The Senate has taken steps on a bill that will empower Nigerian banks to recover loans from defaulters without consent from the borrowers.
The bill which passed second reading at the Senate on Tuesday will require banks place their defaulters on watch-list and ultimately blacklist them without their consent.
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.
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 forecast 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.
