Director, CBS Credit, United Kingdom and Chief Executive Officer, Institute of Credit Administrator, Dr. Chris Onalo, lists steps to borrowing. He spoke with BOSEDE OLUSOLA-OBASA
How would you rate the credit appreciation of Nigerians in the past two decades?
It is better now compared to when I started the awareness project in the 1980s. Nigerians now appreciate that credit drives the economy. Banks now appreciate the need to keep management books well. They have better understanding on the importance of lending to the public as a key driver of the sector. I’m happy about the recent move by the Central Bank of Nigeria blocking the access of habitual loan defaulters to further facilities. The beauty of borrowing is paying back as and when due. Credit administration and management has come to stay in Nigeria. The Institute of Credit Administration remains committed to developing skills and education in line with global best practices in credit as a discipline. We are on course with one of the major requirements for industrialisation. Government is, however, advised to moderate the growth of the economy by expanding ideas that encourage wealth creation. I’m glad about the progress so far made in this field as one who was privileged to champion it. For me, that is a way of fulfilling my purpose on earth.
What do you say to people borrowing money to throw lavish social parties?
In credit management and credit-driven societies as a whole, there is room for borrowing for either personal or business purposes. It really depends on the choice of the borrower and the will of the lender to give him access to the credit being sought. Some basic rules must, however, be observed to avoid strain. The person borrowing money to throw a party must do so against his income – that is, in line with his capacity to repay back within the agreed period. It is wrong to borrow money for business and then divert such into social frivolities. It will mean losing at two ends – the business will suffer and the loan will still have to be paid. Borrowing for social engagements comes under consumer borrowing. If someone genuinely needs money to meet a social need and the money is not readily available, he could borrow with the expected income in view. But people must avoid borrowing just to massage their non-existing social symbols. If someone is borrowing to organise a social event where big donations are envisaged, then there is some commercial sense in that step. This is because what he makes at the end of the day can be used to pay back and possibly have some money left. Intending couples should, however, be wary of borrowing to stage their wedding. Cases abound where newly-weds begin their union on such a wrong platform. They start with tension from creditors who are bent on having their loans paid. This should be avoided. The ultimate rule is to live within your means. Don’t window-dress your status. Another important note is for the lender to ensure that there is proper documentation when money is being given to a borrower. This principle is important for every kind of borrower – local or organised setting. This is crucial because every lending transaction comes with the risk of not getting the money back. There must be proper documentation with which you can enforce the repayment of your money. People should stop giving out loans based on sentiments. Above all, we need to build our society on contentment and avoid recklessness, chaos and sorrow that goes with not being able to honour a loan agreement. Not living within your means will make a salary earner to commit fraud in his office just so that he can pay back his loan and avoid imminent shame. Professionally, I advise people not to set up an image that doesn’t belong to them. That accounts for the level of corruption in the political sphere.
Is it okay to patronise locally-advertised ‘money lenders’?
This brings me back to the issue of contentment. What are you borrowing for that is so urgent and you have to patronise a money lender that you do not know? There is always the need to define your project funding initiative. Are the money lenders legal? Are they licensed? Are they recognised by the Central Bank of Nigeria, which regulates the industry? What if you get your hands burnt, are they answerable to CBN? I must say that the CBN has done well by sounding notes of warning on this issue on a regular basis. There has been a consistent campaign against them, urging members of the public to avoid patronising them. CBN says that they are not legal borrowing outfits. What if you fail to meet their terms and they come around and cart away your belongings? Who would you run to? You would be on your own. I hear that people even borrow to foot rents for their apartments; but that is a signal of poor financial planning. You should follow a sound personal financial plan that makes provision for your bills before they are due for payment, provided you are living in an apartment that is the size of your pocket. Don’t just say that you are operating by faith and from a one-room apartment with two children and you say you are moving to a three-bedroom flat. The question to ask first is, “has my income increased to match the new lifestyle I desire?” Nigerians are too desperate and this should give way to decent living.
Is it proper to borrow money to pay a loan?
You are still in the circle of debt. You are not free. You only moved perhaps from an impatient creditor to a more patient one. But if there someone with a true sense of credibility and he falls into a circumstance that requires an urgent action such as borrowing to repay an existing loan, it is permitted. It could happen in consumer and corporate borrowing. It is a type of debt buyback. It is not free, it may even increase your cost, but the money can be paid back at a later and more convenient day.
What should individuals note before entering mortgage arrangements?
First, I would say that the trend in one-on-one mortgage marketing is a good development. We now have situations where individuals have access to mortgage funds to develop or complete the development of their homes. Everyone looks forward to a time when they can move into their completed homes, and this will reduce the cases of abandoned projects in town. However, I advise people to read between the lines before signing a mortgage arrangement. Failure to do this may result in losing your property to the mortgage company. Even if you have spent N10m on the building and all the company invested to complete it is N3m, you will still be a tenant to them pending the complete repayment of the loan. So if you desperately enter the agreement without understanding the conditions, you may default in payment and they may take over your property, sell it and give you the change, which will not be sufficient to build another house. They are in business for profit, but you have the right to ensure that their terms suit your capabilities before entering into it. Don’t be in a haste at all. You must also involve the services of your lawyer. He will interpret the conditions and their implication to you. There should be no verbal agreements, ensure that everything is documented.
You initiated the Nigerian/London business and trade forum. How will business owners benefit from it?
I do not reside in the United Kingdom, but I own some businesses in London, which makes me a regular visitor to the city. I identified a vacuum that needs to be filled in terms of business opportunities for Nigerians. During one of my business trips, I observed that London, the UK’s biggest commercial capital, was lacking in a dedicated business and trade enterprises platform for the London-based Nigerians that own credible businesses. I thought there should be a forum that would influence policies and programmes of government, disseminate useful information and provide business advice, foster co-operation, consultation and collaboration in business, trade and investment, and to make its opinions known on matters affecting the business environment generally in the city of London.
This was what led to the conception and eventual incorporation of the Nigerian-London Business Forum, essentially to join the league of credible elite advocacy and lobbyist-organisations, whose mode of operation is fashioned, structured and managed in the manner that is consistent with best practices. Like a seed, it has been planted, but the watering of the seed for growth is the responsibility of people whose interests the forum seeks to cater to.
How will the forum operate?
To operate as an individual legally and to have legal authority, the forum was incorporated as a private body under Companies Act 2006 of the Laws of the United Kingdom, and is limited by guarantee with registration number 8294525 dated November 15, 2012. Going by the popular saying that a tree cannot make a forest, I shared the vision with some distinguished personalities such as: Mazi Sam Ohuabunwa, (a former President, Nigerian Economic Summit); Prof. Pat Utomi, (a respected entrepreneurial advocate); John Momoh, (Chairman/Chief Executive Officer, Channels Television); Ray Ekpu (a Former Editor-in-Chief, Newswatch Magazine); Dr. Adekola Ali, (Managing Director/Chief Executive Officer, Union Bank, UK Plc), and Jonathan Banjo, (Managing Director, AJB Executive Search Limited, London).
The trade and commerce section of the Nigeria High Commission in London, in a letter, stirred up our patriotic efforts when it sent words of support and commitment to the initiator of NILOBF. The functions of NILOBF honorary board members are non-administrative and non-executive. It is based on bilateral policy advisory, advocacy and other essentials that strengthen bilateral engagements.