Foreign Currencies Should No Longer Be Used As Collateral For Naira Loans – CBN

The Central Bank of Nigeria has written to all banks in Nigeria to stop the use of foreign currencies as collateral for naira loans.

The statement was recently shared by the apex bank’s acting Director, Banking Supervision Department, Adetona Adedeji, and Nigerians have been reacting.

According to him, CBN has observed the use of FCY by bank customers as collateral for naira loans and, therefore, prohibits it with immediate effect at all Nigerian banks.

He added that all loans currently secured with dollar-denominated collaterals other than as mentioned above should be wound down within 90 days.

It read, “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.”

WOW.