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Why CBN banned use of foreign currency as collateral for Naira loans

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By Chioma Obinagwam

 

The Central Bank of Nigeria—the apex of Nigeria has instructed all Nigerian banks to stop accepting foreign currencies as collateral for loans denominated in naira.

 

Confiance News gathered from a circular titled “The use of foreign currency denominated collateral for Naira loans” the official X handle of CBN on Monday.

 

“Consequently, he 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 FG or Guarantees of foreign banks, including Standby Letters of Credit,” the statement disclosed.

 

The statement which was signed by the bank’s Acting Director, Banking Supervision Department, Adetona Adedeji, ordered banks to wound down all loans currently secured with dollar-denominated collaterals with the exception of those stated above, within 90 days.

 

Adedeji added that defaulters will be

sanctioned.

 

 

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