By Chris Agabi
The Central Bank of Nigeria (CBN) has banned the use of foreign currency accounts as collateral on naira loans.
The CBN announced the ban in a letter addressed to all banks and signed by Dr. Adetona S. Adedeji, the Ag. Director, Banking Supervision Department, CBN.
CBN in the notice said it “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” the letter read.
In this regard, the CBN said “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.”
