In a bold move to fortify the Nigerian currency, the Central Bank of Nigeria (CBN) has issued a new directive to all financial institutions within the country: the use of foreign currency-denominated collaterals for Naira loans is now strictly prohibited.
The CBN’s decision, articulated in a circular signed by Adetona Adedeji, the Director of Banking Supervision, outlines that the only exceptions to this rule are Eurobonds issued by the Federal Government of Nigeria or guarantees provided by foreign banks, including Standby Letters of Credit.
“This measure is part of our concerted efforts to strengthen the Naira and ensure stability in the financial sector,” explained Adedeji. “We must prioritize our currency and take control of the economic levers that will drive our nation forward,” he added.
Banks have been given a 90-day window to comply with the new regulations. Failure to do so will result in the exposures being risk-weighted at 150% for Capital Adequacy Ratio computation, along with other regulatory sanctions.
The CBN’s recent actions, including an upward review of the minimum capital requirement for banks, reflect a broader strategy to bolster the banking sector and stabilize the Nigerian economy amid global financial uncertainties.
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