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Business News

CBN reveals plans to deduct bad loans from bank balances of defaulters in any bank in Nigeria

CBN, Bankers Committee agree to recover bad loans from accounts of defaulters in any bank in Nigeria. How it will work…

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CBN reveals Aishah Ahmad

Reports reaching Nairametrics indicate the Central Bank of Nigeria (CBN) in conjunction with the NIBSS and the Bankers’ Committee have agreed to launch an initiative that will allow lenders to recover loans from deposit accounts of loan defaulters from any bank or financial institution in the country. 

Media reports monitored by Nairametrics reveal this decision was announced by Aishah Ahmad, the Deputy Governor of the CBN at the end of the meeting of the Bankers’ Committee held in Abuja on Monday 26th of August.  

Reasons: According to TheCable, Ahmad said the directive was to encourage banks to increase lending in the country with more comfort. 

[READ MORE: CBN issues disclaimer: Warns public to beware of false loan empowerment scheme]

  • Confronting credit challenges: Ahmad said, “We are not unaware of the challenges/reasons why credit has not been growing. Part of that was the appetite of banks to lend especially when you have customers that willingly refuse to pay their loans.  

“In this respect, we have come up with a new clause that will be included in the offer letters that will be granted going forward.” 

  • Leveraging on BVN and TIN: According to the report, Ahmad also said, “This is going to be a credit risk protection clause. Basically, it will contain the BVN details and TIN of the customers and more or less it will be a commitment on the part of the customers that you agree that should you default on the loan, the total amount of deposits you have across the banking industry would be applied towards repaying the loan.” 

How this will work: Nairametrics also understands that the new system might be handled by the NIBSS on behalf of the banks in exchange for fees. This is how we understand it will work: 

  • A bank lends money to a customer under the typical terms and conditions. However, all banks which sign up to this arrangement will have to get their borrowers to sign a right of setoff against their balances across any bank. 
  • Right of setoff has existed among banks in the past but hasn’t been as effective as it should be. This arrangement should now make it easier for banks to benefit as NIBSS will basically operate it on their behalf. 
  • Once a customer defaults on their loans, relying on BVN, NIBSS will first recover the loans from the defaulter’s balance in any account within the bank. If that is not enough, it will proceed to other accounts deposited in other banks. 
  • We understand this service only applies to individual accounts only. Thus, it may not function for accounts that have more than one signatory 
  • They will also only recover Principal Amounts as this may not apply to penalties, fees, and charges.
  • The Federal Inland Revenue Service can also request for tax payment to be deducted at source using BVN and Tax Identification Number (TIN) to debit customer accounts.  
  • From what we read, the banks will continue to recover their money from any accounts tied to the BVN until it is fully paid. They might also limit to just 90% of the amount in the bank. 
  • All financial institutions that accept deposits can partake in this scheme.

It is however not clear how FinTEch firms also operating in the lending space will benefit from this initiative. Most of them are not deposit-taking banks or institutions.  

Why this is important: The CBN has mandated Nigerian banks to increase lending to SME’s and the private sector in general rather than concentrate on a few obligors (debtors).  

  • Recent report from the National Bureau of Statistics revealed that about 1,887,877 obligors (debtors) borrowed about N15.2 trillion as at the first quarter of 2019.  
  • Out of this amount, the top 100 debtors alone borrowed N7.4 trillion or 47% of total credit to the private sector. Top 5 customers alone borrowed N2 trillion. 

To provide bank and other lending institutions comfort and as an incentive, the CBN believes moves like this will help reduce default rates among banks. Non-performing Loans (NPL) was 9.36% as of June 2019, the lowest in about 40 months. Initiatives like these as well as the collateral registry is expected to help reduce credit risk. 

[READ ALSO: Forex ban on food import has commenced, says CBN]

Olalekan is a certified media practitioner from the Nigerian Institute of Journalism (NIJ). In the era of media convergence, Olalekan is a valuable asset, with ability to curate and broadcast news. His zeal to write was developed out of passion to shape people’s thought and opinion; serving as a guideline for their daily lives. Contact for tips: [email protected]

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Coronavirus

COVID-19 Update in Nigeria

On the 24th of February 2021, 655 new confirmed cases and 11 deaths were recorded in Nigeria

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Covid 19 update symptops

The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record significant increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 153,842 confirmed cases.

On the 24th of February 2021, 655 new confirmed cases and 11 deaths were recorded in Nigeria.

To date, 153,842 cases have been confirmed, 130,818 cases have been discharged and 1,885 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 1.49 million tests have been carried out as of February 24th, 2021 compared to 1.44 million tests a day earlier.

COVID-19 Case Updates- 24th February 2021,

  • Total Number of Cases – 153,842
  • Total Number Discharged – 130,818
  • Total Deaths – 1,885
  • Total Tests Carried out – 1,489,103

According to the NCDC, the 655 new cases are reported from 21 states- Lagos (240), Ogun (88), Rivers (56), FCT (51), Kaduna (43), Kano (25), Plateau (21), Taraba (19), Edo (17), Abia (15), Delta (13), Nasarawa (11), Akwa Ibom (10), Kwara (10), Oyo (10), Kebbi (9), Borno (5), Bayelsa (4), Gombe (4), Ekiti (2), and Osun (2).

Meanwhile, the latest numbers bring Lagos state total confirmed cases to 55,122, followed by Abuja (19,115), Plateau (8,854), Kaduna (8,422),  Oyo (6,708), Rivers (6,398), Edo (4,491), Ogun (4,277), Kano (3,716), Ondo (2,944), Kwara (2,875), Delta (2,539), Osun (2,326), Nasarawa (2,208), Gombe (2,031), Katsina (2,029), Enugu (1,998), Ebonyi (1,839), Anambra (1,615), and Abia (1,487).

Imo State has recorded 1,440 cases, Akwa Ibom (1,439), Borno (1,247), Bauchi (1,221), Benue (1,188), Niger (912), Ekiti (797), Sokoto (768), Bayelsa (767), Adamawa (762), Taraba (712), Jigawa (496), Kebbi (358), Yobe (268), Cross River (267), Zamfara (219), while Kogi state has recorded 5 cases only.

READ ALSO: COVID-19: Western diplomats warn of disease explosion, poor handling by government

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

The movement restriction, which was extended by another two weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.

On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.

On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.

Governor Babajide Sanwo-Olu of Lagos State announced the closed down of the Eti-Osa Isolation Centre, with effect from Friday, 31st July 2020. He also mentioned that the Agidingbi Isolation Centre would also be closed and the patients relocated to a large capacity centre.

Due to the increased number of covid-19 cases in Nigeria, the Nigerian government ordered the reopening of Isolation and treatment centres in the country on Thursday, 10th December 2020.

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On 26th January 2021, the Federal Government announced the extension of the guidelines of phase 3 of the eased lockdown by one month following the rising cases of the coronavirus disease in the country and the expiration of phase 3 of the eased lockdown.

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READ ALSO: Bill Gates says Trump’s WHO funding suspension is dangerous

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Appointments

Cornerstone Insurance Plc appoints Ogechi Adeola as Director

Dr Ogechi Adeola has been appointed as an Independent Non-Executive Director at Cornerstone Insurance Plc.

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Cornerstone Insurance Plc has appointed Dr Ogechi Adeola as its new Independent Non-Executive Director, subject to ratification by members at general meeting.

This is according to a notification sent to the Nigerian Stock Exchange platform, dated 24th of February, 2021, as seen by Nairametrics.

Dr. Adeola’s profile

Dr. Adeola has over two decades of work and consulting experience in the Nigerian Financial services sectors. She is an Associate Professor of Marketing at the Lagos Business School and an alumna of the Manchester Business School, United Kingdom.

On the other hand, Cornerstone Insurance closed trading today (24th of February, 2021) at the floor of the Nigerian Stock Exchange with a share price of N0.59.

Results from the recently released FY 2020 financials posted by the firm showed that gross premium written increased from N13.06 billion in 2019 to N17.6 billion. However, profit for the period declined to N1.6 billion, from N4.11 billion recorded in 2019.

What you should know:

Cornerstone Insurance Company Plc is a Nigerian-based insurance company offering services in the life and non-life categories.

It was incorporated on the 26th of July, 2021, initially as a private limited liability and subsequently became a public limited liability after its listing on the Nigerian Stock Exchange in 1997.

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