CBN warns bank customers to stop using forex as collateral for Naira loans

The Central Bank of Nigeria (CBN) has issued a warning to bank customers, urging them to avoid using foreign currency as collateral when applying for Naira loans.

This cautionary measure is in place to protect the stability of the local currency and prevent potential risks associated with foreign exchange fluctuations.

Acting Director, Banking Supervision Department of the CBN, Adetona Adedeji, gave the warning in a statement on Monday, in Abuja.

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

“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 per cent for Capital Adequacy Ratio computation in addition to other regulatory sanctions,” he said.