The Central Bank of Nigeria (CBN) has prohibited the use of Foreign Currency-denominated collaterals for Naira loans by all Nigerian banks.
The apex bank disclosed this on Monday in a letter to all commercial banks signed by its Director Banking Supervision Department, Adetona Adedeji.
However, the new guidelines gave exceptions to Eurobonds issued by the Federal Government of Nigeria and Guarantees of foreign banks, including Standby Letters of Credit.
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 per cent for Capital Adequacy Ratio computation, in addition to other regulatory sanctions,” CBN stated.
The development comes in the wake of the recently announced minimum capital requirements for all banks.
