Olasunmibo Aboluwade, Abuja
The Central Bank of Nigeria, (CBN), has banned the use of foreign currency denominated collaterals for naira loans .
This is contained in a memo by the CBN to all banks operating in the country.
The memo with references, BSD/DIR/PUB/LAB/017/004, dated April 8, 2024, was signed by Dr Adetona S. Adedeji, Acting Director, Banking Supervision Department .
It was titled, Letter to All Banks: The Use of Foreign-Currency-Denominated Collaterals For Naira Loans
Part of the letter read, “The Central Bank of Nigeria has observed the prevailing situation where bank customers use Foreign Currency (FCY) as collaterais for Naira loans.
“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 exposures shall be risk weighted 150% for Capital Adequacy Ratio computation in addition to other regulatory sanctions. Please be guided accordingly.”
