The Central Bank of Nigeria (CBN) has asked commercial banks to restrict loan
defaulters, specifically large-ticket obligors, from accessing credit facilities.
A large ticket obligor is a borrower (an individual or company) that owes a very
large amount of money to a bank.
The CBN issued the directive in a circular to banks seen by TheCable on Monday.
The latest instruction comes almost a week after the CBN asked financial
institutions to stress test.
It is uncertain if the two directives are connected or what may have triggered the
loan-related instruction, but the apex bank said it furthers its mandate to protect
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,” 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 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.”
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.
The CBN warned that noncompliance would attract appropriate regulatory
sanctions in line with the provisions of the Banks and Other Financial Institutions
Act (BOFIA) 2020.
Nigerian banks are undergoing a recapitalisation programme, slated to end by
March 31.
So far, about 30 banks have met the minimum capital requirements announced in
March 2024.
