The Central Bank of Nigeria (CBN) has directed commercial banks to restrict loan defaulters—specifically “large-ticket obligors”—from accessing further credit facilities.
A large-ticket obligor is a borrower (either an individual or a company) that owes a significantly large amount of money to a financial institution.
The CBN issued the directive in a circular to banks, which was seen by TheCable on Monday. This latest instruction comes nearly a week after the CBN asked financial institutions to undergo stress testing.
While it remains uncertain if the two directives are directly connected or what specifically triggered the loan-related instruction, the apex bank stated that the move is part of 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.
The circular further clarifies the scope of these restrictions: Credit Freeze: Any large-ticket obligor with a non-performing facility recorded in the Credit Risk Management System (CRMS) or any licensed private credit bureau shall not be granted additional credit facilities, including loans and other forms of direct credit.
Service Restrictions: Such obligors will also be barred from accessing banking facilities or contingent liabilities, such as bankers’ confirmations, letters of credit, performance bonds, or advance payment guarantees.
To mitigate risk, the CBN has instructed financial institutions to obtain additional realizable collateral from these obligors to adequately secure existing exposures.
The CBN defines large-ticket obligors as borrowers whose exposures fall under Clause 3.2 (d) of the Prudential Guidelines for Deposit Money Banks in Nigeria 2010. This also includes customers whose combined exposure across banks—as shown in the CRMS or private credit bureau reports—exceeds the Single Obligor Limit (SOL), materially affecting a bank’s Capital Adequacy Ratio (CAR) or otherwise posing a systemic risk.
“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. This is to ensure consistency and effectiveness in curbing credit abuse by large-ticket obligors,” the circular added.
The regulator stated it will closely monitor compliance to ensure consistent implementation across the banking industry. The CBN warned that non-compliance would attract appropriate regulatory sanctions in line with the Banks and Other Financial Institutions Act (BOFIA) 2020.
This move comes as Nigerian banks undergo a mandatory recapitalization program, slated to conclude by March 31. So far, approximately 30 banks have met the minimum capital requirements announced in March 2024.
