The Central Bank of Nigeria (CBN) has directed commercial banks to restrict large borrowers who have defaulted on loans from accessing additional credit facilities.
Naija News gathered that the apex bank disclosed this in a circular issued to banks across the country.
According to the CBN, the directive is aimed at strengthening the stability of the financial system, safeguarding depositors’ funds, and improving compliance with banking regulations.
Part of the circular reads: “In furtherance of its mandate to promote a sound financial system, protect depositors, and enhance prudential compliance within the banking sector, the Central Bank of Nigeria (CBN) hereby directs all banks to restrict non-performing large ticket obligors, whose activities pose systemic risk to the financial system, from accessing specified banking services.”
The apex bank stated that any large borrower with a non-performing loan recorded in the Credit Risk Management System (CRMS) or any licensed private credit bureau will no longer be eligible for additional credit facilities. These include loans and other forms of direct credit.
The directive also prevents such defaulters from accessing banking instruments or contingent liabilities, including bankers’ confirmations, letters of credit, performance bonds, and advance payment guarantees.
To further strengthen loan security, the CBN instructed financial institutions to obtain additional realizable collateral from affected borrowers to adequately cover existing credit exposures.
The bank explained that “large-ticket obligors” refer to borrowers whose loan exposure meets the definition under Clause 3.2(d) of the prudential guidelines for deposit money banks in Nigeria (2010). This also includes customers with combined exposure across several banks, as captured in the CRMS or by licensed credit bureaus, that exceed the Single Obligor Limit (SOL) and could significantly affect a bank’s Capital Adequacy Ratio (CAR) or pose a systemic risk to the financial system.
The circular further noted that the directive reinforces an earlier policy titled “Prohibition of Loan Defaulters from Further Access to Credit Facilities in the Banking System,” issued on June 30, 2014, aimed at curbing abuse of credit by large borrowers within the banking sector.