In a bid to monitor the campaign expenses of politicians, the Central Bank of Nigeria (CBN) has vowed to strictly monitor the rate at which banks provide loans to politicians to finance their campaign spending ahead of the 2019 elections. The CBN Governor, Mr. Godwin Emefiele, revealed this in Abuja after the meeting of the Monetary Policy Committee. The step by the apex bank is to ensure that politicians do not exceed their campaign expenses as stipulated in the Electoral Act 2010.
READ ALSO: Senate passes Electoral Act Amendment Bill
Emefiele explained that the apex bank took the decision to forestall the consequences of excessive lending to politicians by money deposit banks. He said that past experiences had shown that banks got into excessive risks by increasing their lending exposure to politicians.
To ensure compliance, the CBN boss recently met with chief executives of banks and warned them on the dangers of excessive lending to politicians, as well as getting involved in money laundering activities. It is commendable that the CBN is keenly watching developments in the banking industry, especially now that election campaigns have started. It is equally good that the CBN will not hesitate to impose sanctions on any erring bank. Therefore, we support the CBN’s decision to ensure that the banks manage their loan portfolios appropriately, and that politicians abide by the stipulated campaign spending limits. In fact, a bank bears a risk when it lends for campaign purposes, especially when the borrowers fail to repay the loans. It will be recalled that such loans in the past made some banks to become insolvent. Therefore, it is imperative that banks should control the risks of lending. Without doubt, bad loans have contributed to bank failures in the country. Banks should not allow such experience to recur.
We urge the banks to be extremely careful in their lending transactions. Some of the avoidable pitfalls include inattention to loan policies, generous or excessive loan terms and lack of clear standards, disregard of banks’ own policies, unsafe concentration of credit, lack of understanding of burrowers’ cash needs, out-of-market lending, and others. The banks should be aware that some politicians often exploit these faults in lending procedures.
In April, the CBN introduced new rules aimed at curbing insider crimes in the banking industry and stipulated some penalties on banks, their directors and other staff for money laundering and terrorism. The policy was formulated in collaboration with the office of the Attorney-General of the Federation (AGF). Sections 6-14 of Money Laundering (Prohibition) Act 2004 cover a range of offences and sanctions on banks, board members as well as chief compliance officers.
It is indisputable that during election campaigns, the banks are often the politicians’ last resort to get the much-needed money to run their campaigns. Available statistics from the Global Financial Integrity group revealed that Nigeria accounted for the cumulative $854 billion illicit cash from Africa between 1971 and 2009. It also reported that Nigeria lost $140 billion to illicit financial transactions and pointed out that the banks served as conduits for such illegal money transfers. Therefore, the loan policy formulation and objectives of the banks need to be reviewed, strengthened and effectively monitored by the CBN.
Additionally, it is important that the Independent National Electoral Commission (INEC) and the Economic and Financial Crimes Commission (EFCC) should also monitor the campaign expenses of party candidates to ensure that they do not exceed the ceiling stated in Sections 90 and 91 of the Electoral Act 2010 (as amended). According to the Amendment Bill, campaign expenses’ limit for a presidential candidate is 5 billion while that of governorship candidate is 1 billion.
Therefore, the banks must heed the CBN’s advice and conduct loan reviews to reduce losses. Loan reviews involve a periodic audit of the performance of some or all the active loans in the bank’s loan portfolio.
In all, the over-monetisation of the electoral process has placed an additional burden on the banks to be prudent and cautious in their lending. The CBN must tighten its surveillance of the banks.