Economic Confidential, September, 2009

INTERVIEW

Debtors Should Pay…But CBN is unfair- Jimoh Ibrahim

He is just 43 years old but his businesses cut across different sectors of the Nigeria’s economy. He is a lawyer, publisher, national award winner, oil magnet, hotelier and owns the major insurance company in the West Africa in addition to other investments in financial institutions and estates at home and abroad. He is Barrister Jimoh Ibrahim, the Chief Executive officer of Global Fleet group of Companies. After the recent directive of Central Bank of Nigeria (CBN) to major debtors in the Nigerian banks to offset their indebtedness on non-performing loans, Jimoh said that he was wrongly credited with inaccurate and bloated figure on the loan. In this interview he granted the Economic Confidential Jimoh voices out his mind on the new reform in the banking sector and the effect on the economy.

EC: How do you feel about the CBN publication of the list of debtors of the banks whose CEOs were removed

I feel very bad especially in the wrong figures attached to some of the debtors.  If accurate figures were published it would have been a different thing. For instance my bank wrote officially to us that we are owing them N8 billion, but the CBN claims we are owing N14 billion. I didn’t borrow from CBN nor do I have any contractual relationship with. But imagine the bank did not publish our huge deposits.  We have deposits in the bank and other banks. In that bank if you net our deposit from the actual figure of N8 billion which they communicated to us, it would definitely reduce our indebtedness drastically. If Nigerians ask me why I owe N8 billion, I will publish what I used the money to do, which is to create 15, 000 jobs and buy so many enterprises. Not too long ago, we wrote a cheque of N25 billion to the Federal Government for some of the enterprises it sold to us. People should also understand that every loan that we took is secured, properly collateralised. By CBN regulation, it should be 150 per cent collateralisation. So, if the bank had achieved that, then what is the problem about taking loans? They can foreclose on my collaterals. What I am not happy about is the inaccurate figures credited to me.

EC: Only few banks have so far been audited by CBN, what could have been the reason for the selective auditing?

It would be disastrous if he does not complete the auditing and publish the debtors of the remaining banks. There are many ways of going about it. Sanusi could have asked the CEOs to resign and report to the Economic and Financial Crimes Commission (EFCC) for investigation. He still could have achieved the same purpose. Then he would have got the time to go and do a thorough audit. You could do the audit and give them the report to defend themselves. If you are not satisfied, then you prosecute. But I want to say that anybody owing any bank and has been served a notice should pay back. I will not defend any loan defaulter. They should pay back and lodge their complaints later. To me, failure to repay money taken from the bank after appropriate notice had been served amounts to corruption. But CBN must follow the due process. I know the President to be painstaking person, who will not support a military approach. You don't come on television to say, 'I, by the power conferred on me,' when you could have communicated the same message to the bank chief executives concerned by circular. Have you ever seen the President saying that, even when he sacked his ministers? But why should CBN  approve an account and immediately remove the managing director. What could be the effect of this on the economy?

EC: How does CBN determine loans that are performing or not performing?

They are not the judiciary. CBN would have had a fantastic argument if only it had exercised some patience in compiling the debtors' list it published. The loan might not be performing in the opinion of the CBN, but it is the judiciary that can finally determine whether or not a loan is performing. There is no specific law in Nigeria that says a loan shall perform provided credit input every other day or whatever. The interpretation could be objective or subjective. In fact, there are three ways of interpreting the statutes. You have the literary rule, the golden rule and mischief rule. CBN could have relied on literary interpretation in determining which loan is performing or not. But CBN should read those Supreme Court judgments concerning the banking sector. That of Kutoye and Saraki is a very good example. A customer can sue CBN on the status of the loan and want the court to declare that his/her is performing, citing instances. For example, if a customer's account is over-charged by a bank for almost N2 billion and the bank, by its own admission stated so in writing, the customer can suspend activities on that account until the account is audited. If at that time, CBN picks the account, it would not get the accurate information about the customer and the bank and terms it as a non-performing loan; that would be wrong. That was exactly what happened in my case, and I am sure CBN didn't have this information.

EC: Are you saying the loans are performing?

Most painful facts is that they tagged the loans as non-performing when in actual fact they are performing as most of the published debtors have been paying money into their respective accounts, like in my own case with detailed bank drafts and the amounts on three different occasions, not on the same day, the bank is saying the they have been cleared and it is reflecting in the ledger. Remember I am landlord to Oceanic Bank in its 20 branches. I still wonder why the CBN is publishing people's debts without publishing their deposits. You don't look at accounting from the aspect of liability without looking at assets. It is an embarrassment of the highest order to take the balance sheet of a company and judge it only on the basis of liability without looking at assets and draw a conclusion. We must do this thing with good conscience. I don't blame CBN for rescuing the financial sector, which I think was also destroyed by CBN itself, because it allowed people to withdraw what they didn't have with it.

EC: So you are saying that the new CBN Governor is not fair…

I don’t have anything personal against Sanusi or his new reforms. He can publish the list of debtors, that is not my business but at least publish the exact debt with accurate figures that these people are owing as the regulator in this industry. I can say that there is nothing really bad in the new reform of CBN. The only problem is that the process or procedure is not right. For instance, under the Bank and Other Financial Institutions Act (BOFIA), which is what the CBN is relying largely on, it is not the duty of CBN to recover bank loans or publish debtors' list. That is not within the BOFIA law. So where did they get the power to do what they did, since it is outside the law? That is if those views are canvassed in the court of law, for instance, CBN might find itself in a tight corner.

EC: There are various complaints on loan abuse in Nigeria, what can you say on that?

As a businessman, I have borrowed money from banks and fully repaid and most of them not only issued us discharge letters but also appreciated our prompt payment even when we have a lot of deposits in the banks. To me, it will show Nigerians that we are not fronting for people. We do our legitimate businesses, sometimes by borrowing from the banks and repaying. At the same time I agree with you there is loan abuse in Nigeria. There can be no defence for somebody who has taken loans not to pay back. I know some big businessmen who owe about N400 billion. In fact, I used to know two people that owed about N1 trillion. That is why I feel CBN would have made history if it had published exactly and correctly, what individuals owe the banks so that it wont be criticised of protecting some individuals. I know an individual that owes over $700 million in Nigeria, whose loans are said to be performing. Like I said reducing some people's loan by margin of computer error is not the best for this country. I know somebody, who owes about N12billion in one transaction in Oceanic Bank, another N2 billion in another transaction, but where the name was published, the figure one was missing and it reflected just about N2 billion. How can that be? It is amazing and I don't see how that can be correct. I strongly support the idea that debtors should pay back these loans, because if they don't, it is difficult for the banks to lend to the young entrepreneurs, who probably have better ideas than the debtors in doing business. By God’s grace when our newspaper comes on stream, we will publish those figures that we know about, whether CBN likes it or not.

EC: Don’t you think publishing the list is to encourage the debtors to pay?

Paying by intimidation? If this happens in other countries of the world, where the major players in the economy … the employers of labour are indirectly indicted and discredited through unnecessary and inaccurate figures, it could really be dangerous to their economy. Such publications could make the banks to lose business and public confidence.  If for instance all the debtors felt threaten by that publication and they close their accounts and transfer their businesses abroad, the panic in the system and expected loss of jobs would be unbearable. There is nothing wrong in borrowing money to do business. Most of these billionaires are debtors, just like other countries are.  If there are non-performing loans, CBN could have directed Nigeria Deposit Insurance Corporation(NDIC)which has statutory responsibilities to ensure recovery of the debts.

EC: But can one do business without bank loans?

You can’t do a very big business at a high level without taking bank loans unless you are using government money or looted funds from somewhere that you are using. If you are working with free funds, then it is not your money. A business can’t succeed if it lacks the basic ethics expected to make things work. Like I keep on saying all over the world, businessmen go to the bank to borrow money to carry on their legitimate businesses. As businessmen, we see loan as extra gear in the motor vehicle that can take you to the smoothest and fastest possibility in your journey. People like us collateralised the loans. If I owe a bank N8 billion, it means that I have N12 billion worth of collateralisation with that bank. That is how this thing works. No bank will give you money if you don't have enough collateral to back it. Anybody granted loan is of high integrity. It is people that do not have enough assets to secure a loan that the banks do not grant loans.

EC: Is easy to get loans from the banks?

In our own case, in a year, we reject about N70 billion worth of loans from different banks, because we are doing very well. That is the synergy between Oceanic Bank and us. Our only point of disagreement was the over-charging of our account to the tune of almost N2 billion in several transactions, and that is no small amount.

EC: Don’t you believe that some of the debtors cannot repay their loans?

It is not possible for a bank to give a loan without collateral. Our loans are adequately secured because if they are not secured then there is nothing to fall back on. For instance my companies can clear our indebtedness with our 480 million units of oceanic Bank shares and deposits in the bank apart from our collaterals. If a customer took a loan and had been faithful in repayment within the agreement, or defaulted only once, how easy is it to repay the entire loan in just one week? Like I said, there are no defaulting clauses in most of these loan agreements. Secondly, CBN does not understand the components of the loan given to us. Some were given loans in form of overdraft to be used for day-to-day business activities. That can never be non-performing. For example, I collect money/sales from my over 200 filling stations across the country every day, which is paid into my account with the some bank, so, how can my loan be non-performing? Some people's loan is for a five-year term, which may not have expired. So, how does that become a non-performing loan? In some people's cases, there is two-year honourarium, although I don't know how the banks came about that or how a customer can enjoy honourarium for two years without paying principal and interest back. It is amazing.

EC: How much was the original facility you had with Oceanic Bank?

We have almost N 100 billion turn over in the bank every other two years because it is a large account.  As far as I am concerned, I am passionate about my business… creating jobs to Nigerians.  We have about 15,000 in our employment.  We pay more than N500 million per month for the entire conglomerate, that is about N 6 billion a year. In our business relation with Oceanic Bank, between December last year and May this year, we repaid over N4 billion, which was acknowledged by the bank, after the over-charge issue had been resolved. Since CBN published the list, we have repaid over N3 billion. And you say the loan is not performing; in the same bank where I have some shares and I am landlord to its 20 branches and have a deposit of over N2 billion? If the over N4 billion we paid earlier was not reflected in the account in the report to CBN, then something was wrong somewhere. For me, my loan was performing, because I paid in over N4 billion by May.

EC: What do you expect the CBN to have done?

The new CBN is seemed to be so much in a hurry when it could have held meetings with the affected banks and probably with the highest debtors to determine the real positions on the ground before the publication. These debtors are also the largest depositors of cash in the banks.  There was no need to be in a hurry.  What are you in hurry…hurry for.  Nobody is going to run away from Nigeria. My point is that if CBN had realised that some of the banks were not doing the right thing, the best thing to do is to go check thoroughly before accusing customers of defaulting in loan repayment, because it is possible for them to have wrong returns. Some banks could keep three accounts- one for the customer, one for CBN and one for the management. In that case, if CBN relies on the one given to it, there is no binding contract with the one they gave to the customer. So, there is a problem there. That is why we think that the principle of total disclosure, as canvassed by Sanusi, would have received the highest level of commendation, if there were patience in ascertaining what actually happened. But people are saying, 'oh, it is a marginal error.' How can it be a marginal error? A small error can make a plane to crash.

EC: Have you complained to CBN?

I don’t have a contractual agreement with the CBN... I don’t bank with CBN and I didn’t borrow from the CBN and CBN is not my regulator.  They are regulating the bank so they should collect their information from the bank. You should also note that we have a global recession and in developed nations, they are careful and they cannot publish list of debtors. The richest man, Bill Gates  is a debtor but no one published his name because in a recession most big businesses lose their money. When the other time I said that these were these bad, some people said Jimoh Ibrahim had come again. They insisted that we were not in a recession; that recession is technical. Now, we are taking almost half a trillion naira from the national treasury to rescue banks problems. Are we not in recession? Most of those that borrowed money to finance their oil businesses actually lost a lot when the Naira depreciates against the dollar and the prices of the oil crashed. The money was wisely invested but the economic meltdown affected the business and expected profit but a debtor must find a way to pay back to the bank.

EC: Do you read ethnic or sectional sentiments to all these?

It depends on what unfolds in the agenda of the CBN. For now, I believe regulation is for corrective measures and punitive. Even in the office, we cannot sack somebody without hearing his own side and based on the response/defence, you decide what actions to take against the person. There are a lot of punishments that CBN knows. CBN says the banks were at the grave stage, but why were they there? After all, somebody had been approving their accounts all these years. Where did things go wrong? CBN management is a continuous one. I know one thing that will come out of this: if the entire exercise is based on illegality, for any reason and cannot be supported with cogent facts, the President Umaru Musa Yar'Adua I know will reverse it. So, don't let anybody use any wrong information to achieve his/her desire today, because he/her will lose it tomorrow. I strongly believe that if the President had been around when all these things were happening, considering the consequences and all that, maybe he would have asked them to use another means or method. He will have reviewed the strategy.

EC: How do you view the rush by debtors to pay back?

It may ultimately lead to unemployment, because most of those paying back are doing so from their working capital. And when you don't have enough working capital, you begin to right size. But that should not be a defence not to pay back your loan, because if you show the capacity to pay back, you can get bonds to do your business. It is also a bad business habit to borrow and not want to pay back. And if people refuse to pay back, there are procedures the law enforcement agencies can use, like what the EFCC has done. Some people took the loans to execute even government projects that may not have matured which they should have envisaged when they took the loans. In any case, a loan has duration; it is not granted perpetually. The loan is guaranteed. If you default, the bank can foreclose on the guarantee.

EC: Have you been to EFCC?

Yes when they requested for some documentation about the payments which I did. We also want to reconcile the accounts, which the bank has agreed. In one of the accounts, I have discovered a charge of 33 per cent interest rate, which is not what we agreed on with the bank. But that is not what I am contesting. The general loan can be published as a figure, while I can then go to the bank to reconcile some of these other issues.

EC: Can you tell our readers the level of your indebtedness to Nigerians banks?

It may interest you to note that my companies have offset most of our indebtedness with Nigerian banks and which they acknowledged and in several occasions they wrote us letters of appreciation. For instance Oceanic Bank wrote to acknowledge receipt of value of N3bn on our outstanding facilities with the bank as at May 18, 2009 before the additional N3bn we paid in August; Union Bank sent a letter conveying management decision to allow our fixed deposit of 126mn pound sterling to run at 5% interest after I rejected 0.75% per annum. The deposit in Naira value is over N35bn in cash as at August 3, 2009. We also received a letter of non-indebtedness from various banks that we have dealt with which shows our unblemished records in financial probity. Skye Bank sent us a letter of appreciation upon payment of N3.7bn to clear our indebtedness; Intercontinental Bank too issued us a letter of non-indebtedness upon payment of N9.5bn as at February 2009; FCMB too on payment of over 2.2bn in April 2008. So far we are not indebted to 21 banks, while the outstanding indebtedness in the remaining 3 banks are performing loans.

EC: Your final words

We thank the general public for their concern over the misinformation that was circulated by the CBN. We have also instituted a case against the CBN to seek redress over the wrong publication and the incalculable damage the said publication has done to our company’s integrity. In future we advise the CBN to follow the President Umaru Musa YarÁdua’s desire for due process in its quest to reform the banking sector. One of the 7-Point agenda of the Federal Government is wealth creation and the only legitimate way to accelerate this is to make use of bank financing. At Global fleet, we have taken advantage of this method to grow our business and have been paying the banks’ funds as and when due. And before we approach a bank for funding, we make sure that we have 150% security for the loan in the bank.

Thank you

Related:

Jimoh Ibrahim Pays  N3.1bn to Oceanic Bank Over Debts

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