The Central Bank of Nigeria (CBN) has ordered tighter restrictions on the country's commercial banks, making it more difficult for them to issue letters of credit (L/Cs) to oil marketers.

The measure is one response to a massive build up of bad debts in Nigeria's banking sector, substantially caused by oil marketers' inability to repay loans.

Massive debts

Reports suggest that bad debts across Nigeria's banking system may have reached as much as 800 billion naira (N800 billion) or around US5$ billion.

The situation is variously blamed on poor credit assessments by chief executives of more than a dozen commercial banks and ineffective regulatory controls by the CBN, the Securities and Exchange Commission and the Economic and Financial Crimes Commission.

Oil marketers

Oil marketers are also seen as significant contributors to the high level of indebtedness.

According to CBN Governor, Sanusi Lamido Sanusi, the total exposure of five banks to oil and gas debts alone stood at a massive N487.02 billion.

Now the central bank has made it harder for oil marketers to obtain the L/Cs they need to do business by restricting loans to an amount equivalent to 10 per cent of a company's share capital.

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