Senate plans bill to empower Nigerian banks to recover loans without borrowers’ approval

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The Nigerian Senate has moved to empower Nigerian banks with a bill seeking to recover loans from defaulters, place them on watchlist and ultimately blacklist them without consent from the borrower.

The bill passed second reading at the Senate on Tuesday.
The legislation sponsored by Senator Sani Musa intends to set up a consolidated scheme for a robust financial system that will facilitate and enhance loan repayment culture by authorising creditor Nigerian banks to track loan defaulters.

Musa told the Senate that creditor banks would be able to do so via the Bank Verification Numbers of defaulters.

The move comes at a time the Asset Management Company of Nigeria, which was established in 2010 to buy back bad debts from the books of Nigerian banks and pursue recovery, finds it increasingly difficult to recover about N5 trillion toxic loans on its list.

The lawmaker said the bill before the Senate would enable Nigerian banks to recover the loans from other accounts run by defaulters without seeking the consent of the latter.

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Musa similarly disclosed that the bill would prescribe sanctions for breaches of obligations and improve loan recovery in the country’s banking industry.

Beyond the high incidence of loan delinquency, Nigerian banks are facing a difficult time that could worsen the deterioration of their asset quality further as a steady increase in their impaired loans.

Bloomberg forecasted in October that about 40% of loans in the books of Nigerian banks could be restructured to prevent them from deteriorating to bad loans in 2021.

The average of non-performing loans could more than double to 16.7% in 2020 if 25% of the total credit granted in the economy that are yet to be restructured are lost, the Central Bank of Nigeria said.

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