Amid growing concerns that mounting bad loans are constraining the performance and lending capacity of Nigerian banks, the Central Bank of Nigeria (CBN) has directed commercial lenders to block major loan defaulters from accessing fresh credit within the banking system.
The move targets large-ticket borrowers whose unpaid obligations have contributed to a persistent debt overhang in the banking sector, weakening balance sheets and limiting banks’ ability to extend new credit to productive sectors of the economy.
In a circular issued to banks on Friday, the apex bank said the directive is aimed at strengthening prudential discipline, safeguarding depositors’ funds, and protecting the stability of the financial system.
According to the CBN, banks must immediately restrict non-performing large-ticket obligors—borrowers whose unpaid exposures pose systemic risks—from accessing specified banking services.
A large-ticket obligor typically refers to an individual or corporate entity with a substantial loan exposure to a financial institution.
“In furtherance of its mandate to promote a sound financial system, protect depositors, and enhance prudential compliance within 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 to the financial system, from accessing specified banking services,” the circular stated.
Under the directive, any borrower with a non-performing facility recorded in the Credit Risk Management System (CRMS) or with a licensed private credit bureau will be barred from obtaining additional credit facilities.
The restriction covers loans and other forms of direct credit. It also extends to banking instruments and contingent liabilities such as bankers’ confirmations, letters of credit, performance bonds, and advance payment guarantees.
The apex bank further instructed lenders to strengthen collateral coverage for existing exposures by demanding additional realisable collateral from affected borrowers.
The regulator explained that large-ticket obligors are borrowers whose exposures fall under Clause 3.2(d) of the prudential guidelines for deposit money banks issued in 2010. This category also includes customers whose combined borrowings across multiple banks—captured in the CRMS or by licensed credit bureaus—exceed the Single Obligor Limit (SOL) and could materially impact a bank’s Capital Adequacy Ratio (CAR) or otherwise pose systemic risks.
The CBN noted that the directive reinforces earlier regulatory measures, particularly the circular titled “Prohibition of Loan Defaulters from Further Access to Credit Facilities in the Banking System” issued on June 30, 2014.
“This is to ensure consistency and effectiveness in curbing credit abuse by large-ticket obligors,” the regulator said.
The apex bank added that it will closely monitor compliance across the banking industry to ensure uniform implementation.
It also warned that any institution that fails to enforce the directive will face sanctions under the provisions of the Banks and Other Financial Institutions Act 2020.
