The Central Bank of Nigeria has decided to discontinue the practice of accepting foreign currencies as collateral for loans issued in naira.
In a circular issued today April 8, the apex bank directed all Nigerian banks to discontinue the practice of accepting foreign currencies as collateral for loans denominated in naira.
The apex bank mentioned that foreign currencies can only be used as collateral for loans issued in Naira when the foreign currency collateral is Eurobonds issued by the Federal Government of Nigeria; or Guarantees of foreign banks, including Standby Letters of Credit
The CBN directed that all loans currently secured with dollar-denominated collaterals other than as mentioned above should be wound down within 90 days and that failure to comply will attract sanctions. Read below
‘’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 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.
Meanwhile, the Central Bank of Nigeria has again announced the sales of dollars to Bureau De Change operators. The CBN disclosed this in a circular uploaded to its website on Monday, April 8, 2024.
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. This is the second time in two weeks that the CBN is making the same move.
The move suggests BDCs are not expected to sell above N1,117/$1. The selling rate is below the N1,251.05/$1 recorded at the end of last week, according to data from the Nigerian Autonomous Foreign Exchange Market (NAFEM)
