Experts' recipe for effective credit policy | Thenigeriandaily.com

Saturday, April 7th, 2012 | Source:

LACK of effective credit policy is at the heart of the crisis bedeviling the nation?s economy at all sectors, experts have said.

A cross-section of experts made this declaration at the annual industry conference organised by the Institute of Credit Administration (ICA), Nigeria?s foremost credit management body, which held at the auditorium of the Chartered Institute of Bankers of Nigeria (CIBN), Victoria Island, Lagos.

The event, which drew participants from the financial service sector including senior managers, executive directors in charge of credit matters, members of the Credit Committee of Banks, business management organisations, among others, was chaired by Chief Godfrey Ozurumba.?

Dr. Chris Onalo, the Registrar/Chief Executive of the institute who delivered the lead paper titled: ?Company Credit Report and its place in Business, Lending and Investment Decisions?, gave a general overview of a credit report vis-?-vis its principles and practice.

Onalo who stated that the conceptual framework of a credit policy can best be discussed in four phases namely: credit analysis, credit administration, credit risk management and credit reporting, said it was gratifying to note that the concept was already gaining acceptance in the continent.?

Speaking further, he said the components of a company credit include but not limited to the following: business risk, financial risk, management risk, industry risk, political/country risk, forex risk respectively.

Justifying the need for credit report, the ICA boss said, it comes in handy when mergers and acquisition between different companies are being planned as well as when equity investment is being sought by a party from another, to mention just a few.?

Besides, he said: ?CCR is an innovative and value-added credit management initiative designed to support and justify credit approval process, ensures ?Know Your Customer ? KYC? compliance, strengthens internal appraisal rigor and eliminates perceived complacency in line with regulatory and management expectations.?

Speaking earlier, Ozurumba said, the lack of adherence to credit policy was responsible for the poor financial outlook of most banks today. ?If you look at the financial sector today, credits are not coming the way. When credits are not coming out the economy as a whole is dull. Which is why as professionals, it becomes necessary for us to show the way so that others will follow.?

In his presentation titled: ?Strategic Trade Credit Management in Oil Industry?, Mr. A.O. Adabonyan, Executive Director, Finance, Pipelines and Product Marketing Company Limited, who was represented by Mr. Ekong Anietie Bassey, gave insight into the modus operandi adopted in the sale and marketing of petroleum products to the major marketers and independent marketers.

According to him, ?when firms enter into a trade credit arrangement with their suppliers, a certain ?credit term? is usually set. Payment is within this term e.g. 15 days from the date of purchase to qualify for a certain discount. If payments are not made within this term, all receivables are required to be settled within a stipulated time period. The cost of not availing discount is the cost of credit. In the case of PPMC, our major marketers enjoy trade credits of 15 days from the date of lifting. Our collecting banks are engaged n the debt collecting drive on a weekly basis.?

While acknowledging the fact that ?constant and consistent payment improves the borrower?s ability to gain more credit, he however stated that slow or non-payment has the tendency to destroy any future financial gains.?

As the conference drew to a close, the institute also inducted new members into its fold.?

A total of 53 persons were inducted including eight fellows, 11 members and 34 associate members respectively.

The highpoint of the occasion was the presentation of different categories of award to deserving members of the institute.?

Among the award recipients was Alhaji Shittu Mudashiru Adeleke, Managing Director/Chief Executive, Consolidated Discount Limited, who was named the Credit Personality of the Year. The award was received on his behalf by Mr. Akinola Odedina, Chief Risk Officer.?

Adebayo Wosilat Olaitan, of PPMC, bagged the Debt Recovery Executive Award while Jude Monye, Credit Risk Officer, Wema Bank Plc, received the Credit Risk Team of the Year Award respectively. ?

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Experts? recipe for effective credit policy

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