CBN Orders Lenders to Disclose Bad Debtors

Central Bank of Nigeria (CBN) has ordered banks to publish lists of individuals and companies with non-performing loans to curb a rise in bad debt as the industry stumbles amid low oil prices.

The apex bank “observed the rising trend of non-performing loans,” Tokunbo Martins, director of banking supervision, said in a circular posted on the Abuja-based regulator’s website.

The new rule, effective from May 1, is to “ensure that the industry NPL ratio does not exceed the prudential limit of 5 percent, and to improve the credit culture in the banking industry.”

Delinquent borrowers will get three months to start repayments, Martins said in the statement. Borrowers whose loans remain non-performing after that period will be banned from Nigeria’s foreign-exchange and government bond markets, she said.

Nigeria’s banking industry is under pressure with the country’s economy, reliant on oil for 90 percent of export earnings and two-thirds of government revenue, suffering from Brent crude’s 40 percent plunge since June.

Credit losses, which, unlike NPLs, involve writedowns, will increase to as much as 3 percent from 1.8 percent in the next two years, Matthew Pirnie, a director at Standard & Poor’s, said in an interview last week in Lagos. Banks must publish a list of debtors that fail to meet the deadline in at least three national newspapers each quarter, Martins said.

Delinquent debtors include “the persons, entities, directors, subsidiaries and other related parties,” she said.

The move will deter borrowers from defaulting, according to Phillips Oduoza, chief executive officer of United Bank for Africa Plc, Nigeria’s third biggest lender by assets. “It’s very good,” Oduoza said in an interview in Lagos on Friday.

“The average Nigerian has an ego. You don’t want to see your name published in the newspaper saying that you owe banks. It’s going to change the way people think.”