CBN Prohibits High-Risk Borrowers from Accessing Additional Bank Credit

The Central Bank of Nigeria (CBN) has mandated all financial institutions to deny banking services to borrowers with non-performing loans that pose systemic risks to the financial landscape. This directive, communicated to all banks on Thursday, is effective immediately.

“Any large-scale borrower with a non-performing loan listed in the Credit Risk Management System (CRMS) or any authorized private credit bureau will not be eligible for new credit. This includes loans and other forms of direct credit,” stated the CBN.

Additionally, such borrowers will be prohibited from accessing banking services or contingent liabilities, which encompass bankers' confirmations, letters of credit, performance bonds, or advance payment guarantees.

According to the CBN’s Prudential Guidelines for Deposit Money Banks in Nigeria, large-scale obligors are defined as customers or groups of related borrowers whose exposure to a bank constitutes at least 10 percent of the bank’s shareholders’ fund unaffected by losses.

The CBN elaborated in its statement that a large-scale obligor is characterized by total exposure across multiple banks exceeding the single- obligor limit, jeopardizing a bank’s capital adequacy ratio or posing a systemic threat to the financial system.

To safeguard existing loans from these borrowers, the CBN is instructing financial institutions to secure additional realizable collateral from them.

This move is part of the CBN's ongoing initiatives to bolster the resilience and stability of the banking sector. In June of the previous year, the bank mandated that lenders benefitting from forbearance during the COVID-19 pandemic must refrain from paying dividends, awarding executive bonuses, or pursuing international expansions until they have fully provisioned for these loans.

The temporary relief given to banks through the forbearance policy facilitated the restructuring of loans deemed impaired due to the economic disruptions caused by the COVID-19 lockdowns without requiring immediate provisioning.

Femi Otedola, chairman of First HoldCo, one of Nigeria’s major banks, indicated that the institution made a significant one-off provision of N748 billion for bad loans for the financial year 2025 to adhere to the CBN’s stringent measures on non-performing loans.

The recent directive underscores the CBN's resolve to maintain consistency and efficiency in addressing credit abuse by major borrowers, warning that non- compliance will incur suitable penalties.