The Central Bank of Nigeria (CBN) has issued a directive prohibiting Nigerian banks from using Foreign Currency-denominated collaterals for Naira loans.

This directive, outlined in a letter to all commercial banks signed by Director of Banking Supervision Department, Adetona Adedeji, aims to address prevailing practices where bank customers utilize Foreign Currency (FCY) as collaterals for Naira loans.

Under the new guidelines, only specific exceptions are allowed, including Eurobonds issued by the Federal Government of Nigeria and Guarantees of foreign banks, such as Standby Letters of Credit. Loans secured with dollar-denominated collaterals other than those mentioned above must be wound down within 90 days. Failure to do so will result in such exposures being risk-weighted at 150 per cent for Capital Adequacy Ratio computation, along with other regulatory sanctions.

This directive aligns with the CBN's efforts to uphold the stability of the Naira and safeguard Nigeria's economy. It also comes amid the implementation of minimum capital requirements for all banks, reflecting the ongoing efforts of CBN's governor, Olayemi Cardoso, to implement policies aimed at protecting the nation's currency and economic interests.