What is ICA’s position on the present state of the economy?

The position of the Institute is that the economy is still very fragile. It looks like a directionless economy and there is the need to begin afresh. This is because corruption has grown bigger than the size of this country. Ultimately, we can say there is no economy. If there was an economy, the dictates that allows everyone to fall in line was not allowed to exist, resulting in people doing things the way they want. Policies that drive the economy, if they were in place, were not working. Economic growth parameters have either been ignored or were not established at all. If they were established, they were not allowed to work. There was no rolling plan from one year to the other, especially with a projection of where the economy is expected to be in some years’ time. All of those things were not in place, so how would you say there was an economy?

We must come to terms with reality; Nigeria can no longer afford to play to the gallery. Our economy is in a mess because of the misdeed of our past leaders; no one actually comes to governance due to a burning desire for a greater Nigeria. I think that if President Buhari’s antecedent for probity, accountability, transparency, good governance and discipline are still what he represents, then we can say that the journey to a greater Nigeria with attractive economy and democratic principles based on the rule of law has finally commenced.

The economic team and democratic partners that he has chosen, in my opinion, should remember that it is not going to be the “usual practice”, where Nigerians are forsakenly forgotten and left to cry helplessly. Buhari alone cannot do or implement the change agenda; he needs the unity and purpose of like-minded men and women he has chosen. If you ask me what I feel about the credibility of the people he has brought into his cabinet, I will tell you that he (Buhari) knows what he wants; they must have given him undertaking that they will be on the same page with him. But the point need stressing here is that those who think that they are godfathers, that they have statesmanship rights to present candidates for appointment by Mr. President should sit back and sincerely reflect on why Nigeria is unfortunately where it is and the need to go forward for greatness.

Over the years, from our end, the Institute of credit Administration kept maintaining one advocacy: that we have no national course of action to take Nigeria out of the wounds, which would form part of our philosophy and character by any successive government. What we have had was the kleptomaniac acquisition of wealth by the few of us who were close to the corridors of power, leading to a state of poverty and absence of the rule of law. But I am happy with the person of President Muhammadu Buhari, whose pedigree and personal values tend to touch on this fundamental fact; if it were not Buhari, it probably would have been Chris Onalo to bring about the change.

The change is that there must be rule of law to govern socio-economic and political behavior of any person or institution in this country. This is fundamental because an economy must be protected by the rule of law and establishment of operating policies, which must be implemented. If anybody goes against the law, we should have no system to shield such a person, you have to face it to serve as a deterrent to others.

Then the operatives of government policies must be up and active, must implement policies devoid of any sentiments or personal or sectional interest. It is only then we can say things are working and the economy flies. This would encourage people to invest their time, energy and resources in the economy, believing in the strongest terms that there will be good return on their investments.

A friend of mine asked me this question in London recently: is Nigeria too complex to govern? My answer was no, Nigeria is a very simple kind of territory to govern, manage and control, provided that the leader is bold, courageous and determined; upholding the rule of law, that is, let the law bite, is the only thing required. People get easily adjusted when they realized that law is no respecter of any person or persons. More importantly, let there be deliberate policies that encourages industrialization, entrepreneurial development and genuine rewards for innovation, creativity and great stride. In addition, let there be proactive institution of economic growth and social made-easy infrastructures, e.g., electricity, good road networks, excellent transportation options, clean environment, portable water, security, etc.

Does the Institute believe in the current administration to deliver on its promises to Nigerians?

The ICA is extremely happy with the values that President Buhari represents, but we can only pray that he will not succumb to pressures from the old school of thoughts or the hands of cabals, who think they own Nigeria. This institute is determined to work with him because we believe credit economy is the only way, the only system this country needs to nail and delete corruption. Corruption thrives in a situation where cash and carry transaction is the order of the day, but credit system tells you to buy what you want today and pay for it tomorrow from your identifiable income.

If you are buying a house the credit market tells you to pay certain percent of the total cost, then pay the balance on an installment basis on your income over a period of time. The transaction becomes legitimate and official and corruption has been dealt with in that transaction. I believe the time for credit economy has come and we are strongly impressing it on the government that for the president to make name, he should not only fight corruption, but build institutions that support credit economic system to replace the present cash system we operate in order to eliminate corruption from both public and private sector.

When barriers, economic obstacles such as taxes that retards industrialization, levies that frustrate business growth by states and local government are removed, when growth incentives are introduced, then we are on our way to running a robust credit economy.

Also, government must pay greater attention to institutionalizing a system that brings the real sector, small and medium enterprises, into the mainstream of economic activities. Past governments have consistently overlooked this, in spite of clarion calls. But the quick-rich syndrome has not allowed our leaders to make this work. We must begin now to lay that foundation and grow it.

Let me not over-labour the fact that economy of any nation of this planet earth is in the hands of their citizens; those citizens are denominated into small and medium enterprises. But as it is typical of them, they lack access to institutional finance to grow, expand or start up their businesses so that they can create more jobs and make wealth for the nation. As Nigeria’s legal expert house for credit economy and management, it is our recommendation, as we have always recommend, that this government led by Buhari’s administration should rise to set up a National Credit Guarantee Corporation which will serve as a motivation to banks to lend their own monies to the nation’s SMEs.

The National Credit Guarantee Corporation should have statutory power to stand as a “guarantor” to an SME company who is seeking loan to grow, expand or start a project that is considered to be commercially sensible and that can generate jobs and create wealth.

The intervention fund creation idea that has been the case as a way of reaching out to certain section of the SME’s sector for access to fund should be stopped as it has never worked, but rather created more and more corruption in the system.

It is more transparent and sustainable to have a system where Banks and the National Credit Guarantee Corporation independently and strategically collaborate in encouraging credit flow to the nation’s SMEs and manage such credit through active synergy.

I want to see the government stopping “political credit budget handout” to the economy. It has never worked and it will never work, because apart from actually not reaching those it is targeted, it is difficult to manage, and also it is a corruption carrot.

With extension services provided by the corporation for the guaranteed SMEs a strong foundation for economic growth and prosperity would have been laid. This is the way to go; the very way that ushered in strong and robust economy for the developed world

The president needs to move very fast to get these things in place because four years is like four months in the life of a nation. And he has only two full years. Once we enter the third year, election campaigns come in and there will be distractions here and there.

An institution that is key to the revival of the economy is the banks, but the banks due to some corporate governance failures have failed in its role to stimulate economic growth. What is your assessment of the banks?

On the role of the banking sector to the overall state of the economy, I think that the banking sector has never been very proactive in its traditional culture, which is mobilization of deposits from surplus end and giving support to the sector that’s deficient.

Banks in this country have had access to easy funds, the government fund. To that extent, their vulnerability to shock is very high. Government fund will not be perpetually available. A day may come, government may sniff and there will be massive glut in the system. It has happened now and this is not the first time where government is calling for its funds with this Treasury Single Account (TSA). The impact on the bank as we speak is enormous, simply because they have over the years relied on government agencies for deposits.

Recently in the banking sector, there was an action purportedly approved by the Central Bank of Nigeria (CBN) that bank debtors should have their names published in order to help banks recover some funds to their vaults. Credit market economy frowns seriously at this as unethical, unprofessional and a trend capable of doing greater damage to the economy, because the economy thrives on borrowing to invest or execute projects. In credit management, there is what we call the five Cs of Credit: Capital, Collateral, Character, Circumstance or Condition, and Capacity. All these Cs play themselves out in the analysis and daily management of any credit facility extended, whether it is from banks to borrowers or from manufacturers to distributors or in whatever form.

A distortion in any of these processes could tamper with the ability of a borrower to honour his or her obligation. And in situation where there is default in the credit account, the next line of action is litigation with the weapon being the collateral that was used to safeguard the loan facility. These are decent due process that anyone anywhere must take. The road to managing that eventual default in credit is to go to court, which is the globally accepted practice, but what we saw in Nigeria, the publication of debtors list was an overreaction and expression of sympathy by the CBN to the bankers. We have seen the mess created by that action, with some banks rendering apology to some customers, whose names were listed in error. And there were some others in the list that have disputed the debts with threats of litigation as we speak.

The development became an issue to the ICA because it was said that the CBN gave directives to the banks to do so and that this directive is going to be carried out on a quarterly basis. That is why we are concerned. It is sending out wrong signals to international investors and this economy needs more investors than banks. Investors, domestically or globally watches the climatic condition of an economy whether it is safe and sound to invest and one of the things they consider is this aspect of banks that are supposed to be partners in progress and advisor to entrepreneurs. It is therefore shocking that banks could come out in a damaging way to publish names of people that borrowed from the bank under the directive of a regulator. This practice is not acceptable.

How then can the banks recover these loans?

The Nigerian idea is do it and go to hell, which is against all known decency. Banks need to put in place globally accepted best practices to protect their credit portfolios. But I think that credits that go bad are those given under wrong sentiments. And for bank owners, there is need for them to curtail their high profit appetite. The level of profit returns that they impose on bank management is also a motivation to inconsistency with best practices, which most times lead to default by debtors.

The pressure is there and some of them approve facility in a hurry without carrying out necessary due diligence. One thing I know as a credit economist is that debtors all over the world behave the same way. Because of the glamour in business, especially once an entrepreneur is successful; there is a sense of glamour associated with it. Also, there is societal pressure like demands from relatives, associates and friends and the need to give back to the society, all of which add up to a common pressure that comes on an entrepreneur. Bank owners should limit their appetite for corporate profit because it is bringing pressure on the best practice that the operational process of a bank should characterize.

Furthermore, the personnel of the banks need to be trained and retrained in every facet of credit management. People become credit officers on the desk, there have never been prior learning in credit management. There is need to groom bank credit workforce on ethical issues in credit management, while bearing in mind the business interest of the borrowers side by side with the interest of their own organization. When these structures are in place, there is the likelihood that the possibility of credit default will be minimized. There is nowhere in the world however where we don’t have credit default in spite of structures put in place by any financial institution. The only way to protect credit is through legally acceptable means, which is the court.

How can banks stay afloat in the face of the challenge with TSA and an economy going into recession?

With the federal government mopping up all its resources into one account and the banks groaning under bank debts, this obviously announces to you that recession is around the corner. Recession has come on us because of poor attitude to managing the economy. The way out, as it affects the banks, is that banks should wake up and strengthen their marketing strategy for deposit sourcing by considering business networking through membership of relevant trade, business and professional associations

They seem to be too far away from associating with other business sectors, all moving en mass into oil and gas funding. Let these banks encourage fund pooling that can sustain a longer period of time like pension fund and hedge fund for example. They have to be forward looking in a developing market. They need to be environmentally driven in their marketing strategy, locating investment opportunities, not sitting and waiting for government funds.

What can be done in an economy slipping into recession?

Economic recession time calls for great creativity and innovative business ideas. In recession, you are going to have a lot of unemployed people because there are going to be rightsizing and downsizing. You have to shrink your size in order to survive until the economy is strong enough for another boom. People need to discover new business ideas. I don’t see banks giving out loans now and anybody thinking of approaching banks for loans should be ready to pay a higher interest rate.