The Central Bank of Nigeria (CBN) has directed all banks in the country to stop the use of foreign currencies as collateral for naira loans.
CBN gave the directive in a circular issued by the Director of Banking Supervision Department at the apex bank, Dr Adetona Adedeji, on Monday, April 8, 2024.
The apex bank said it had observed the use of foreign currency by bank customers as collateral for naira loans and, therefore, prohibits it with immediate effect.
It stated: “The current practice of using foreign currency-denominated collaterals for naira loans is 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 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.”
