Financial market operators and analysts have expressed support for the proposal of the Central Bank of Nigeria (CBN) to create a special court to address non-performing loans in the banking industry, saying it will further enhance access to credit in the country.
The CBN had last week while appearing before the Senate Committee on Banking, Insurance and Other Financial Institutions for the public hearing on its Bill for an Act to repeal the Banks and Other Financial Institutions Act 2004 and re-enact the Banks and Other Financial Institutions Act 2020, made the appeal for the establishment of a tribunal for the banking sector.
Managing director of Afrinvest Securities Limited, Ayodeji Ebo, said the tribunal if allowed would be a positive step that will bring sanity in the banking system and derisk the real sector.
He explained that the creation of the credit tribunal will be an enhancement for credit such that when customers know that if they default, “judgement can easily be concluded within a short period”.
He said, “It has been part of what has been discouraging some banks from lending because even if you have the collateral, the period of going to court takes a lot of time. So I feel it is very positive for the banking sector and it will find a way of trying to help recover a lot of assets.
“Also a lot of NPLs that have been in default would be concluded and that will reduce NPLs in the sector and once people know that, borrowers will want to make sure that they don’t default on loans.”
On his part, managing director and chief executive of Cowry Assets Management Limited, Johnson Chukwu who said the call for a tribunal for the banking sector is not new, noted that going through the normal courts have created a lot of delays in resolving loan defaults.
Chukwu said, “If we go through our normal courts, the delay is so much. Right now the courts are not taking commercial cases they have forgotten us for political and other civil cases and the judges in the conventional courts are overstretched.
“Beyond that we also need judges that have deep understanding of commercial issues and cases and that will make it easy for them to dispense justice, timely. I completely align with the CBN and we have advocated for it for several years.
“In commercial disputes there is what we call time over money. One naira today is not the same as one naira tomorrow, and the conventional courts do not seem to recognise that.
“So I strongly support that and it is something that needs to be done. Beyond that, we need to review our bankruptcy law, we need to review our law on foreclosure and collateral such that people who have pledged their collateral cannot go to court and stall foreclosure.
“What happens in other climes is that if you have pledged your property, you can’t contest it in court. But here they can get orders from court restraining the claimant from taking claims”.
Also, head of financial institutions ratings at Augusto and Co, Ayokunle Olubunmi, noted that if the essence of the tribunal is to ensure the quick realisation of collateral, it will be a welcome development as it has been difficult for most banks, especially in real estate, to realise the collateral.
“You might be in court for five to 10 years and some customers intentionally just take it to court, knowing that they will lose but they drag it on for years. If the idea is to fast track the arbitration process, for delinquent loans and to ensure quick realisation of assets then that is a welcome development.”
He however cautioned that care must be taken not to criminalise loans.
A capital market analyst, Dr Timi Olubiyi, said that the request by the CBN is a welcome development and is in tune with global best practices, saying that it will help the banking sector and stakeholders greatly, particularly reducing and curtailing market infractions.
He stated that it will also forestall long wait for judgements and significantly improve banking regulations and also service delivery.
According to Olubiyi, when the request is eventually considered it will provide a dedicated, specialised and fast-track independent civil court for the resolution of disputes such as what we currently have with Investments and Securities Tribunal (IST), which is an independent specialised judicial body for the capital market and investments.
“As obtainable with IST such new Tribunal in banking sector will be mandated to adjudicate disputes and controversies arising from banking transactions within short period of time, on the average 90 days. With the setting up of the new tribunal disputes will also be resolved in an accessible, flexible manner different from the long waits noticeable in the conventional courts.”
A stockbroker and the CEO, Sofunix Investment and Communications, Mr Sola Oni, said that this is desirable and the Tribunals do not operate like normal courts where civil and criminal cases are presided upon with emphasis on law of evidence.
He added: “But tribunals basically deal with specialised issues. Those who handle cases in Tribunals need not be judges. If banks deploy tribunals to handle issues, it will expedite action. In the capital market, Investment and Securities Tribunal (IST) enhances faster decision making in securities related disputes.”
Also contributing, credit managers, under the auspices of the Institute of Credit Administrators of Nigeria (ICA) said it was solidly behind the Central Bank of Nigeria (CBN) in advocating for the creation of special tribunal for the banking sector of the nation’s economy.
Speaking in an exclusive interview with LEADERSHIP yesterday, the registrar/chief executive, ICA, Professor Chris Onalo, said, such initiative is required for a healthy financial system, even though, he blamed the bankers for circumventing some of the existing extant laws for their selfish interest.
He noted: “Already, there are extant laws and legislations that protect the banking system, to ensure that 90 to 95 per cent of credit granted were repaid. But insider abuse and conspiracy as well as lack of proper documentation in the granting of loan facilities have always made debt recovery difficult.”
He said the tribunal, if created, can only function effectively, when one can prove beyond reasonable doubt, with proper documentation, a debt case.
“So, for such tribunal to work, proper due process must be followed when granting credit facilities to people”, he further said, adding that when such tribunal is finally established, some banks would still be reluctant to pursue certain cases with this special court because of insider interest, among others.
“Such initiatives should also be extended to social welfare schemes , such as, the CBN’s N50 billion COVID-19 palliative, among other sectorial credit intervention to ensure that beneficiaries repay these loans.”
Calling on the banking sector players and regulators to lobby the executive, legislature and the judiciary for a favourable banking law that will protect the interest of the banking sector, he charged bankers to discharge their duties of extending credit facilities to the people, professionally to create a healthy financial system.