Bank Debtors and the plight of textile sector; By Saka Raji Audu

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LAST week, the Central Bank of Nigeria, CBN under the headship of its vicious and progressive governor, Sanusi Lamido Sanusi, for the first time, took a progressive step to save the looming tragedy in the nation's banking sector. At least, the Managing Directors of the five highly indebted banks, namely; Oceanic Bank, Finbank, Afribank, Union Bank and Intercontinental Bank were removed, arrested and they will be arraigned on allegations of arbitrary granting of loans, securing foreign loans without consulting the Central Bank of Nigeria (CBN), indirect granting of loan to themselves through fronts, insider trading, capital market manipulation and money laundering. The CBN governor went further to inform the world that about N420 billion was injected into the five troubled banks in order to save them from the imminent total collapse.

The Nigeria's EFCC led by its Chairman, Mrs. Farida Waziri also threatened to begin arrest and prosecution of the already published names of the big debtors of the five banks should any of them failed to repay their debts after the expiration of the one week ultimatum effective 18th August 2009. Already, as at the expiration of the deadline on Tuesday, the 25th of August, 2009, only N20 billion out of the total N746 billion debt was said to have been recovered so far from the debtors. A detachment of EFCC and security officials including the Chairman of the EFCC herself are now in Lagos to ensure that arrest of the bank debtors are made towards the recovery of the debts. All things being equal, most of these bank debtors will soon be cooling their feet in EFCC's net.

OF course, no one would like our banks to be used as a conduit pipe of corruption by some inconsiderate bankers and their accomplices, who borrow huge amounts of money but fail to repay such money back to the banks within the stipulated time. In fairness, the CBN governor deserves a pat on the back for such an unprecedented bold step he took a week ago to sanitize the banking sector of the country's economy, as it cannot be business as usual all the time. One must also in all honesty commend the support of Farida Waziri led EFCC towards her agency attempt at recovering the bank debts.

In spite of the various commendations however, one should not be carried away by the good intention to save the economy through the vibrant steps taken by both the CBN and EFCC so far on the five indebted banks. It is indeed most unfortunate that the banks that should have saved the endemic situation of our ailing textile industries, which have been crying profusely as a result of smuggling and high cost of infrastructure have indeed allowed a colossal amount of N746 billion to a near waste. The question is, where were these five banks with their N746 billion when the Federal Government of Nigeria had been searching for only N70 billion to assist the textile industries towards overcoming their plights in form of textile revival loan? Wouldn't it have been better for any of the five banks to volunteer to give out the N70 billion loans to the ailing textile sector for its revival with the government as guarantor than wasting the same amount on individuals that specialize in bank fraud?

IT would be recalled that at the Public Hearing on Textile Revival organized by the Senate, which took place on 16th July 2009, the government hinted through the Minister of Commerce and Industry that it had for the umpteenth time proposed to give N100 billion as textile revival fund to Manufacturers in the Daily trust of 17th July 2009. The question again is where was the N70 billion textile revival funds that the government so much talked about for two years? Is it a case of the more we see, the less we understand? For instance, we are told that a Senator who has never sponsored a single bill received N500 million in two years as allowance. We have 108 senators in the senate. It shows therefore that N54 billion was paid to them as allowance in two years. Yet, the country could not raise N70 billion with one digit interest for the textile industries in Nigeria. This is a sector that is second in employment generation after government and which at the same time cannot be compared with the employment generation of the banking sector.

If the government had lived up to its bidding with the Textile Revival loan with let say 4% interest rate to some of the textile industries, the present mess where some of the companies found themselves would have happened. Still, if the government could not raise N70 billion for textile revival funds since 2007, how will it raise the now proposed N100 billion in the remaining less than two years of its tenure?

Because the Federal Government of Nigeria could not bail out the textile industries from their precarious problems, some of them who are still struggling to survive resulted to their individual banks to take loans of huge amount of interest rate of about 25 to 30% to be able to meet with the required standards. It is therefore not surprising that textile industry like the African Textile Manufacturers Ltd, one of the extremely few surviving composite textile industries located in Challawa Industrial Estate, Kano with about 1,850 employees is one of the companies and individual that is indebted to one of the five banks to the tune of about N896, 848,126, which came about as a result of extremely high interest rate. This debt when compared to the huge amount of the company's capital investment, it is just like a drop in the ocean.

IN the past, this writer had cause to vividly analyze and showcase the horrendous state of textile affairs but no one took it as a matter of urgent attention including the Federal Government. One did say that African Textile Manufacturers Ltd requires about N100, 900,800 to run its factory on diesel for 24 hours of 26 days in a month. This is against the N16, 707,600- if PHCN services were to be available for the same hours and days of the month. Unfortunately, the PHCN services are not always forthcoming and there is no way a company can run on diesel for 26 days consecutively, considering the extremely high cost of diesel and maintenance in the event of break down of the generating plant. This is in addition to a total sum of N35 million expenses required on salary and wages per month. These aside, there are other obligatory financial commitments of the company to the government, which are always fulfilled, else harmer will fall. As at today, the company, African Textile Manufacturers Ltd is still functioning in spite of all odds, just to keep the over 1,800 employees on the job for their livelihood.

It is not long ago, the company downsized its production capacity and now, the Central Bank of Nigeria and Economic/Financial Crime Commission is asking it to repay its bank debt of N896,848,126 within one week, failure of which its Chief Promoter will be sent to 'jail' for daring to invest in a country as ours. The one week deadline for repayment of the said loan has expired and it is now certain that the CBN and EFCC are bent on enforcing their threats of sending some people to jail or seize their assets. If either happens, it would be the end of the road for the affected company and it's over 1,800 employees that have been operating for the past ten years. This is the kind of textile revival fund the government has been preaching about; i.e. to use its might to send as many textile industries to their untimely grave, thereby, leaving the stage free-for-all smuggle material and invasion of foreign made textile goods in our markets.

As I said, CBN and EFCC have done well in their action so far taken at recovering the bank debts. But, methinks that individual merit should be adopted in the present approach to avoid using a sledge harmer to kill some mosquitoes. What am I saying? I am saying that before the CBN and EFCC finally fill their darkrooms with bank debtors, the history of such debts and how they are invested should be a subject of consideration so that genuine investors will not have any form of regret in investing in a country that is only interested in jailing bank debtors, performing or non-performing. Every borrower has specific agreement with his lender. What happens to the collateral security of the individual or collective loan? If such securities still exist, the CBN or EFCC should pounce on them as a mark of last result. It is only in the absence of securities that the bank debtors could be sent to jail.

Bank Chief Executives and their Managers should however know the limit of approving loans to individual or corporate bodies. It is fraudulent to approve fresh loan in addition to an existing loan that has not been paid off. Unnecessary loan rescheduling must be checked. Funniest enough, under the recapitalization scheme, banks are considered healthy with N25 billion capital base. But how it happened that over N22 billion naira was given at a shot to an individual or corporate organizations as loan as in the case of some of the affected banks?

Perhaps, my fear at the end of the day is that, all these development will teach foreign investors a big lesson. That they cannot just come to Nigeria for investment without coming along with their infrastructure, black oil, diesel, security and market to sell their products. They must also come with their banks in case they want to save or get any loan for improvement of their investment without repayment. I therefore urge the CBN and EFCC to go ahead with their threat of recovery of the bank loans in order to sanitize the banking sector since it is an important aspect of the economy. But due process and individual merit must not be relegated to the background or thrown to the dogs.

Saka Raji Audu writes from Kano and can be reached on his email: [email protected]