The Central Bank of Nigeria has directed commercial banks to stop granting new loans and certain banking services to major loan defaulters as part of efforts to strengthen discipline in the country’s financial system.
In a circular issued to banks and obatianed by ENigeria Newspaper, the regulator said borrowers with large non-performing loans must be restricted from accessing additional credit facilities. The directive specifically targets large-ticket obligors which are individuals or companies that owe substantial amounts of money to banks.
According to the CBN, any borrower with a non-performing facility recorded in the Credit Risk Management System or listed by a licensed credit bureau will not be eligible for fresh credit.
The restriction extends beyond loans to include other banking services such as letters of credit, performance bonds, bankers’ confirmations and advance payment guarantees.
The apex bank said the move is aimed at promoting a sound financial system, protecting depositors and ensuring stronger compliance within the banking sector.
“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 circular reads.
It also directed banks to obtain additional and realisable collateral from such borrowers in order to properly secure existing exposures.
The CBN noted that the measure reinforces an earlier directive issued in 2014 that bars loan defaulters from obtaining new credit within the banking system.
“This directive reinforces earlier measures, particularly the circular titled “Prohibition of Loan Defaulters from Further Access to Credit Facilities in the Banking System” issued on June 30, 2014 (Ref: BSD/DIR/GEN/LAB/07/015). This is to ensure consistency and effectiveness in curbing credit abuse by large-ticket obligors,” the circular further adds.
The regulator added that it will monitor compliance across the industry and warned that banks that fail to enforce the directive will face sanctions under the Banks and Other Financial Institutions Act.
The instruction comes as Nigerian banks continue with an ongoing recapitalisation programme introduced by the CBN, with institutions expected to meet new minimum capital requirements before the March 31 deadline.
