The Central Bank of Nigeria, CBN, has called on all stakeholders in the country’s financial space to unite against the rising level of Non-Performing Loans NPL in the system.
Director, Banking Supervision, CBN, Mr. Abdulhaziz Barawu speaking at an event on credit reporting in the financial system noted that Credit and liquidity work concurrently and have an economic meaningful reciprocal relationship.
“However, where such cash is granted to enhance liquidity and repayment is not guaranteed or outrightly defaulted, liquidity is hampered and credit risk is high”-He said
He revealed that the task before the CBN is eliminating default risk associated with granting the credit.
Barawu revealed that in order to arrest the situation, the CBN had in January 1998 established the Credit Risk Management System, a public credit registry operated by the apex bank that allows banks to report and check up on all credits above N1m.
Why the need for credit reporting
According to Barawu, credit reporting would not only uphold a healthy credit culture, but would also create a lower interest rate system, reduced the need for physical collateral, optimize decision-making processes, help people escape poverty, and create access to better economic life.
Recall that a number of bank directors had been fired by the Central Bank of Nigeria following cases of insider abuse relating to non-performing loans in financial institutions in the country.
The credit bureau was established by the CBN in the then newly enacted Central Bank of Nigeria Act, Cap 7 of 2007, and it released the Guidelines for the Licensing, Operations, and Regulations of Credit Bureaux in Nigeria.