Regulatory Alerts2024-04-08 | BSD/DIR/PUB/LAB/017/004Letter to all Banks- The Use of Foreign- Currency Denominated Collaterals for Naira Loans
The Central Bank of Nigeria has prohibited the use of foreign currency-denominated collaterals for Naira loans, with a few exceptions. Banks have 90 days to wind down existing loans secured with dollar-denominated collaterals or face regulatory sanctions and a higher risk weight for Capital Adequacy Ratio computation. This directive aims to regulate the use of foreign currency as collateral for loans in Nigeria.
Banking Supervision Department P.M.B. 12194 Tinubu Square.
Lagos.
Email: bsd@cbn.gov.ng Website: www.cbn.gov.ng BSD/DIR/PUB/LAB/017/004 April 8, 2024 LETTER TO ALL BANKS THE USE OF FOREIGN-CURRENCY-DENOMINATED COLLATERALS FOR NAIRA LOANS 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% for Capital Adequacy Ratio computation, in addition to other regulatory sanctions.
Please be guided accordingly.
Yours faithfully, DR ADETONA S. ADEDEJI AG. DIRECTOR, BANKING SUPERVISION DEPARTMENT Tel .