Regulatory Alerts2009-06-26 | BSD/DIR/GEN/CIR/03/011Lending to All Tiers of Government and Their Agencies
The Central Bank of Nigeria revised its circular from April 15, 2002 regarding public sector credits. Banks are now to apply normal provisions of prudential guidelines to all public sector credits and limit such loans to a maximum of 10% of their total credit portfolio on-and-off balance sheet. This must be achieved by December 31, 2009 if the existing limit exceeds this new threshold. The CBN warns banks against non-performing public sector credits and advises them to exercise caution in extending loans, as it reserves the right to reintroduce measures to curb public sector loans should the banks fail to adhere to these guidelines.
234-9-46236403 234-9-46236418 June 26, 2009 BSD/DIR/GEN/CIR/03/011 CIRCULAR TO ALL BANKS
LENDING TO ALL TIERS OF GOVERNMENT AND THEIR AGENCIES
Our circular reference number BSD/03/2002 of April 15, 2002 on "granting of credits to all tiers of government and their agencies" requiring banks to make provision of 50% and 100% for performing and non-performing credits, respectively is hereby revised as follows: Banks are now to apply the normal provisions of the prudential guidelines to all public sector credits. However, a maximum limit of 10% of the total credit portfolio should be placed on public sector credits, both on-and-off Balance Sheet. Where the existing credit limit to the public sector has exceeded the prescribed maximum limit of 10%, it should be brought down to the maximum limit of 10% by December 31, 2009.
Banks are reminded of the history of non-performing public sector credits, and are therefore strongly advised to exercise caution and set a more conservative threshold to avoid the mistakes of the past. The Central Bank of Nigeria will be constrained to reintroduce measures to curb public sector loans if banks do not put in place appropriate measures to avoid excessive exposure to the sector.
D.A.N. EKE
For: DIRECTOR OF BANKING SUPERVISION