The Central Bank of Nigeria (CBN) has directed commercial banks to restrict non-performing large-ticket obligors from accessing credit facilities, signaling a renewed effort to safeguard the stability of Nigeria’s banking sector.
The circular instructs banks to deny additional loans and other banking services to borrowers whose outstanding obligations pose systemic risks to the financial system. Large-ticket obligors are defined as individuals or companies whose combined exposures exceed the Single Obligor Limit (SOL), potentially affecting a bank’s Capital Adequacy Ratio (CAR) or endangering overall financial stability.
According to the circular: Any large-ticket obligor with non-performing facilities recorded in the Credit Risk Management System (CRMS) or a licensed private credit bureau is prohibited from receiving further loans or other forms of direct credit.
Such obligors are also barred from contingent banking facilities, including bankers’ confirmations, letters of credit, performance bonds, and advance payment guarantees.
Banks are required to obtain additional realizable collateral from these borrowers to adequately secure existing exposures.
The CBN emphasized that the directive builds on earlier measures, notably the 2014 circular titled “Prohibition of Loan Defaulters from Further Access to Credit Facilities in the Banking System”, to curb credit abuse by high-value borrowers and ensure consistent enforcement across the banking industry.
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“In furtherance of its mandate to promote a sound financial system, protect depositors, and enhance prudential compliance within the banking sector, the CBN hereby directs all banks to restrict non-performing large-ticket obligors whose activities pose systemic risk to the financial system from accessing specified banking services,” the circular stated.
The CBN said it will monitor compliance to ensure uniform implementation across commercial banks. Noncompliance will attract regulatory sanctions in line with the provisions of the Banks and Other Financial Institutions Act.
The directive comes shortly after the central bank asked financial institutions to conduct stress tests, although it remains unclear whether the two measures are directly connected.
Nigerian banks are currently undergoing a recapitalization program scheduled to conclude by March 31, 2026. So far, about 30 banks have met the minimum capital requirements announced in March 2024.
By targeting large-ticket obligors, the CBN aims to reduce non-performing loans and strengthen prudential compliance, ensuring that high-risk borrowers do not threaten the stability of Nigeria’s financial system.