CBN Cracks Down on Loan Defaulters, Orders Banks to Restrict Services

CBN Cracks Down on Loan Defaulters, Orders Banks to Restrict Services

The Central Bank of Nigeria (CBN) has directed banks to restrict financial services to borrowers with large non-performing loans (NPLs), a move aimed at strengthening credit discipline and safeguarding the stability of the banking sector.

In a circular dated March 12, 2026, signed by the Director of Banking Supervision, Olubukola Akinwunmi, the apex bank instructed deposit money banks to immediately limit access to credit for customers whose loans have already gone bad.

The directive applies to borrowers classified as large-ticket obligors, whose total exposure across the banking system exceeds the Single Obligor Limit, and who are listed in the Credit Risk Management System (CRMS) or in the records of licensed private credit bureaus.

Under the new rules, such borrowers will be barred from obtaining new loans or any financing arrangement that could create additional obligations for banks. The restrictions also cover contingent liabilities, including letters of credit, performance bonds, bankers’ confirmations, and advance payment guarantees.

“The measure specifically targets large-ticket borrowers whose defaulted loans could pose significant risks to banks and potentially threaten the wider financial system,” the circular stated. Banks are also expected to demand additional collateral from these borrowers to secure existing loan exposures.

CBN explained that the action is part of broader efforts to curb the rising level of NPLs, which recently climbed to about seven per cent; above the regulatory threshold of five per cent necessary for maintaining sector stability.

The increase is attributed largely to the expiration of previous regulatory reliefs on restructured loans, many of which were reclassified as non-performing after the relief period ended.

The regulator emphasized that the restrictions are designed to protect banks’ capital adequacy and prevent systemic risks, while encouraging borrowers to meet repayment obligations. Banks are required to rely on CRMS data and licensed private credit bureau records to determine borrowers’ exposure levels and compliance status.

“The new policy reinforces credit discipline and ensures that financial institutions remain resilient amid rising NPLs,” the circular noted, signaling a firm stance by the CBN on loan recovery and responsible lending practices.

The directive underscores the apex bank’s commitment to preserving stability in Nigeria’s banking system while ensuring that high-risk borrowers do not compromise the sector’s health.