JUST IN: CBN Directs Banks to Deny Fresh Loans To Defaulters

The Central Bank of Nigeria (CBN) has directed commercial banks to stop granting new loans and credit facilities to borrowers who have defaulted on existing obligations, particularly those owing large sums to financial institutions.

The directive, communicated through a regulatory circular to banks, requires lenders to immediately restrict such customers from accessing additional credit until their outstanding debts are resolved.

According to the apex bank, the measure is designed to safeguard Nigeria’s financial system and prevent risky lending practices that could threaten the stability of banks.

“Banks are required to restrict non-performing large-ticket obligors whose activities may pose systemic risk to the financial system,” the regulator said in the circular. 

It added that borrowers with unpaid facilities recorded in the Credit Risk Management System or in reports of licensed credit bureaus must not receive further credit.

The restriction also goes beyond conventional loans. Financial institutions have been instructed not to extend contingent banking services to such borrowers, including letters of credit, performance bonds, bankers’ confirmations and advance payment guarantees.

Furthermore, banks have been advised to strengthen collateral arrangements tied to existing loans issued to these obligors. 

The regulator said lenders should obtain additional realisable assets where necessary to adequately secure outstanding exposures.

Under existing prudential guidelines for deposit money banks, large-ticket obligors are customers whose total borrowings exceed the Single Obligor Limit or whose combined exposures across multiple banks could materially affect a lender’s capital adequacy ratio.

Officials explained that the latest directive reinforces earlier regulatory efforts aimed at curbing repeated borrowing by chronic loan defaulters within the banking system.

“This action strengthens previous measures prohibiting loan defaulters from further accessing credit facilities within the banking sector,” the regulator stated, adding that strict compliance will be monitored across financial institutions.

The central bank warned that any lender found violating the directive would face sanctions under the provisions of the Banks and Other Financial Institutions Act 2020.

The development comes as Nigerian banks continue to adjust to an ongoing recapitalisation programme introduced by the CBN to strengthen the sector. 

The exercise, announced in 2024, requires lenders to meet new minimum capital thresholds before the March 31 deadline.