CBN ISSUES NEW RULE TO CURB CREDIT ABUSE BY LARGE-TICKET BORROWERS
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By: Fasasi Hammad
The Central Bank of Nigeria (CBN) has directed commercial banks to restrict credit access for loan defaulters, particularly large-ticket obligors.
A large-ticket obligor refers to an individual or company that owes a substantial sum to a bank.
The directive was issued in a circular to banks, obtained by The media on Monday, and comes shortly after the CBN instructed financial institutions to conduct stress tests. It is unclear whether the two directives are linked or what prompted the new loan-related measure, but the central bank said it aligns with its mandate to safeguard Nigeria’s financial system.
“In furtherance of its mandate to promote a sound financial system, protect depositors, and ensure prudential compliance in 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, from accessing specified banking services,” the circular stated.
The directive specifies that large-ticket obligors with non-performing facilities recorded in the Credit Risk Management System (CRMS) or any licensed private credit bureau shall not receive additional credit. Restricted credit facilities include loans and other direct forms of credit.
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Additionally, such obligors are barred from accessing contingent liabilities such as bankers’ confirmations, letters of credit, performance bonds, or advance payment guarantees.
On collateral, the CBN instructed banks to obtain extra realizable collateral from these obligors to secure existing exposures adequately.
According to the CBN, large-ticket obligors are defined under Clause 3.2(d) of the Prudential Guidelines for Deposit Money Banks in Nigeria (2010), or as customers whose combined exposures across banks—shown in the CRMS or licensed private credit bureau reports—exceed the Single Obligor Limit (SOL) and materially impact a bank’s Capital Adequacy Ratio (CAR) or pose 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 (Ref: BSD/DIR/GEN/LAB/07/015),” the circular added, aiming to ensure consistency and curb credit abuse by large-ticket obligors.
The CBN said it would monitor compliance to ensure uniform implementation across the banking sector and warned that violations would attract regulatory sanctions under the Banks and Other Financial Institutions Act (BOFIA) 2020.
Nigerian banks are currently undergoing a recapitalization exercise, scheduled to conclude by March 31, with about 30 banks having already met the minimum capital requirements set in March 2024.
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