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Business News

CBN grants approval for banks to debit accounts of loan defaulters 

The CBN has finally granted DMBs the approval to directly debit bank accounts belonging to loan defaulters across all banks in the country.

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Banks' stakeholders express 4 main concerns bothering the sector right now, CBN, MARKET UPDATE: CBN’s historic agriculture lending; Is it yielding the desired results? 

The Central Bank of Nigeria (CBN) has finally granted Deposit Money Banks the approval to directly debit bank accounts belonging to loan defaulters across all banks in the country.

The CBN Director, Banking Supervision, Ahmed Abdullahi made the disclosure on Thursday while briefing Journalists at the end of the bankers’ committee meeting.

The details: According to the CBN, the approval became necessary as a new measure to mitigate the rising spate of Non-Performing Loans. It should also be noted that concerns had been mooted in recent times as the CBN’s new policy directed banks to lend up to 65% of deposits to the real sector of the economy.

[READ ALSO: Total loans in Nigeria’s banking sector hit N15.35 trillion]

Speaking after the banker’s committee meeting, the CBN Director stated that as the apex bank was encouraging banks to lend, the CBN was also poised to defend banks against possible future loan defaulters.

A new Clause: At the end of the bankers’ meeting, it was also learned that the CBN approved that the clause permitting banks to apply the new measure as part of loan agreements to all customers.

Abdullahi’s statement reads: “To encourage the banks to lend, the CBN has agreed that there will be a clause that an obligor will sign that will enable the bank net off against any amount he or she has in any other bank.”

Reacting to the approval from the CBN, the Executive Director, Risk, Standard Chartered Bank, Mubola Faloye, reportedly said the new CBN 65% loan to deposit ratio would force banks to lend to some vulnerable sectors and it is important for the apex bank to help deposit money banks mitigate the risk.

Sigma Pensions

“One of things the committee reiterated is that there are some vulnerable sectors the committee will be lending to and it’s important that we mitigate our risks and have what we call a credit cross-default clause that allows us to net off the obligations of defaulting party against any other money the defaulting party has in the industry. That is good support from the CBN for the banking community and it’s very important for us to include that clause in our loan agreement,” Faloye was quoted as saying.

The Backstory: Earlier in May 2019, as published on Nairametrics, the bankers’ committee disclosed plans to go tough on efforts to bring loan defaulters to book. According to the committee, plans have been perfected to go beyond publishing the names of defaulters. This time, all banks would be speaking with one voice, sharing information about those entities, and refusing to do further business with them until they settled their obligations.

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  • Similarly, the CEO addressed smear campaigns by defaulters which are always targeted at banks and their CEOs in a desperate bid to either delay repaying loans or avoid meeting their debt obligations completely.
  • While the banks have been increasing efforts to reduce bad loans, the CBN introduced a 65% loan to deposit ratio – a policy which means bad loans may surge.
  • Nairametrics was first to publish that the CBN had reviewed the earlier 60% LDR to 65%.
  • According to the CBN, the major reason for the newly revised LDR was the noticeable “growth in the level of the industry gross credit”.

[READ ALSO: A total of 34.7 million bank accounts are not yet linked to BVNs]

How this affects you: With the latest approval granted by the CBN to banks, loan defaulters who have funds in accounts across any bank in the country should expect debit alert from their respective banks any moment from now.

  • The new approval also means that for interested loan applicants, a new clause has been introduced, which mandates you to give consent to your bank to debit your accounts in any Nigerian bank where you have funds in the event of you defaulting.
  • Although, the right to setoff account balances has existed among banks in the past but hasn’t been operational.
  • It was learned that 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.

In the meantime, this move by the CBN is expected to drive down the huge non-performing loans in Nigerian banks and also strengthen the country’s financial sector.

Stanbic 728 x 90

 

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

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    Business News

    COVID-19 Update in Nigeria

    On the 14th of April 2021, 89 new confirmed cases 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 164,000 confirmed cases.

    On the 14th of April 2021, 89 new confirmed cases were recorded in Nigeria.

    To date, 164,000 cases have been confirmed, 154,270 cases have been discharged and 2,061 deaths have been recorded in 36 states and the Federal Capital Territory.

    A total of 1.8 million tests have been carried out as of April 14th, 2021 compared to 1.7 million tests a day earlier.

    COVID-19 Case Updates- 14th April 2021,

    • Total Number of Cases – 164,000
    • Total Number Discharged – 154,270
    • Total Deaths – 2,061
    • Total Tests Carried out – 1,838,174

    According to the NCDC, the 89 new cases were reported from 10 states- Lagos (19), Abuja (15), Adamawa (12), Akwa Ibom (10). Cross River (9), RIvers (6), Ogun (6), Kano (5), Kaduna (4), and Osun (3).

    Meanwhile, the latest numbers bring Lagos state total confirmed cases to 58,033, followed by Abuja (19,742), Plateau (9,041), Kaduna (8,998), Rivers (7,007), Oyo (6,838), Edo (4,893), Ogun (4,627), Kano (3,935), Ondo (3,226), Kwara (3,120), Delta (2,617), Osun (2,563), Nasarawa (2,378), Enugu (2,259), Katsina (2,097), Gombe (2,034), Ebonyi (2,017), Anambra (1,909), Akwa Ibom (1,810), and Abia (1,683).

    Imo State has recorded 1,655 cases, Bauchi (1,540), Borno (1,337), Benue (1,188), Adamawa (1,051), Niger (930), Taraba (910), Bayelsa (878), Ekiti (868), Sokoto (775), Jigawa (527), Kebbi (450), Cross River (385), Yobe (365), Zamfara (234), while Kogi state has recorded 5 cases only.

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

    Sigma Pensions

    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.

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    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.

    Stanbic 728 x 90

    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.

    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.

    On 28th February 2021, the federal government confirmed that the first tranche of Covid-19 vaccines will arrive in Nigeria on Tuesday, March 2nd, 2021.

    On Tuesday, 2nd March 2021, the National Primary health Care Development Agency announced the arrival of the expected COVX Astrazeneca/Oxford covid-19 vaccines.

    On Saturday, 6th March 2021, President Muhammadu Buhari and his vice, Yemi Osinbajo received vaccination against the covid-19 as the State House in Abuja.

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

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    Business News

    FG to distribute 10 million LPG gas cylinders in 1 year

    The FG is set to inject up to 10 million gas cylinders into the market to help improve safety and deepen cooking gas utilization.

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    The Federal Government has announced plans to inject 5 to 10 million Liquefied Petroleum Gas (LPG) cylinders into the market in the next one year.

    This is to help improve safety and deepen LPG (otherwise known as cooking gas) utilization across the country.

    This disclosure was made by the Programme Manager, National LPG Expansion Implementation Plan, Mr Dayo Adeshina, at a sensitisation workshop on LPG Adoption and Implementation for Industry Stakeholders, on Wednesday in Lagos.

    According to a report from the News Agency of Nigeria (NAN), Adeshina said the National LPG Expansion Implementation Plan, domiciled in the Office of the Vice President, was committed to achieving Nigeria’s target of 5 million Metric Tonnes of LPG consumption annually by 2027.

    What the Programme Manager for LPG Expansion Implementation Plan is saying

    Adeshina said, “The Federal Government is working towards injecting five to 10 million cooking gas cylinders into the market within the next one year. We are starting the cylinder injection under the first phase in 11 pilot states and FCT, with two states from each of the geopolitical zones.

    The states are Lagos, Ogun, Bauchi, Gombe, Katsina, Sokoto, Delta, Bayelsa, Ebonyi, Enugu, Niger and the Federal Capital Territory. The cylinders will be injected through the marketers. The marketers will be responsible for the cylinders and the exchange will take place in homes and not in filling stations.

    What this means is that going forward, cylinders will not be owned by individuals but by the marketers who will ensure that they are safe for usage.’

    Adeshina pointed out that apart from household consumption, the government was trying to increase LPG usage in agriculture, transportation and manufacturing adding that this will enable the country to reduce CO2 emission by about 20% and create millions of jobs for Nigerians.

    Sigma Pensions

    He said that the government had also granted waivers on importation of LPG equipment and removed Value Added Tax (VAT) on LPG in addition to investment in infrastructure.

    The President of the Nigerian Liquefied Petroleum Gas Association, Mr Nuhu Yakubu, said efforts should be made to ensure the availability, accessibility and affordability of cooking gas in the country adding that this would encourage more Nigerians to embrace gas usage in their homes with the attendant benefits to the country.

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    Mr Olalere Odusote, Lagos State Commissioner for Energy and Mineral Resources, said the population of Lagos makes it imperative for residents to adopt cleaner energy sources for cooking, transportation and power generation adding that the government was targeting the conversion of 45% of about 4 million vehicles in the state to autogas over a four-year period in partnership with marketers.

    What you should know

    • It can be recalled that the Federal Government had in November 2020, announced plans for the conversion of cars to autogas in a bid to have cheaper and cleaner energy especially with the high cost of petrol.
    • The government at different levels are pursuing cleaner energy sources for cooking, transportation and power generation.

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