The Central Bank of Nigeria has directed commercial banks to block loan defaulters, particularly large-ticket borrowers, from accessing new credit facilities.
A large-ticket borrower refers to an individual or company that owes a significant sum to a bank.
The CBN issued the instruction in a circular to banks on Monday, according to TheCable.
The latest directive follows nearly a week after the CBN instructed financial institutions to conduct stress tests.
It is unclear whether the two measures are related or what prompted the new loan restriction.
The apex bank, however, said the move aligns with its mandate to safeguard Nigeria’s financial system.
“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.
“Any large-ticket obligor with a non-performing facility recorded in the CRMS and/or any licensed private credit bureau shall not be granted additional credit facilities. For the purpose of this restriction, credit facilities include loans and other forms of direct credit.
“In addition, such obligors shall not be granted banking facilities or contingent liabilities such as bankers’ confirmations, letters of credit, performance bonds, or advance payment guarantees,” the circular reads in part.
On strengthening collateral coverage, the CBN directed financial institutions to obtain additional realizable collateral from large-ticket borrowers to adequately secure their existing exposures.
The apex bank defined large-ticket borrowers as those whose exposures meet the criteria in Clause 3.2(d) of the 2010 Prudential Guidelines for Deposit Money Banks in Nigeria, or as customers whose combined exposures across banks—reflected in the Credit Risk Management System or reports from licensed private credit bureaus, exceed the Single Obligor Limit, materially affect a bank’s Capital Adequacy Ratio, or otherwise pose a systemic risk to the financial system.
The CBN said it will monitor compliance with the directive to ensure consistent implementation across the banking sector.
It warned that failure to comply would attract regulatory sanctions under the Banks and Other Financial Institutions Act (BOFIA) 2020.
Nigerian banks are currently undergoing a recapitalisation programme, scheduled to conclude by March 31.
So far, around 30 banks have met the minimum capital requirements set out in March 2024.
