THE recent clampdown by regulators and law enforcement agencies on the activities of illegal online loan sharks operations points to the deteriorating economic situation in Nigeria. Tellingly, it reiterates the weakness of the Central Bank of Nigeria in asserting its writ as the highest financial sector regulatory agency in charge of the monetary flow and lending in the country. Also in focus is the regulatory efficiency of the Corporate Affairs Commission, the National Information Technology Development Agency, the Independent Corrupt Practices and Other Related Offences Commission, and the Ministry of Communications and Digital Economy.
In March, the Vice-Chairman of the Joint Task Force of the Federal Competition and Consumer Protection Council, Babatunde Irukera, said the commission had frozen no fewer than 30 bank accounts operated by illegal loan organisations. Irukera said that the commission had engaged Google and Apple Store to take down some loan applications from their sites, noting, however, that there were certain processes required for that to happen. And to avoid and limit the unintended consequences of the clampdown on legal lenders, he said that the commission engaged three major loan companies whose businesses had been adversely affected by the commission’s raid.
Clearly, due to the parlous state of the economy and the failure of the agencies concerned to efficiently regulate Nigeria’s technological space, the illegal online lenders have been able to thrive. This is dangerous; the relevant agencies should quickly clean up.
Online loans sharks are preying on Nigerians. Their modus operandi is to give seemingly cheap credit to impoverished citizens, ostensibly under less-than-stringent, tempting conditions, some of which defy the basic canons of lending. In reality, both the pricing of the loans that lack full disclosure and the lax terms and conditions are all subterfuges to hoodwink unsuspecting beneficiaries to take the bait. In the end, the victims realise too late, the full extent of their burden when repayment starts.
In the event of a default, the credit firms bare their fangs; they deploy verbal assault and cyber-bullying to great effect on the defaulters, their relations and friends on their phone contacts. This is an abnormal way to operate. It is also criminal.
Some go to bizarre extents. The PUNCH reported how in January, a micro-loan company was accused of declaring defaulters dead, designing and circulating their ‘obituaries’ to family and friends. Some of the defaulting clients of these loan companies have been reported to have committed suicide or become suicidal when they turned the heat of loan recovery on them. It is, therefore, a welcome development that the government is raiding the Shylock firms to rein in their atrocious activities.
According to Irukera, there are about 70 to 90 online lending applications currently operated by various firms in Nigeria. Although not all the applications are illegal, the majority are illegitimate. Some, though legitimate, are tracking debtors illegitimately. Irukera explained that some of the companies were not even Nigerian companies, as they were not registered with the CAC and do not have a licence to operate in Nigeria.
However, beyond the clampdown, there is the imperative of interrogating how the country descended to this mess. Bluntly, it is hardship. The unpleasant trend of citizens abjectly borrowing for basic consumption from unscrupulous loan firms, who mete out degrading treatment to them when they default, comes from privation among the populace.
Although some of the affected persons are victims of their own greed, the bitter reality is that it is increasingly becoming difficult for many Nigerians to survive due to the battered economy. Businesses are collapsing and industries are shutting down due to the harsh economic climate. Some 21.76 million persons were unemployed by late 2021, said the National Bureau of Statistics.
Consequently, some are desperate, creating a loophole for the loan sharks to exploit, as hapless citizens borrow from them to meet basic needs. They face humiliating treatment in the hands of the Shylock loan companies when they default in repayment.
What is the way out? The priority is to urgently set the economy on the path of recovery. The government should adopt short, medium and long-term policies to alleviate poverty, boost SMEs and start-ups, tame inflation and interest rates. Being an import-dependent country, the CBN needs to work much more creatively and harder to effectively manage the naira exchange rate and halt its free fall. All tiers of government must aggressively stimulate productive activities. The surest way to stamp out the extortionists from the system is by creating socioeconomic conditions that deny loan sharks the vacuum of lack of access to credit at affordable rates.
Sadly, on the watch of the President, Major General Muhammadu Buhari (retd.), hardship has spread, afflicting many Nigerians. Millions are sinking into the poverty hole, thereby making them susceptible to loan sharks. After displacing India as the world’s poverty capital in 2018, the number of extremely poor is projected by the World Bank to rise from 87 million to over 95 million this year.
The COVID-19 pandemic, widespread insecurity, energy crisis, external events and the terribly poor management have worsened the plight of Nigerians. Desperate, many fall for the false promises of loan sharks and illegal lenders. The law should fall hard on the criminals. Singapore’s criminal code prescribes up to five years imprisonment for offenders. The offence attracts two years imprisonment or £5,000 fine in the United Kingdom. Linked to organised crime, both federal and state laws in the United States clamp down on loan sharking. Individuals should take responsibility and investigate all credit offers thoroughly.
The CBN should upgrade its surveillance, monitoring and ICT systems, work closely with other regulatory and law enforcement agencies and exterminate this new crime. The CAC should shut down illegal and unregistered businesses. The Ministry of Communications and NITDA should ensure that online applications made available to Nigerians on Google, Apple play stores and other platforms are thoroughly vetted.
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