The Central Bank of Nigeria (CBN) on Friday issued a lending limit directive to financial institutions in Nigeria, in order to reduce their exposure to risk as regards lending to the public.
The apex bank gave the recommendation to microfinance banks, Deposit Money Banks, mortgage refinance companies, finance companies, and Development Finance Companies.
The CBN directed the microfinance banks to offer loan at 1% to individuals, while the maximum loan that should be offered to groups of borrowers like a cooperative shouldn’t exceed 5% of the microfinance banks’ shareholders’ fund.
“The maximum loan to any individual borrower shall not exceed 1% while a loan to a group of borrowers, a cooperative or a corporate body shall not exceed 5% of the MFB’s shareholders’ fund unimpaired by losses or as may be prescribed by the CBN.”
The CBN added that the aggregate insider-related lending must not exceed 5% of an MFB’s shareholders’ fund unimpaired by losses.
Also, Deposit Money Banks have been instructed not to exceed 20% of the bank’s shareholders’ fund unimpaired by losses for individuals or single persons and group of related borrowers.
“50% of a bank’s off-balance-sheet engagements shall be applied in determining the bank’s statutory limit to a single obligor.”
The apex bank also ordered that the total outstanding exposure (on and off-balance sheet) by a bank to all tiers of government and their agencies must not exceed 10% of the total credit portfolio.