By Abiola Olawale
The Central Bank of Nigeria (CBN) has issued a fresh directive to commercial banks to strictly block chronic loan defaulters and “large-ticket obligors” from accessing new credit facilities across the industry.
The directive, contained in a circular signals the apex bank’s “zero-tolerance” approach toward non-performing loans (NPLs) as the Nigerian banking sector enters the final stretch of its 2024–2026 recapitalization program.
The latest instruction comes almost a week after the CBN asked financial institutions to stress test.
The New Diplomat reports that a large ticket obligor is a borrower (an individual or company) that owes a very large amount of money to a bank.
“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 in part.
“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 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.”
On strengthening collateral coverage, the CBN asked financial institutions to obtain additional realisable collateral from such obligors to adequately secure existing exposures.
The CBN said large ticket obligors are borrowers whose exposures are as defined under Clause 3.2 (d) of the prudential guidelines for deposit money banks in Nigeria 2010, or a customer with a combined exposure across banks, as shown in the credit risk management system (CRMS), and/or as shown in the reports of a licensed private credit bureau, “that exceed the Single Obligor Limit (SOL), which materially affect a bank’s Capital Adequacy Ratio (CAR) or otherwise pose a systemic risk to the financial 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 reads.
The regulator said it will monitor compliance with the directive to ensure consistent implementation across the banking industry.
