EFCC Issues Strong Warnings to Nigerian Banks as Risky Lending Fuels Bad Loans
The Economic and Financial Crimes Commission (EFCC) has issued a stern warning to Nigerian banks, cautioning them against the practice of granting loans without solid and verifiable collateral. This advisory comes as the Commission highlights that such lending habits are contributing significantly to the increase in non-performing loans across the banking sector.
Criticism of Lending Practices
During a recent meeting with a delegation from First Bank Plc, led by Chief Audit Executive Mufutau Abiola, EFCC Chairman Ola Olukoyede, represented by Acting Zonal Director Bawa Kaltungo, criticized banks for approving loans based solely on personal guarantees, even when provided by top executives. Olukoyede emphasized that this approach exposes depositors' funds to unnecessary risks and reflects weaknesses in internal lending controls. He stated that loans granted without credible backing are essentially unsecured and are a major driver of bad debts.
Olukoyede stressed the need for stricter lending standards, urging banks to ensure that every loan is supported by tangible and verifiable collateral. He warned that without such measures, financial institutions risk mismanaging the funds entrusted to them by customers, which could lead to further financial instability.
Call for Enhanced Due Diligence and Collaboration
In addition to addressing collateral issues, Olukoyede called for improved due diligence processes in lending to minimize defaults. He noted that even when these checks are outsourced, accountability must remain clearly defined. He reiterated that banks, as custodians of public funds, must handle lending decisions with utmost responsibility to protect the financial system.
Olukoyede also urged stronger cooperation between banks and the EFCC, particularly in investigations involving suspected financial misconduct. He encouraged banks to promptly release staff members when invited for questioning, especially in cases where insider involvement is suspected. Highlighting the importance of joint efforts, he noted that collaboration is essential to staying ahead of offenders and may require escalation to international security agencies when necessary.
Response from First Bank and Broader Context
In response, Mufutau Abiola expressed appreciation for the engagement and reaffirmed First Bank's commitment to strengthening its partnership with the EFCC. He also appealed for faster resolution of investigations involving bank staff and disclosed that a dedicated team within the bank handles requests from the Commission.
This warning aligns with recent actions by the Central Bank of Nigeria (CBN), which has instructed commercial banks to deny additional credit facilities to borrowers who have failed to repay existing loans. The EFCC has also previously warned about the growing incidence of bank-related fraud, including practices such as accounting manipulation, cheque forgery, falsified loan applications, identity theft, and money laundering, advising the public to remain vigilant.
The EFCC's latest advisory underscores the ongoing challenges in Nigeria's banking sector and the need for robust measures to safeguard financial integrity and protect depositors' interests.
