CBN directs banks to block loan defaulters from accessing credit

Central Bank of Nigeria (CBN) has instructed commercial banks across Nigeria to prevent loan defaulters from obtaining new credit facilities.

The directive was conveyed in a circular issued by the apex bank to banks, targeting borrowers who have failed to meet their loan repayment obligations.

According to the circular, the restriction particularly applies to large-ticket obligors—individuals or companies with significant outstanding debts to financial institutions.

Under the new measure, banks are required to block such defaulters from accessing further credit until their existing obligations are settled.

The circular further clarifies that any large-ticket obligor with a non-performing facility recorded in the Credit Risk Management System (CRMS) or any licensed private credit bureau shall not be granted additional credit facilities.

This includes loans and other forms of direct credit. In addition, such obligors are barred from accessing contingent banking facilities such as bankers’ confirmations, letters of credit, performance bonds, or advance payment guarantees.

To strengthen collateral coverage, the CBN also directed banks to obtain additional realisable collateral from these borrowers to adequately secure existing exposures.

The central bank defines large-ticket obligors as borrowers whose exposures, individually or combined across banks, exceed the Single Obligor Limit (SOL) in a way that materially affects a bank’s Capital Adequacy Ratio (CAR) or poses systemic risk.

This aligns with Clause 3.2(d) of the 2010 Prudential Guidelines for Deposit Money Banks in Nigeria

“This directive reinforces earlier measures, particularly the circular titled ‘Prohibition of Loan Defaulters from Further Access to Credit Facilities in the Banking System,’ issued on June 30, 2014. It aims to ensure consistency and effectiveness in curbing credit abuse by large-ticket obligors,” the CBN said.

The regulator said it will monitor compliance to ensure consistent implementation across the banking sector and warned that noncompliance would attract regulatory sanctions under the Banks and Other Financial Institutions Act (BOFIA) 2020.