The recent crackdown by regulators and law enforcement on the activities of illegal online loan shark operations indicates the deteriorating economic situation in Nigeria. Tellingly, it reiterates the weakness of the Central Bank of Nigeria in asserting its mandate as the highest financial sector regulatory agency in charge of money flows and lending in the country. The regulatory effectiveness of the Corporate Affairs Commission, the National Information Technology Development Agency, the Independent Corrupt Practices and Other Related Offenses Commission and the Ministry of Communications and Digital Economy is also at the center of concerns.
In March, the vice-president of the Federal Council’s joint task force for competition and consumer protection, Babatunde Irukera, said the commission had frozen no less than 30 bank accounts run by illegal lenders. Irukera said the commission hired Google and the Apple Store to remove some loan requests from their sites, noting, however, that certain processes were required for that to happen. And to avoid and limit unintended consequences of the crackdown on legal lenders, he said the commission had hired three major loan companies whose businesses had been affected by the commission’s raid.
Obviously, due to the alarming state of the economy and the inability of relevant agencies to effectively regulate Nigeria’s tech space, illegal online lenders have been able to thrive. It’s dangerous; relevant agencies should promptly clean up.
Online loan sharks are preying on Nigerians. Their modus operandi is to extend seemingly cheap credit to poor citizens, apparently on less than strict and tempting terms, some of which defy the fundamental canons of lending. In reality, both the loan pricing that is not fully disclosed and the lax terms and conditions are all gimmicks to entice unsuspecting recipients into taking the bait. In the end, the victims realize too late the full extent of their burden when the reimbursement begins.
In the event of default, credit companies show their fangs; they deploy verbal assaults and cyber-harassment with great effect on defaulters, their relationships and friends on their phone contacts. It’s an abnormal way of working. It is also criminal.
Some go to bizarre proportions. The PUNCH reported that in January, a micro-loan company was accused of declaring defaulters dead, crafting and distributing their “obituaries” to family and friends. It has been reported that some of the defaulting customers of these lending companies committed suicide or became suicidal when they turned to them. It is therefore a welcome development that the government is attacking the Shylock companies to curb their atrocious activities.
According to Irukera, there are around 70 to 90 online lending applications currently operated by various companies in Nigeria. While not all requests are illegal, the majority are illegitimate. Some, although legitimate, stalk debtors in an illegitimate way. Irukera explained that some of the companies were not even Nigerian companies as they were not registered with the CAC and did not have a license to operate in Nigeria.
However, beyond the repression, there is the imperative to question how the country descended into this mess. Frankly, it’s a test. The unpleasant tendency of citizens to borrow abjectly for their basic consumption from unscrupulous loan companies, which inflict degrading treatment on them in case of default, comes from the deprivation of the population.
Although some of those affected are victims of their own greed, the harsh reality is that it is becoming increasingly difficult for many Nigerians to survive due to a struggling economy. Businesses are collapsing and industries are closing due to the difficult economic climate. Some 21.76 million people were unemployed at the end of 2021, the National Bureau of Statistics said.
Consequently, some are desperate, creating a loophole for loan sharks to exploit as unhappy citizens borrow from them to meet their basic needs. They face humiliating treatment from Shylock loan companies when they fail to repay.
What is the output? The priority is to urgently put the economy back on the road to recovery. The government should adopt short, medium and long-term policies to reduce poverty, stimulate SMEs and start-ups, control inflation and interest rates. Being an import-dependent country, the CBN has to work much more creatively and harder to effectively manage the Naira exchange rate and halt its free fall. All levels of government must aggressively stimulate productive activities. The surest way to eradicate extortionists from the system is to create socio-economic conditions that rob loan sharks of the vacuum of lack of access to credit at affordable rates.
Unfortunately, under the watch of the President, Major General Muhammadu Buhari (Retired), the difficulties spread, afflicting many Nigerians. Millions of people sink into the pit of poverty, making them vulnerable to loan sharks. After replacing India as the world’s capital of poverty in 2018, the World Bank predicts that the number of extremely poor people will rise from 87 million to more than 95 million this year.
The COVID-19 pandemic, widespread insecurity, energy crisis, external events and terrible mismanagement have compounded the plight of Nigerians. Desperate, many fall under the false promises of loan sharks and illegal moneylenders. The law should fall hard on criminals. Singapore’s Penal Code provides for up to five years in prison for offenders. The offense is punishable by two years imprisonment or a fine of £5,000 in the UK. Linked to organized crime, federal and state laws in the United States crack down on loan sharking. Individuals should take responsibility and thoroughly investigate all offers of credit.
The CBN should upgrade its monitoring, control and ICT systems, work closely with other regulatory and law enforcement agencies and eradicate 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 carefully monitored.
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