The Chairman of the Economic and Financial Crimes Commission, Ola Olukoyede, has warned banks against issuing loans without proper collateral, raising concerns over insider influence and rising loan defaults.
The warning was delivered during a meeting with officials of First Bank Plc in Lagos, where the Commission pointed to a pattern of loans backed mainly by personal guarantees, including those from top executives.
According to the EFCC, this approach weakens lending standards and exposes depositors’ funds to unnecessary risk, especially in cases where loans are approved based on internal relationships rather than clear financial backing.
What this points to is a deeper issue within the banking system. When loans are driven from the top without strict checks, it shifts the risk from the borrower to the institution itself. And when those loans go bad, it is not just a balance sheet problem, it affects liquidity, confidence, and the bank’s ability to lend further.
The emphasis on collateral and due diligence suggests regulators are paying closer attention to how credit is being created, not just how it is recovered. It also signals concern that some of the bad loan cycles seen in the past may still be repeating quietly within the system.
This raises pressure on banks to tighten internal controls, especially for politically exposed or high-level borrowers. For regulators, it shows a renewed focus on preventing problems before they surface, rather than stepping in after defaults begin to pile up.
At a time when credit is critical to business activity, the quality of that lending is becoming just as important as access to it.
