By Abiodun Apete, Esq


The Central Bank of Nigeria (CBN) is the apex bank in Nigeria, the CBN is responsible for the welfare and supervising of all banks in Nigeria, the CBN regulates and guides every financial institution in Nigeria, the regulation and control of financial institution is done by the issuing guidelines and articles. The function and roles of the CBN is why it is often referred to as the “bankers bank.”

In the discharge of its roles and obligations the CBN as a regulatory agency issued guidelines to all financial institutions as regards their Non Performing Loans (NPLs), this guideline is called the Global Standing Instruction (GSI). The apex bank in a collaborative effort with stakeholders has developed the necessary protocol to facilitate the seamless implementation of the GSI process which includes eligible loans granted after August 28, 2019. The guideline which was issued on the CBN’s website by Mr. Kelvin Amugo, Director, financial policy and regulation department will take effect on August 1, 2020.

Some studies have however shown that NPL and its bearing on banking stability cannot be the same across different categories of banks due to the following:

  • Varying levels of Market discipline,
  • Risk management strategies,
  • Regulatory and supervisory measures and,
  • The institution sources of capital.

The introduction of special vehicles to avoid systemic failure and revitalize the system is a way to mitigate the high rate of NPLs. The NPL are skyrocketing with attendant economic penalties which is made more obvious because of the Covid-19 pandemic. It is common knowledge that most loan defaulters are oil companies. It is imperative for the CBN to issue a guideline to financial institutions on how to handle NPL in order to reduce impact and strains of these times on the economy.


The GSI is dated July, 2020, it has the definition sections and it is divided into 8 (eight) parts which are the following:

  • Introduction: The introductory part talks about the purpose and the objectives of the GSI.
  • Eligible accounts
  • The third part discussed the stakeholders; their roles and responsibility,
  • The fourth part discussed the GSI transaction report; who you are meant to report to,
  • The fifth part discussed accountability in Participating Financial Institutions(PFI),
  • The sixth part discussed the penalties when any of the stakeholders involved violates the GSI,
  • The seventh part discussed the participation requirement,
  • The last part is the training, it concludes the GSI guidelines.

The GSI made mention of stakeholders in the GSI that is the participators in the GSI, the stakeholders in the GSI as outlined includes:

  • The borrower
  • Creditor bank
  • Participating Financial Institutions (PFI)
  • Nigeria Inter-Bank Settlement System (NIBSS)
  • Central Bank of Nigeria.


  • A customer who takes a loan in any bank can get the loan deducted from any other bank account connected to the Bank Verification Number (BVN).
  • The loan deduction from your other accounts by the bank will only be that of capital and interest, no other deductions will be made.
  • There is an elimination or reduction of the risks associated with CBN not granting loans, owing to previous loans history with them.
  • The GSI guidelines apply to all financial institution within the country and the new policy gives big business and corporate individual the option of shopping for the best loan rates.
  • The GSI is expected to serve as a last resort by creditor banks without recourse to the borrower (principal and interest rate) excluding any penal charges.
  • The borrower is expected to execute a GSI mandate in hardcopy or digital form, ensure that the terms and conditions of the mandate are clearly understood before execution and ensure that all qualifying accounts are linked to his or her BVN accounts.
  • When a commercial bank wrongfully activates the GSI on a customer’s account, the apex bank will take appropriate measures to fine the defaulting bank, the fine is in the rate of N500,000.00 or N10,000,000.00 depending on the procedure.
  • The guideline noted in the event that a borrower qualifying account which is not linked to his or her BVN is identified, such BVN shall be watch listed.


According to the GSI, the roles and responsibilities of the creditor bank includes:

  • Ensure that borrowers are properly educated about the GSI mandate and its implication, and enshrine same in the loan application process
  • The creditor bank needs to review and validate the GSI mandate instrument prior to loan disbursement, indemnifying the NIBSS and PFIs from all liabilities that may arise from the inappropriate use of the GSI infrastructure, and retain copies of physical or digital version of the executed GSI mandate and to provide same when required.
  • The creditor bank is to ensure that the GSI trigger amount is only for outstanding principal amount and accrued interest (excluding any penal charges), comply with the CBNs prudential guidelines as it applies to classification of loans and as a risk management tools, the MD/CEO of each PFI shall routinely update the board of directors on the GSI process as it relates to frequency of use and amounts recovered or released.


  • Individual Savings Account
  • individual Current Account
  • Individual Domiciliary Account
  • Investment and Deposit Accounts (Naira and foreign currency)
  • E Wallet and,
  • Joint Account


The penalty involved in the default of the GSI varies and are shown in the GSI.


Considering the impact of the pandemic on the economic and how the Nigeria economy has been faring it is pertinent that the apex bank issues guidelines to regulate the loan defaulter. The number of loan defaulter in Nigeria skyrocketed from the month of April, 2020 till now as opposed to what has been seen in the past where there is actually a balance.

The GSI will salvage the current pandemic faced by banks as it regards NPL.


Non Performing Loan: A non performing loan (NPL) is a loan which the borrower is in default and hasn’t made any scheduled payments of principal or interest for sometime.

NOTE: A loan given by a commercial bank is considered NPL is the borrower is 90 days past due. The International Monetary Fund (IMF) considered a loan as NPL if there is high uncertainty concerning future payments.

Return on Equity (ROE): ROE is a measure of financial performance calculated by dividing net worth by shareholders’ equity, because shareholders equity is equal to a company’s asset. ROE is considered a measure of how effectively management is using a company’s asset to create profit.

Return on Assets (ROA): is an indicator of how profitable a company is relative to its total assets and how efficient management is using them to generate earnings.

Written by Abiodun Apete, Esq. a senior associate in the firm of A and E Legal Practitioner

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