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CBN bans use of foreign currency as collateral for naira loan

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CBN demands strict compliance from Authorized Dealer Banks on FX allocation

The Central Bank of Nigeria (CBN) has prohibited the use of foreign currency-denominated collaterals for naira loans.

In a circular directed to all banks by CBN’s Acting Director of Banking Supervision Department, Adetona Adedeji. The apex bank stated thus:

“The Central Bank of Nigeria has observed the prevailing situation where bank customers use Foreign Currency (FCY) as collaterals for Naira loans,” the circular partly read.

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“Consequently, the current practice of using foreign currency-denominated collaterals for Naira loans is hereby prohibited, except, where the foreign currency collateral is:

“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 such exposures shall be risk-weighted 150% for Capital Adequacy Ratio computation, in addition to other regulatory sanctions.”

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