EFCC Issues Strong Warnings to Nigerian Banks as Risky Lending Fuels Bad Loans
- The EFCC has warned Nigerian banks against granting loans without credible collateral, saying it encourages an increase in non-performing loans
- The Commission stressed that relying on personal guarantees puts depositors’ funds at risk and called for stricter due diligence in lending processes
- It also urged stronger collaboration with banks, including prompt cooperation during investigations involving suspected financial misconduct
Legit.ng journalist Victor Enengedi has over a decade's experience covering energy, MSMEs, technology, banking and the economy.
The Chairman of the Economic and Financial Crimes Commission, Ola Olukoyede, has advised Nigerian banks to stop issuing loans without solid, verifiable collateral, noting that such practices often encourage insider abuse and lead to bad debts.
He gave this caution during a recent meeting with Mufutau Abiola, Chief Audit Executive of First Bank Plc, who led a delegation on a courtesy visit to the Lagos Zonal Directorate 2 office of the Commission in Ikoyi.
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Speaking through the Acting Zonal Director, Bawa Kaltungo, Olukoyede criticised the practice of approving loans based solely on personal guarantees, even when provided by top executives.
Olukoyede stressed that this approach exposes depositors’ funds to unnecessary risk and reflects weaknesses in internal lending controls.
According to him, loans granted without credible backing are essentially unsecured and contribute significantly to the rise in non-performing loans.
“We have issues with banks’ mode of giving loans. The process often shows insider abuse."
He emphasised that banks must adopt stricter lending standards by ensuring every loan is supported by tangible and verifiable collateral.
“Banks must not issue loans without verifiable collateral. If there is proper collateral for loans obtained by bank customers, this will reduce the rate of non-performing loans.”
Without this, he warned, financial institutions risk mismanaging funds entrusted to them by customers.
Call for stronger oversight and collaboration
Olukoyede further urged banks to improve their due diligence processes to minimise defaults, noting that even when such checks are outsourced, accountability must remain clearly defined.
He maintained that financial institutions are custodians of public funds and must handle lending decisions with utmost responsibility.
In addition, he called for stronger cooperation between banks and the Commission, particularly in investigations involving suspected financial misconduct.
He encouraged banks to promptly release staff members when invited for questioning, especially in cases where insider involvement is suspected.
Highlighting the importance of joint efforts in combating financial crimes, he noted that collaboration is essential to staying ahead of offenders, adding that some cases may require escalation to international security agencies when necessary.
The Central Bank of Nigeria (CBN) recently instructed commercial banks to deny additional credit facilities to borrowers who have failed to repay existing loans.
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In response, Abiola expressed appreciation for the engagement and reaffirmed the bank’s commitment to strengthening its partnership with the Commission.
He also appealed for faster resolution of investigations involving bank staff and disclosed that a dedicated team within the bank handles requests from the EFCC.
EFCC identifies various bank frauds
Meanwhile, Legit.ng earlier reported that the EFCC warned about the growing incidence of bank-related fraud and advised members of the public to remain vigilant to red flags.
The warning was issued during a recent edition of #EFCCCONNECT (Episode 145), where the commission drew attention to several fraudulent practices that are becoming increasingly common within the banking system.
According to the EFCC, these include accounting manipulation, cheque forgery and alteration, falsified loan applications, identity theft and impersonation, as well as money laundering activities.
Source: Legit.ng
