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ARTICLE · 27 NOVEMBER 2019

Introduction Of A New Default Clause In Credit Facility Agreements

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The Central Bank of Nigeria (CBN) has been vocal about implementing regulatory measures aimed at ensuring banking stability while improving credit growth in the Nigerian economy.

NigeriaFinance and Banking
Olubusola Oyeyosola Diya
Olubusola Oyeyosola Diya
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The Central Bank of Nigeria (CBN) has been vocal about implementing regulatory measures aimed at ensuring banking stability while improving credit growth in the Nigerian economy. In line with this initiative, the CBN released a circular on 26 August 2019 titled: New Offer Letter Clause for Credit Facilities ("the Circular"). The Circular is pursuant to the CBN Bankers Committee's decision to grant banks access to the deposits in other banks of their defaulting customers to repay non-performing loans (NPL).

THE CIRCULAR

The Circular gives banks, who have extended facilities to customers, the right to access and utilise deposits of the NPL's customer across the banking industry in the event of a payment default. As such, a bank loan can be repaid, upon default on repayment of either the principal or interest or both, with funds in any bank account belonging to the customer. A bank can exercise this right by reporting the defaulting loan and customer to the CBN, who

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