The New Credit Risk Protection Clause for Nigerian Commercial Banks : Efficacy and Limitations

A major challenge which has continuously bedeviled Nigerian banks is the burden of non-performing loans (NPLs). Data from the Nigerian Bureau of Statistics reveal that NPLs stood at N1.44 trillion at the end of the second quarter of 2019. This was about 9.3% of total loans in the banking sector and the first time in 40 months that NPL ratio would be in single digit. Despite rising NPLs, lack of access to credit has remained the bane of most businesses in Nigeria. In recent times, the Central Bank of Nigeria (CBN) has initiated measures aimed at improving credit culture as well as credit risk management. One of such initiatives was the resolve of CBN and Bankers' Committee at the Committee's 345th to introduce a credit risk protection clause in loan agreements. This discourse examines the efficacy and limitations of this initiative