Nigeria’s central bank ordered banks on Friday to crack down on borrowers with non-performing loans (NPLs) in a move aimed at avoiding a repeat of a 2009 industry bailout that cost the government $4 billion.

A sharp drop in the global price of oil, Nigeria’s main export, has triggered a currency crisis in Africa’s largest economy and strained government’s finances, while also harming the cash flow of some companies with foreign currency loans.

Ratings agency Fitch said in February it expects NPLs for Nigerian lenders to rise above a central bank cap equal to five percent of their total loan portfolio but to remain below 10 percent this year, driven by high credit concentration in oil and gas and power sectors.

Under the new plan, banks will give bad debtors three months to square up their accounts. Failure to do will result in them being named and shamed in Nigerian media and being barred from currency and government debt markets.

“The Central Bank of Nigeria has observed the rising trend of non-performing loans in the industry,” Tokunbo Martins, director of banking supervision, said in a statement.

“Banks and discount houses are required with effect from May 1 … to give delinquent debtors three months’ grace to turn their accounts from non-performing to performing status.”

They must then publish a list of those “delinquent debtors that remain non-performing in at least three national daily newspapers quarterly”, the statement said.

The central bank gave no estimate of the current level of commercial lenders’ NPLs.

In 2009, the central bank rescued several banks that had lent mainly to the oil and gas sector just before crude prices collapsed and as the stock market turned sour, triggering a near collapse of eight commercial banks.

Fitch has said the recent sharp drop in oil prices and pressures on the local currency could affect the profitability, asset quality and capital ratios for lenders.

The central bank has been battling to support the currency, which it has had to devalue twice despite spending billions of dollars from its reserves to defend the naira. However, demand for dollars, including for debt servicing, has not abated as oil prices and reserves remain low.

Last month, the central bank limited the amount individuals can spend abroad on their debit cards to $50,000 per annum, down from $150,000, in order to support the naira.

Source: Reuters