Nigeria has a serious debt problem. It is such a pervasive problem that families will not invest in the businesses of their family members, banks refuse to give loans without collateral and there is an unhealthy amount of distrust when it comes to financial matters. This has persisted largely because there were no instruments to punish loan defaulters other than foreclosure, and Nigerian loan defaulters have gotten very good at hiding their assets either by registering properties and businesses in the names of family and acquaintances or operating multiple bank accounts where money is domiciled after it is taken as a loan. The Central Bank of Nigeria (CBN) sought to address this and other problems plaguing the banking industry by implementing the Bank Verification Number policy (BVN) that required all Nigerians to agree to a biometric registration process that connected their identities to a BVN. With this BVN, individuals with multiple accounts were required to connect all their accounts, private and corporate.
The primary solution that the BVN solved was cleaning up the banking industry, it improved response times for bank transfers as the complex process of verification was no longer needed as a client’s details could simply be brought up via BVN. It also made book keeping significantly easier for financial institutions and the CBN. And now, it will make banks seeking to recover their funds from defaulting clients significantly easier.
Bruh if you know anyone taking loans and defaulting to pay, tell them time’s up. Banks now have authority to reclaim their debt from your other funded accounts now via BVN. pic.twitter.com/7hLf3DyRBg
— Nasty Gal (@Miss_Bilala) July 15, 2020
What does this mean for Nigerian loan defaulters?
Banks will have the backing of the CBN and the autonomy to repay defaulting loans by consolidating client accounts. It will also mean that individuals who pay personal moneys into their corporate accounts run the risk of having those moneys become subject corporate and income taxes, and vice versa for clients who pay corporate funds into personal accounts. However, we can’t really predict how this new directive will be implemented until the banks put it into effect.
One thing is clear, privileged people who abuse the access they have to financial institutions will be forced to think twice before they take their next loan.