Compelling Reasons Why This Businessman Doesn’t Want CBN to Publish Deliquent Debtors List

The Central Bank is set to Publish a list of debtors whom the bank say are owing about N13trillion on August 1, 2015. The threat has attracted some criticism as much as it has been hailed by others. This is not the first time the CBN will be publishing a list as it did same in the early days of Sanusi Lamido Sanusi.

One member of the Public who is vehemently against the publication of this list is the President of the Lagos Chamber of Commerce and Industry (LCCI), Remi Bello. In an statement made available to the press he highlighted valid reasons why the CBN should reconsider the move. We look at the key points and air our views.

Best Practice

“There are global best practice principles in debt recovery. Publishing the names of debtor companies and their directors in national newspapers is unorthodox and unprofessional. Due consideration should also be given to the legal implications.”

It is difficult to argue against this especially as it is companies who borrow and not individuals. By Law companies are legal entities that can be sued and can sue, so why attack the personalities of directors of these companies. To what extent can the CBN go? Will they also someday consider publishing the names of shareholders?

Two types of Debtors

“The LCCI recognises two broad categories of debtors. There are defaults that have arisen as a result of genuine business failure (some of which are irreversible), which affected the capacity to repay; there are defaults that have arisen as a consequence of deliberate intent not to repay. The latter borders on character quality, which is what the ‘Know Your Customer (KYC)’ concept is meant to address,”

This is also another valid statement and is a case of throwing away the baby and the bath water. Ironically most defaulters to bank loans are either related parties, family or  friends of the top management and board members of the banks. That is basically why they get away with these things. A bank relying on the threat of a list to get debtors to pay also smacks of weak risk assessment apparatus within the bank. Also perhaps means they did not secure adequate collateral for their loans.

Risky Business

“Entrepreneurship is about risk taking. Sometimes profits are made, at other times losses are suffered. It will be unfair to portray business failure as an act of criminality, which is what the publication of names connotes. The reputational cost to such businesses is also very high. In any event, loans are supposed to be collaterised and a foreclosure invoked in the event that such loans are not redeemed. We should not discourage investors from taking risks and should refrain from actions that could undermine the spirit of enterprise in the Nigerian economy”

Businesses fail everyday which is true. In fact, most people who have failed in one business or the other end up creating even more successful businesses. By publishing a list of debtors the CBN is inadvertently discouraging risk taking and innovation. If they had published the names of the Lander Brothers as debtors, we probably never would have had an aeroplane.