LAGOS, Nigeria (VOICE OF NAIJA)-The Central Bank of Nigeria (CBN) has implemented a ban on the use of foreign denominated collaterals for naira loans, except for Eurobonds issued by the Federal Government of Nigeria or guarantees of foreign banks, including Standby Letters of Credit.
In a letter from the acting Director of the Banking Supervision department, Dr. Adetona Adedeji addressed all banks, noting the observed practice of bank customers in the country using foreign currencies as collateral for naira loans.
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Consequently, the CBN said “the current practice of using foreign currency-denominated collaterals for Naira loans is hereby prohibited. The apex bank furthered that the use can be permitted in situations where the foreign currency collateral is either 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.