The Economic and Financial Crimes Commission (EFCC) has cautioned Nigerian banks against granting loans without credible collateral, warning that such practices could fuel insider abuse and increase the volume of non-performing loans.
The EFCC Chairman, Ola Olukoyede, issued the warning during a recent engagement with the Chief Audit Executive of First Bank Plc, who led a delegation to the Lagos Zonal Directorate 2 of the Commission in Ikoyi.
Speaking through the Acting Zonal Director of Lagos Zonal Directorate 2, Assistant Commander of the EFCC, ACE 1 Bawa Usman Kaltungo, Olukoyede expressed concern over what he described as weak lending practices in some financial institutions.
“We have issues with banks’ mode of giving loans. The process often shows insider abuse,” he said.
He stressed that loans backed only by personal guarantees, including those of top executives, were not sufficient security for credit facilities.
“Top-down loans are not secured. You cannot give a loan based solely on the personal guarantee of the Chief Executive. This is not security. Banks must not issue loans without verifiable collateral,” he stated.
According to him, failure to enforce proper lending standards exposes depositors’ funds to unnecessary risks, noting that banks must strengthen due diligence processes to reduce loan defaults.
“A bank is only a custodian, and giving loans without adequate collateral amounts to tampering with depositors’ funds,” he added.
Olukoyede also urged financial institutions to ensure accountability even when due diligence is outsourced, insisting that liability clauses must be clearly defined.
He further called for closer cooperation between banks and the EFCC in tackling financial crimes, stressing the need for timely release of staff when required for investigations.
“When we invite your staff, especially where insider connivance is suspected, you must release them so we can jointly fight economic and financial crimes,” he said.
Earlier, the First Bank delegation led by Mufutau Olawale Abiola commended the EFCC for the engagement, saying the visit was aimed at strengthening collaboration between both institutions. He also urged the commission to speed up investigations involving bank staff and other related cases.