The Central Bank of Nigeria (CBN) has directed commercial banks to block loan defaulters, especially large-ticket borrowers from accessing new credit facilities within the banking system.
The directive was contained in a circular issued to banks, as the apex bank moves to strengthen financial system stability and curb credit abuse.
According to the CBN, a large-ticket obligor refers to an individual or company that owes a substantial amount of money to a financial institution.
The circular stated that any large borrower with a non-performing loan recorded in the Credit Risk Management System (CRMS) or any licensed private credit bureau will not be allowed to obtain additional credit from banks.
This restriction covers loans and other direct credit facilities.
In addition, such borrowers will also be denied access to other banking instruments and contingent liabilities, including:
- Bankers’ confirmations
- Letters of credit
- Performance bonds
- Advance payment guarantees
The apex bank also directed financial institutions to strengthen collateral coverage for existing exposures by obtaining additional realisable collateral from affected borrowers.
The CBN explained that large-ticket obligors include borrowers whose exposures exceed limits defined under the prudential guidelines for deposit money banks in Nigeria.
This also covers customers with combined exposures across banks that exceed the Single Obligor Limit (SOL), which could significantly affect a bank’s Capital Adequacy Ratio (CAR) or pose systemic risk to the financial system.
The directive reinforces an earlier circular titled “Prohibition of Loan Defaulters from Further Access to Credit Facilities in the Banking System”, issued on June 30, 2014.
The CBN said the move is intended to ensure consistency in enforcing credit discipline across the banking sector.
The regulator added that it will closely monitor compliance by banks and warned that institutions that fail to follow the directive will face sanctions under the Banks and Other Financial Institutions Act 2020.
