Single Obligor Limit (SOL)

The regulation in brief

The CBN-mandated Single Obligor Limit is the institution-specific ceiling on credit exposure to a single borrower, calculated as a percentage of the institution's shareholders' funds unimpaired by losses. The caps vary by institution type:

• Microfinance banks: 1% to any individual borrower; 5% to a group, cooperative, or corporate body; aggregate insider-related lending capped at 5%.
• Deposit money banks: 20% to any single person or group of related borrowers (merchant banks: 50%).
• Finance companies, primary mortgage banks, development finance institutions, and other supervised lenders: institution-specific caps under CBN prudential guidelines for each category.

The "obligor" definition is wider than the named borrower — it sweeps in related entities, group structures, and connected parties. For institutions at the tighter end of the range — MFBs especially — the cap is operationally significant: a Tier-1 MFB with modest shareholders' funds can find the 1% per-borrower limit drives the structure of its lending book.

SOL breaches are an examiner's red flag for two reasons: they indicate concentration risk that could destabilise the institution, and they often point to weak internal credit controls.

How FinovaMax handles it

• SOL module with override workflow. Every credit-origination request is checked against the institution-specific SOL cap before approval. The platform refuses to silently process a transaction that would breach the limit.
• Related-party aggregation. Exposure is aggregated across the borrower and their declared related parties — not just the named applicant.
• Real-time exposure dashboard. The Head of Credit can see current exposure against SOL at any moment, not at month-end close.
• Documented override workflow. Where a breach is contemplated (e.g., during restructuring or extension), the override pathway requires board-level approval with audit-evidence capture — same discipline as insider lending.
• Group-counterparty exposure tracking. For institutions dealing with corporate groups, exposure is also tracked at the group level, not just per-entity.

Practical implication for your institution

The Chief Credit Officer no longer has to reconstruct exposure manually at every credit-committee meeting. The platform's answer to "What is our exposure to Group X across all subsidiaries and lines?" is a single screen. The examiner's question — same.