The Central Bank of Nigeria (CBN) has ordered all lenders to restrict borrowers with non-performing credit, whose activities constitute systemic risk to the financial system, from accessing specified banking services, including obtaining additional credit.
The directive takes effect immediately, according to a letter by the regulator to all banks, issued on Thursday.
“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,” the CBN stated.
“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,” it added.
According to the CBN’s Prudential Guidelines for Deposit Money Banks in Nigeria 2010, large-ticket obligors are customers or a group of related borrowers, whose exposure to a bank is “at least 10 per cent of the bank’s shareholders’ fund unimpaired by losses.”
The CBN said in the Thursday statement that a large-ticket obligor is also a borrower with a total exposure across banks that is higher than the single-obligor limit, which significantly affects a bank’s capital adequacy ratio or otherwise poses a systemic risk to the financial system.
To sufficiently secure existing exposures from such borrowers, the CBN is asking the financial institutions to obtain extra realisable collateral from the obligors.
The CBN has been stepping up efforts to enhance the resilience and stability of the banking industry. Last June, it ordered lenders that enjoyed forbearance exposures during the COVID-19 crisis to stop dividend payment, executive bonuses and international expansion until they had made a full provision for such loans.
The temporary relief granted to lenders through the forbearance policy had allowed banks to restructure loans that became impaired as a result of COVID-19 shutdowns without having to make immediate provision for them in their books.
First HoldCo, one of Nigeria’s biggest lenders, made a one-time provision, as substantial as N748 billion, for bad loans for the financial year 2025, a decision its chairman, Femi Otedola, said was made to comply with the CBN’s tough stance on curbing non-performing loans across banks.
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The latest move by the regulator highlights its determination to achieve consistency and effectiveness in tackling credit abuse by large-ticket borrowers, it said. Non-compliance will attract appropriate penalties, it warned.
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