…As FG targets $1bn from tax amnesty scheme***
Bank directors with non-performing loans (NPLs) are to quit or be sacked, according to a new Code of Corporate Governance approved by the Central Bank of Nigeria (CBN).
Director, Bank Examination Department at the Nigeria Deposit Insurance Corporation (NDIC), Adedapo Adeleke, said the new code was instituted to address the rising cases of insider bad loans, which not only represent a conflict of interest, but are against the prudential guidelines for the industry.
He described corporate governance as an essential pillar in financial system stability.
Banks’ assets have depreciated in the last three years, with provisions for NPLs hitting N856.9 billion, due to the drop in crude oil prices. A large part of these bad loans is owed by bank directors and are in most cases unsecured.
Besides, the economic recession showed that the financial industry still harbours weaknesses in governance, as seen in insider non-performing loans, unreported losses, huge exit packages for directors, over-domineering executive management, contravention of regulatory/prudential guidelines and lending limits, poorly appraised credits and weakening of shareholders’ funds, among others.
Adeleke, who spoke at the weekend in Kano during a media workshop organised by NDIC for finance reporters, said the Corporate Governance Code for Bank Directors is signed by all bank directors at the point of their appointment, and has a section that empowers the banks’ boards to remove any director with insider non-performing loans. That section says: “If you are having non-performing loans, you will be removed. It is already being enforced except that the regulators are not being dramatic in publishing the names of affected directors,” Adeleke said.
Speaking on the theme: Curtailing the Growth of Non-Performing Loans in Banks: The Role of Regulators and Supervisors, he said that delay or non-payment of workers’ salaries by government and private companies is worsening the level of non-performing loans in the industry. He said the rate of non-performing loans is in excess of 20 per cent as against the five per cent regulatory threshold.
The NDIC director said when salaries are delayed, workers who have borrowed from banks, especially through consumer loans, always find it difficult to pay back. “If the economy is improving, and government can help to fulfill its responsibilities, including prompt payment of salaries, the level of non-performing loans in the industry will drop,” he said.
“If people working in companies that are troubled borrowed from banks, it is important that the loans be provided for when their employers can no longer pay salaries,” he said.
He however, expressed confidence that the current rise in crude oil prices will impact positively on the banking industry and businesses and help reduce the rising cases of bad loans in the industry.
Adeleke said the establishment of the Asset Management Corporation of Nigeria II (AMCON II) to buy up non-performing loans as being suggested can only be private sector led. “If there is going to be AMCON II at all, it is going to be private sector-led,” he said.
He said the CBN Prudential Guidelines allows banks to review their credit portfolio continuously (at least once in a quarter) with a view to recognising any deterioration in credit quality. Such reviews, he added, should systematically and realistically classify banks’ credit exposures based on the perceived risks of default.
In the meantime, the Federal Government is targeting to rake in about $1 billion from the on-going Voluntary Income and Asset Declaration Scheme, VAIDS, before the deadline on March 31, 2018.
The Minister of Finance, Kemi Adeosun, who made this disclosure on the sidelines of the VAIDS training workshop in Lagos at the weekend, said the ministry had received $110 million already from just two companies. She said: “We have set $1 billion as the success target.
However, it’s not really about how much money that comes in. For me, it’s about getting people into the tax net, going forward. Once people start declaring the appropriate income, that revenue for the government will be continuous.
Hence, regardless of the oil price, the government will have a steady source of revenue. “The problems we have faced in the last two years would not have occurred if we had a better tax collection system. Developed countries, today, have a very high tax to GDP ratio, some as high as 90 percent. The days of heavy dependence on oil ought to be over.”
Adeosun further disclosed that Nigeria was already a part of the Automatic Exchange of Information, AEOI, that plans to supply the government with information concerning various categories of income and financial transactions of Nigerians in other countries.
She said that from January 1st, 2018, the ministry will have full access to this information. She has promised that the ministry will name and shame wanting individuals and entities that fail to avail themselves of the amnesty programme after the deadline. “It would be premature to call persons who have/will receive letters, ‘Tax Evaders’. We will only label people as real tax evaders when the VAIDS deadline expires and they have failed to regularize. We will then proceed to apply the full weight of the law.
Then we must name and shame the tax evaders,” she affirmed. Adeosun added that the ministry was working relentlessly with agencies such as Federal Inland Revenue Service,FIRS, Corporate Affairs Commission, CAC, Securities and Exchange Commission, SEC, Nigeria Customs Administration, among others, to mine the data required to detect tax defaulters.
“Increased cooperation between the Federal & State Governments, and also with foreign governments, has provided the ministry of finance with unprecedented amounts of data that allow us accurately profile taxpayers & identify those whose lifestyles/assets are not consistent with their declared incomes.
Nation with additional report from Vanguard
