The Nigerian Deposit Insurance Corporation (NDIC) said in order to improve on borrowing culture, the creditor’s right mechanism require a drastic overhaul through appropriate legislation.
Ganiyu Ogunleye, Managing Director and Chief Executive Office of the Nigeria Deposit Insurance Corporation (NDIC) said while the on-going efforts of the Economic and Financial Crime Commission (EFCC) on debt recovery is appreciated the long-term solution is for borrowers to appreciate that bank credits are largely funded from depositor’s fund and that delinquent credits contribute to illiquidity banks.
Ogunleye who was speaking at the just concluded annual seminar for finance correspondents and business editors organised by the corporation, said the procedures for taking and enforcing collaterals in Nigeria are most inefficient as depositors easily frustrate creditor’s banks by abusing the judicial process.
He said the corporation had come across debtors who would prefer to engage solicitors that could protract cases in court for many years rather than make effort to resolve their debt obligations, adding that bank debtors with such a mind-set constitute a threat to efficacy of the proposed Asset Management Company (AMC).
He noted that essentially, bank management is risk management and that there is need for regulators to focus more on risk management by banks for early detection of systemic risk management proactive response. “It was in this context that the joint NOIC and the CBN special examination of the 24 universal banks was recently conducted, the special examination reveal weak corporate governance, insides abuses, dissipation of depositors fund, undisclosed large credit exposures to related entities as well as poor risk management”, he said.
The NDIC boss further explained that it is imperative that each bank should have in place a binding contract for the tenure of its CEOs, adding that another salient issue relates to executive compensation, especially performance bonus that is based on profit which could be either pre-tax or after-tax.
He recalled that recent development in the banking sector underscored the need for a downward review of the single, Obligor Limited as earlier canvassed by the corporation post consolidation. “The single Obligor limit at 20 per cent of unimpaired shareholders funds is too high post consolidation. A high Obligor Limit could induce concentration of credit risk”.
He however said that the economic reform agenda of the present administration requires a sound financial system.