showed that the financial industry still harbours weaknesses in governance, as seen in insider non-performing loans, unreported losses, huge exit packages for directors, over-domineering executive management, contravention of regulatory/prudential guidelines and lending limits, poorly appraised credits and weakening of shareholders’ funds, among others.
and then