CBN Orders Banks to Take Actions Against Loan Defaulters, Details Emerge
- The Central Bank of Nigeria (CBN) has directed banks to deny new credit to borrowers who default on existing loans
- Defaulters listed in the Credit Risk Management System or credit bureaus cannot access loans or other direct credit
- The policy also bars affected borrowers from contingent facilities such as letters of credit and performance bonds
Oluwatobi Odeyinka is a business editor at Legit.ng, covering energy, the money market, technology, and macroeconomic trends in Nigeria.
The Central Bank of Nigeria (CBN) has instructed commercial banks to deny additional credit facilities to borrowers who have failed to repay existing loans.
The directive was communicated in a circular issued to financial institutions across the country, targeting customers who have defaulted on their loan obligations, Market Forces Africa reported.
Source: UGC
According to the apex bank, the measure primarily affects “large-ticket obligors” — individuals or companies with substantial outstanding debts within the banking system.
New restriction for defaulting borrowers
The CBN explained that banks must block such defaulters from obtaining any new credit until they fully settle their existing loan obligations.
The circular stated that borrowers with non-performing loans listed in the Credit Risk Management System or recorded with any licensed private credit bureau will not qualify for additional credit facilities.
This restriction covers loans and other forms of direct credit from banks. Beyond loans, the regulator said affected borrowers will also be unable to access several contingent banking services.
These include bankers’ confirmations, letters of credit, performance bonds, and advance payment guarantees, which are commonly used by businesses in trade and contractual transactions.
CBN orders stronger collateral coverage
To further manage risks in the financial system, the central bank directed banks to obtain additional realisable collateral from borrowers whose existing exposures remain unsettled.
The aim, the regulator noted, is to ensure that current loans are adequately secured and to reduce the risk of losses within the banking sector.
Definition of large-ticket obligors
The CBN clarified that large-ticket obligors are borrowers whose loan exposures, either individually or collectively across several banks, exceed the Single Obligor Limit.
Such exposures, the regulator explained, could significantly affect a bank’s Capital Adequacy Ratio or pose broader systemic risks to the financial system.
The policy also aligns with Clause 3.2(d) of the 2010 Prudential Guidelines for Deposit Money Banks in Nigeria.
Source: Getty Images
Reinforcing earlier lending rules
In the circular, the CBN noted that the directive reinforces an earlier policy introduced in June 2014 titled “Prohibition of Loan Defaulters from Further Access to Credit Facilities in the Banking System.”
According to the regulator, the updated instruction is designed to strengthen enforcement and ensure consistent application across banks.
The central bank added that it will closely monitor compliance with the directive and warned that financial institutions that fail to implement it may face sanctions under the Banks and Other Financial Institutions Act 2020.
CBN lowers interest rate
Legit.ng earlier reported that the CBN has released the latest lending rates following its decision to cut the interest rate by 50 basis points to 26.50% from 27%.
The apex bank announced the new MPR rates during its 304th Monetary Policy Committee (MPC) meeting held in Abuja recently.
The CBN said publishing the rates will create a comparison and allow borrowers to compare borrowing costs.
Source: Legit.ng
