•Apex bank bars chronic debtors from accessing Letters of Credit, performance bonds, and guarantees.
••Banks face stiff BOFIA sanctions for breaching directive ahead of 2026 recapitalization deadline.
The Central Bank of Nigeria (CBN) has ordered commercial banks to deny additional credit to loan defaulters identified as “large‑ticket” obligors, a decisive step aimed at protecting depositors and safeguarding financial stability. The directive, issued in a circular seen by TheCable on Monday, also bars such obligors from accessing contingent banking facilities and requires banks to obtain additional realizable collateral to secure existing exposures.
“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 states.
Scope of the directive
The circular makes clear that any large‑ticket obligor with a non‑performing facility recorded in the Credit Risk Management System (CRMS) or with any licensed private credit bureau must not be granted new credit facilities. The prohibition extends beyond direct lending to contingent instruments frequently used in trade and project finance, including bankers’ confirmations, letters of credit, performance bonds and advance payment guarantees.
The CBN defines a large‑ticket obligor as a borrower whose exposure — whether to a single bank or aggregated across institutions — exceeds the Single Obligor Limit (SOL) to the extent that it materially affects a bank’s Capital Adequacy Ratio (CAR) or poses systemic risk. The directive reiterates provisions of the 2010 Prudential Guidelines for Deposit Money Banks and reinforces an earlier circular issued on 30 June 2014, which similarly sought to curb further lending to chronic defaulters.
Enforcement and penalties
The central bank said it will monitor compliance across the banking sector and warned that breaches would attract regulatory sanctions under the Banks and Other Financial Institutions Act (BOFIA) 2020. Banks have been instructed to strengthen collateral coverage for affected exposures, a move intended to reduce loss severity and accelerate recovery where defaults persist.
Policy context
The instruction comes days after the CBN asked banks to conduct stress tests on their loan portfolios, and against the backdrop of a sector recapitalisation drive due to conclude on 31 March 2026. According to the regulator, about 30 banks have already met the minimum capital requirements set in March 2024. Observers view the two measures — stress tests and the new lending restriction — as complementary tools to strengthen bank balance sheets and limit contagion risks.
Implications for banks, borrowers and the economy
The CBN’s directive is likely to tighten lending discipline and curtail credit to borrowers with impaired repayment histories, particularly syndicated and high‑value corporate borrowers whose combined exposure spans multiple banks. Proponents argue the policy will boost depositor confidence, encourage cleaner balance sheets, and reduce moral hazard by preventing re‑cycling of credit to serial defaulters.
However, the measure also carries potential downsides. Analysts warn of a possible temporary credit squeeze for sectors that rely on trade finance and contingent liabilities, including importers, exporters and large infrastructure projects. Suppliers and smaller businesses tied to large obligors could face liquidity pressures if principal borrowers are restricted from renewing guarantees and letters of credit.
Calls for transparency and a clear remediation path
Industry stakeholders and credit analysts say the effectiveness of the ban will hinge on consistent, transparent application and the availability of dispute‑resolution or remediation mechanisms for affected borrowers. They urge banks and the CBN to ensure robust, timely reporting to the CRMS and private bureaus and to expedite enforcement actions that facilitate recovery without creating avoidable systemic stress.
What to expect next
Banks are expected to immediately review exposures recorded as non‑performing on the CRMS and implement the circular’s collateral and restriction requirements. The CBN will monitor implementation and has signalled readiness to sanction institutions that fail to comply.
Requests for comment sent to the CBN and several commercial banks were acknowledged but no substantive response was available at the time of publication. The regulator’s circular, as reported, will be closely watched by market participants as the industry approaches the recapitalisation deadline.
