The Central Bank of Nigeria (CBN) has prohibited the use of foreign currency-denominated collaterals for naira loans.
In a circular directed to all banks by CBN’s Acting Director of Banking Supervision Department, Adetona Adedeji. The apex bank stated thus:
“The Central Bank of Nigeria has observed the prevailing situation where bank customers use Foreign Currency (FCY) as collaterals for Naira loans,” the circular partly read.
“Consequently, the current practice of using foreign currency-denominated collaterals for Naira loans is hereby prohibited, except, where the foreign currency collateral is:
- Eurobonds issued by the Federal Government of Nigeria; or
- Guarantees of foreign banks, including Standby Letters of Credit
“In this regard, all loans currently secured with dollar-denominated collaterals other than as mentioned above should be wound down within 90 days, failing which such such exposures shall be risk-weighted 150% for Capital Adequacy Ratio computation, in addition to other regulatory sanctions.”