The Central Bank of Nigeria, CBN, has issued a directive to all commercial banks, prohibiting the use of Foreign Currency-denominated collaterals for Naira loans.
The apex bank disclosed this on Monday in a letter to all commercial banks signed by its Director Banking Supervision Department, Adetona Adedeji.
The new regulations however gave exemptions for Eurobonds issued by the Federal Government of Nigeria and guarantees of foreign banks, such as Standby Letters of Credit.
However, the new guidelines gave exception to Eurobonds issued by the Federal Government of Nigeria and Guarantees of foreign banks, including Standby Letters of Credit.
“The Central Bank of Nigeria has observed the prevailing situation where bank customers use Foreign Currency, FCY, as collaterals for Naira loans.
READ ALSO: CBN announces sale of FX to BDC operators at N1,101/$
“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 per cent for Capital Adequacy Ratio computation, in addition to other regulatory sanctions,” CBN stated.
The development comes in the wake of the recently announced minimum capital requirements for all banks.
For months, CBN’s governor, Olayemi Cardoso had continued to roll out policies to defend the Naira and Nigeria’s economy.
Earlier Credible News reported that in effort to stabilize the foreign exchange market, the apex Bank declared the commencement of dollar sales to 1, 588 Bureau De Change,BDC operators.
In a circular uploaded to its website on the apex bank said it is set to sell $10,000 to each BDCs at N1101/$ and directed the operators to sell at a spread not more than 1.5 per cent above the CBN rate.
The listed eligible BDCs were directed to commence payment of the naira deposits into four CBN accounts, starting from April 8, 2024.
Credible News.ng
