You will not repay your bank loan. This is not a curse. Here are the reasons. But first, let us get what the Governor of the Central Bank of Nigeria [CBN], Godwin Emefiele, said about the country’s loan portfolio. According to him, the banks’ non-performing loans stood at N1.2 trillion as of the end of June. This amounted to about 6.4 per cent of the gross credit of the banks to the economy, which is N18.9 trillion.
That is the verdict from the apex bank. However, here are the reasons you will not repay the bank loan. Sometimes life brings surprises. A relative dies. Investment goes bad. Accidents happen. Inflation eats your profits. Ill-health knocks you down. All of these can unintentionally break your repayment schedule. In any of these cases, your bank may give you a justifiable holiday.
Well, if you can’t make payments on one or more of your loans, it’s best you take action sooner rather than later. If you move quickly and engage your bank, the bank may relax the rules. For instance, sometimes the solution is easy. If you can’t afford your car repayments, you may sell the car. Get a less expensive but safe car. Join Plenty waka for a while. Unfortunately, things aren’t always that easy. But several strategies will help you stay on top of things.
Nevertheless, in the course of sniffing for information, I engaged executive directors of two of the leading banks on why some Nigerians do not repay their loan. They spoke to me under anonymity. That is like giving me a “loan”. I am here to repay my “loan” by keeping their names.
If you got a facility from the bank and you have not repaid the loan, what will happen?
Separately, the seasoned bankers explained that some loan applicants believe that the bank’s vault belongs to “nobody”. As such, “anybody” can have access to the vault. Take whatever he wants and walk freely. Because of this attitude, the loan applicants do not repay the loan. Again, the nitty-gritty of the loan saga is that, somehow, there are no consequences.
If you got a facility from the bank and you have not repaid the loan, what will happen? Let me tell you what will happen. Many Nigerians are sure that not much will happen. Worst case scenario, the bank will do two things. The bank will huff and puff. The bank will publish your name in the newspapers. Then, everything will fizzle. The bankers told me that “debtors always getaway.”
One of my subjects pointed out the case between late Buruji Kashamu and five banks. The deceased got N10 billion loans from the banks. He refused to pay. He then got a perpetual injunction at a Federal High Court in Lagos. The injunction restrained the commercial banks from instigating the Economic and Financial Crimes Commission [EFCC] from arresting him over “contractual transaction” between him and the banks.
“The compromised judicial system, where debtors believe, and rightly so, that they could escape being punished by the court is a bane to loan recovery in the banking system”, he told me. Aside from this, some unscrupulous bank executives always connive with loan applicants to secure the facility. “So this makes enforcement difficult when the loan goes bad”. Added to this burden of the enemies within, it is equally evident that “weak risk management” has made the loan process, documentation and prerequisites for loan very easy.
According to my two banker friends, another reason some Nigerians do not repay the loan is that they got the “loans for the wrong reasons”.
Had the banks established stringent conditions for loan applications with collaterals, the story would be different. This is because the bank can trigger the collaterals clause. Once the collaterals are disposed of, the banks will be reimbursed. This is the way things should be. But this is not the way they are.
However, the coronavirus has given some Nigerians a major reason not to repay their bank loans. Why will you repay your loan? Let me tell you why you will not repay. The coronavirus has forced your employer to lay you off. You have not earned a salary in the last seven months. You are not sure if you will get another job in 2020. Your debt profile is mounting.
Meanwhile, your house rent is due. Your children’s school fee is staring at you. Your car needs repair. Your health is failing. Repaying a bank loan is the least of your worries. Now, you know why you will not repay your loan. Anyway, if you cannot repay your loan, you can restructure it. If you cannot maintain the terms and conditions of your loan, you can request your bank to relax the conditions.
The conditions may include charges reduction, lowering of interest rate, lengthening of the loan tenure among others. You can settle for a one-time payment. The option is usually exercised when you are unable to repay your loan. This can occur when your interest is higher than your loan. Research shows that before you can opt for one-time payment your bank would have already classified your loan as a non-performing.
In such a case, you may not be in a position to make further payments. Recently, a bank gave a settlement offer to its non-performing loans in the education loan sector, in which up to 90% of the principal and 100% of the interest were waived.
According to my two banker friends, another reason some Nigerians do not repay the loan is that they got the “loans for the wrong reasons”. This is the wrong step. It will end in the wrong way. “They will divert the funds into another business. Once that business fails, they will default in their loan repayment”. The recent Global Standing Instruction policy from the CBN will ensure you repay your loan. Besides, SystemSpecs Payday, which sits in all the banks, will also ascertain you have no excuse not to repay your bank loan. Now, that is not a curse.
*Olaegbe (email@example.com Tweet @RarzackO Skype:rarzackolaegbe)