I had watched and followed with keen interest as news broke on the arrest of Innocent Chukwuma, the Chairman of Innoson Motors by men of the Economic and Financial Crimes Commission (EFCC).
After a careful study of the trending development on both the social and mainstream media in addition to my personal research and knowledge of related issues, I have come to an informed conclusion that it’s a ‘case of no victim’ with vital lessons for all.
Let me also state here before proceeding further and without prejudice, that I am aware of the various litigations surrounding the issue with the latest coming from the EFCC filing a case in court against Chukwuma and others connected with it.
In the year 2009, for those that know, Nigerian banks were bullish with credit and in fact banks were competing with each other on the basis of credit approval but despite all these, GTBank remains conservative on lending and if they must give credit they give to blue chip companies and also were extremely selective with companies they will lend money to.
In fact among customers, GTBank is seen as a Bank that hardly lend money to her customers. Further, they decide the kind of business and sector they play in. And knowing GTBank for its activities in the credit market, one can’t but wonder how paths have crossed for both the bank and Innoson Automobile because these are dissimilar entities in all ramifications.
This sketchy background of the behind the scene story, is necessary even though waiting to be delivered in its full package sometime, someday .
The transaction between GTBank and Innoson gleamed from the media, was for GTBank to raise a letter of credit in favour of Innoson for the importation of spare parts, motorbike etc. from China on behalf of Innoson. The transaction is structured in a way that the propriety equipment is the collateral for the loan and the bill of laden will be in the name of GTBank in order to ensure that GTBank takes custody of the imported goods.
This arrangement is done by all banks in the past to help entrepreneurs get access to credit and also for the bank to make money. By this arrangement, a lot of banks got their fingers burnt. Ordinarily, GTBank should have asked for a collateral for the loan but how will Innoson be able to get a house worth more than N2.4billion to secure the loan – this is not possible and again we all complain that banks will always ask for head and blood when giving loans. So, this was a good deal for Innoson. Further to this, Innoson was to pay 25% of the value of the goods before the release of bill of laden/imported goods.
How GTBank got it wrong
I have also said that in credits, two departments are important – credit assessment and credit risk management. The former is to structure the transaction while the latter is to ensure the bank does not lose money. The way the transaction was structured, unless all facts are not given, opened a gap for what happened. In structuring the facility the risk manager failed to put total control of the transaction in the hands of GTBank. The transaction should have been structured to the end such that GTB clears the goods, delivers it at a designated warehouse and secured the goods herself since it(GTBank) claims ownership of the goods and not to say until 25% of the value of the goods is paid, the bill of Laden will not be release.
If you must put this clause then Innoson should have paid the 25% in a dedicated account before granting the loan as condition precedent. A lot of banks make this ‘stupid mistakes’ where a bank finances the importation of goods and refuses to pay for the clearing of the goods thinking the customer will clear the goods and then the goods goes into demurrage and the trouble starts.
I doubt if the account officer and the entire team will still be working at GTBank because there is no way they can absolve themselves from culpability. The reason is simple: there is no way the goods will be cleared without them knowing. If they do not know on day one, they will know in less than two weeks or latest, a month. If they get to know within a month, then the problem can still be salvaged by sealing the warehouse where the goods were delivered.
Presently, it’s more difficult to recover the goods and it will take a longer time to recover. It is obvious that GTBank was not strict on the credit from day one and I have no doubt on my mind that Innoson enjoyed ‘brotherly love’ from the Management and Board of the bank that led to serious lack of oversight function on the part of Management and Board Credit Committee.
Again, I think GTBank made a mistake by taking the matter to EFCC. The use of EFCC was suppose to be a short cut of recovering the money but as you can see the customer has grown beyond EFCC and looking at what EFCC has filed, any average lawyer will defeat EFCC in court.
My understanding is that EFCC went to court to get the matter out of their office when the pressure became too intense. GTBank cannot own the imported goods and at the same time, says the same imported goods were used as collateral for loan.
How Innoson got it wrong
I once told my bank that as entrepreneurs, if we want to borrow money from banks, we will be the one calling the banks but once the money is availed, the banks will henceforth do the calling. The Chairman of Innoson, may feel he is winning the war and in truth he is because the only machinery that could further intimidate him in Nigeria, has been intimidated to throw the case to the Judiciary, and for a business man, that gives him time apart for the day one humiliation of arraignment. Then after, he would have years of relief and no more psychological breakdown that banks bring to your doorstep. The truth however, is that this is the best you can get.
Innoson must realise that the aftermath of this event is that it has sent shocking waves to local lenders in the sense that no bank will be able to transact business with you because they know that you are bigger than your financial partner, and even the law. You may think this is not true but time will tell.
Some banks will still deal but trust me, they will be dealing for reasons not known to you. A bank that was able to lend you N2.4billion when no one knew Innoson and when there was no social media, cannot all of a sudden become an enemy even when their approach appears crude. You should think from a bigger perspective of other entrepreneurs that are trying to do the business you are doing and are in great need of the assistance that you got in 2009 and how this action would have blacklisted them, how no bank would not want to touch them.
Our banks live on precedence and it is difficult to remove. You are not showing leadership in this sector by turning to social media and ethnic coloration, which other businessmen have come to learn. Yes, it’s the survival of the fittest which desperate action requires desperate reaction but GTBank will outlive this problem and same may not be said about you.
Too many indigenous Nigerian companies are going down and we are losing the market to foreign players. Its time you looked at the future to the next 20 years when Innoson brand should be competing with brands like Honda, Toyota, Hyundai, all these noisemakers will not be there. Think the future and not now.
The take away…
The engagement of EFCC turned to “roforofo fight”, a fight GTBank does not like to be involved and cannot even engage in unless via back door. GTBank should learn that the way you treat customers that have borrowed few millions, is different from those you have lent billions of naira. The Babalakin’s case is still fresh in our memories.
The bank cannot achieve much from the criminal prosecution of disguising under forged documents, which will be difficult “to proof beyond any reasonable doubt”. A civil matter will yield better result and remove resistance from the customer from being looked and treated like a criminal because if Innoson was a criminal, how come your KYC (know your customer) didn’t detect?
Just thinking: Why was this loan not sold to AMCON?
Lai Omotola is the Group Managing Director of CFL GROUP and Publisher of