The Central Bank of Nigeria has barred banks in Nigeria from using foreign currencies as collateral for naira loans.
The Central Bank of Nigeria made this known in a memo addressed to all banks in the country, dated April 8, 2024.
The memo, signed by the acting Director of Banking Supervision Department, Dr. Adetona S. Adedeji, said it had observed the use of Foreign Currency (FCY) by bank customers as collateral for naira loans and, therefore, prohibits it with immediate effect.
Also Read:
- FG bans use of foreign syringes, needles in tertiary hospitals
- Contempt: Appeal Court grants EFCC’s exparte motion for stay of proceedings, fixes date for hearing
- Court orders arrest of ex-Naval Chief over N1.5 b ‘fraud’ case
- Oyebanji receives Daily Independent’s Governor of the Year Award
- Police arrest 19-year-old for allegedly robbing female students
Adedeji said in the memo: “The Central Bank of Nigeria has observed the prevailing situation where bank customers use Foreign Currency (FCY) as collaterals for Naira loans.
“Consequently, the current practice of using foreign currency-denominated collaterals for Naira loans is hereby prohibited, except, where the foreign currency is collateral is:
“Eurobonds issued by the Federal Government of Nigeria; or
“Guarantees of foreign banks, including Standby Letters of Credit.”
The CBN then gave banks in the country an ultimatum to wind down all such loans.
Adedeji added in the memo: “In this regard, all loans currently secured with dollar-denominated collaterals other that as mentioned above should be wound down within 90 days , failing which such exposures shall be risk-weighed 150% for Capital Adequacy Ratio computation, in addition to other regulatory sanctions.”