CBN Restricts Banking Services for Large Loan Defaulters

The Central Bank of Nigeria (CBN) has directed commercial banks to restrict access to certain banking services for large borrowers with non-performing loans as part of efforts to strengthen credit discipline and protect the stability of the financial system.

The directive was issued in a circular sent to banks and signed by the Director of Banking Supervision, Olubukola Akinwunmi.

Under the new directive, borrowers whose loan facilities are classified as non-performing and recorded in the Credit Risk Management System or any licensed private credit bureau will no longer be eligible to obtain additional credit facilities from financial institutions.

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The apex bank stated that the measure is intended to reduce the risks posed by large borrowers whose loan defaults could threaten the stability of the banking sector.

According to the CBN, financial institutions must immediately restrict further credit access to any large-ticket obligor with a non-performing facility recorded in the Credit Risk Management System or a licensed credit bureau.

The restriction also extends beyond loans to other banking services and contingent liabilities.

Affected borrowers will not be granted banking facilities such as bankers’ confirmations, letters of credit, performance bonds, or advance payment guarantees.

The regulator explained that the restrictions apply to borrowers whose exposures meet the definition of large-ticket obligors as outlined in the Prudential Guidelines for Deposit Money Banks.

Banks have also been directed to obtain additional realisable collateral from the affected borrowers to secure their existing exposures.

According to the CBN, large-ticket obligors are borrowers whose combined credit exposure across banks exceeds the Single Obligor Limit and whose obligations could materially affect a bank’s capital adequacy ratio or pose systemic risks to the financial system.

The determination of such exposures will rely on information contained in the Credit Risk Management System and reports from licensed private credit bureaus.

The apex bank noted that similar restrictions had previously been introduced in June 2024 when loan defaulters were prohibited from accessing additional credit facilities within the banking system.

The CBN stated that the latest directive reinforces earlier regulatory measures aimed at curbing credit abuse and improving loan repayment discipline within the banking sector.

It added that compliance with the directive will be closely monitored and that any breach will attract regulatory sanctions in line with the provisions of the Banks and Other Financial Institutions Act 2020.