Directive targets high-value debtors with non-performing loans as regulator tightens oversight to protect Nigeria’s financial system…..
The Central Bank of Nigeria (CBN) has directed commercial banks across the country to deny new credit facilities to major loan defaulters, particularly borrowers classified as large-ticket obligors.
The instruction was contained in a circular issued to banks and seen on Monday, signaling a fresh regulatory push to curb credit abuse and strengthen stability in Nigeria’s banking sector.
Under the directive, borrowers with large non-performing loans will be barred from accessing additional credit or banking guarantees, a move the apex bank says is necessary to safeguard the country’s financial system.
A large-ticket obligor refers to an individual or corporate borrower with significant outstanding debt to a bank often large enough to pose potential risks to the institution’s financial health.
Defaulters to Lose Access to Credit
In the circular, the CBN said any borrower with a non-performing loan recorded in the Credit Risk Management System (CRMS) or any licensed private credit bureau must not be granted further credit facilities.
The restriction applies not only to direct loans but also to other financial services that could expose banks to additional risk.
According to the directive, affected borrowers will also be denied access to facilities such as:
- Bankers’ confirmations
- Letters of credit
- Performance bonds
- Advance payment guarantees
The regulator explained that the measure forms part of its mandate to promote financial stability, protect depositors, and enforce prudential standards within the banking industry.
Banks Ordered to Strengthen Collateral
Beyond restricting new loans, the CBN also instructed banks to strengthen their risk management practices by securing additional realisable collateral from borrowers with large outstanding exposures.
This is intended to ensure that existing loans are adequately backed by assets that can be recovered if the borrower fails to repay.
Who Qualifies as a Large-Ticket Obligor?
The CBN clarified that large-ticket obligors include borrowers whose exposure exceeds limits set under the prudential guidelines for deposit money banks.
Such exposures may also be identified through the CRMS or reports from licensed credit bureaus.
In many cases, the combined exposure of such borrowers across several banks can exceed the Single Obligor Limit (SOL), a threshold designed to prevent excessive lending concentration to a single borrower.
According to the CBN, loans above this level can materially affect a bank’s Capital Adequacy Ratio (CAR) and potentially create systemic risk within the financial sector.
Reinforcing Earlier Rules
The new directive builds on an earlier regulation issued by the apex bank in June 2014, which prohibited loan defaulters from obtaining further credit from banks.
By reinforcing the rule, the CBN said it aims to improve compliance across the industry and prevent habitual defaulters from moving between banks to obtain new loans.
The regulator also warned financial institutions that failure to comply with the directive would attract sanctions under the Banks and Other Financial Institutions Act 2020 (BOFIA).
Banking Sector Undergoing Recapitalisation
The directive comes at a time when Nigerian banks are already navigating major regulatory changes, including an ongoing recapitalisation exercise mandated by the CBN.
Under the programme, banks have until March 31 to meet the new minimum capital thresholds introduced in March 2024.
Industry reports indicate that about 30 banks have already met the new capital requirements, as lenders raise additional funds to strengthen their balance sheets and support economic growth.
The latest crackdown on large loan defaulters is expected to further tighten lending standards across the sector as regulators push for a more resilient banking system.
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