The Central Bank of Nigeria (CBN) has warned bank customers to desist from using foreign currency as collateral for Naira loans.
Acting Director, Banking Supervision Department of the CBN, Adetona Adedeji, gave the warning in a statement on Monday, in Abuja.
The apex bank outlined the new regulations aimed at addressing prevailing practices in the banking sector.
The directive highlights the observation by the CBN of the widespread practice where bank customers utilize Foreign Currency (FCY) as collaterals for Naira loans.
Adedeji said that the current practice of using foreign currency-denominated collaterals for Naira loans would only be allowed in the case of Eurobonds issued by the Federal Government.
He said that guarantees of foreign banks, including standby letters of credit would also be allowed.
ALSO READ: Over 10,000 houses flooded in parts of Russia
“In this regard, all loans currently secured with dollar-denominated collaterals other than as mentioned above should be wound down within 90 days.
ALSO READ: FG’s policy agenda to boost Nigeria into $1trn economy– Group
“Failing which such exposures shall be risk-weighted 150 percent for Capital Adequacy Ratio computation in addition to other regulatory sanctions,” he said.
The policy shift underscores the CBN’s commitment to ensuring the stability and integrity of the Nigerian banking system while promoting prudent lending practices and safeguarding against currency-related risks.
Banks and financial institutions are urged to adhere strictly to these new guidelines to avoid regulatory penalties. The CBN emphasizes that this directive is in the best interest of maintaining a sound and resilient banking sector in Nigeria.
NAN
