The Central Bank of Nigeria has banned the use of foreign currency-denominated collaterals for Naira loans is.
The regulator in a letter to all banks said it observed the prevailing situation where bank customers use Foreign Currency (FCY) as collaterals for Naira loans.
It therefore stated that the only exceptions henceforth will be where the foreign currency collateral is a Eurobonds issued by the Federal Government of Nigeria or Guarantees of foreign banks, including Standby Letters of Credit.
The letter signed by Dr Adetona Adedeji added that 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.
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