On 13th July 2020, Nigeria’s apex bank, the Central Bank of Nigeria (the “CBN”) issued Guidelines on the Global Standing Instruction (the “Guidelines” or “GSI”) for individual accounts. The Guidelines which shall be implemented from 1st August 2020 seek to facilitate an improved loan repayment culture, reduce non-performing loans, watch-list consistent loan defaulters and generally enhance loan recovery across Nigeria’s banking industry.
The Guidelines provide that at the point of executing loan agreements, borrowers must also execute a GSI mandate in favour of the participating financial institution (PFI). In the event of default by the borrower, the GSI shall serve as a last resort by the PFI, without recourse to the borrower, to recover past due obligations (principal and accrued interests only, excluding any penal charges) from a defaulting borrower through a direct set-off from deposits or investments held in the borrower’s accounts with any other PFI.
In order to qualify as a PFI for this purpose, an institution must:
- be a financial institution duly licensed by the CBN;
- have adequate information technology infrastructure to meet all the connectivity and protocol requirements at Nigeria Inter-Bank Settlement System Plc (NIBSS) and CBN;
- provide access to customers’ NUBAN accounts; and
- execute the GSI Master Agreement with NIBSS with a copy sent to CBN.
The GSI can only be triggered for the purpose of recovering loans (principal sums and interest) granted to natural persons (individuals) and may be triggered in respect of savings accounts, current accounts, domiciliary accounts, investment or deposit accounts, and electronic wallets (whether held individually or jointly). The biometric verification number (BVN) system shall be used to track linked accounts in other financial institutions. The Guidelines however provide that where a borrower’s BVN is not linked to any of the qualifying account types listed above, such an account will be “watch-listed”.