Tuesday, 09 April 2024 05:03

CBN bars banks from using FX-denominated collateral for naira loans

Rate this item
(0 votes)

Central Bank of Nigeria has barred commercial lenders from accepting foreign currency-denominated collateral to grant naira loans, a move that could protect the banking system against a strengthening of the local currency, it said on Monday.

The regulator said in a circular that the practice it had observed of bank customers using foreign currency as collateral for naira loans was "prohibited".

The CBN on Monday said it approved Eurobonds issued by the government or letters of credit issued by an offshore bank as eligible foreign currency collateral.

It told lenders to wind down all loans currently secured with dollar-denominated collateral within 90 days or face sanctions.

The naira has gained sharply against the dollar on both the official and parallel markets after suffering its second devaluation in less than a year in January.

The currency strengthened after the central bank raised interest rates in February and March, and lifted restrictions on foreign participation at its fixed-income auctions.

The bank now allows foreign investors to pre-fund their accounts and get naira at the prevailing exchange rate for bill auctions, analysts said.

In the past, lenders faced constraints in fulfilling foreign investors' bids as they incurred extra costs on settlement day if they borrowed from the central bank's discount window to pay for bills.

 

Reuters

November 22, 2024

All good leaders have this mindset, no matter their background

David G. Ewing In today’s tech-driven business world, the ability to navigate technological challenges isn’t…
November 22, 2024

Tinubu’s borrowing spree retuning Nigeria back into debt peonage - Atiku

Former Vice President Atiku Abubakar has criticized the President Bola Tinubu-led administration for the increasing…
November 18, 2024

The magic and the minefield of confidence: Self doubt, hubris and everything in between - The Economist

Confidence is contagious. Someone declaring a position with ringing certainty is more likely to inspire…
November 16, 2024

Influencer eats pig feed in extreme attempt to save money

Popular Douyin streamer Kong Yufeng recently sparked controversy in China by eating pig feed on…
November 22, 2024

FG excited as pro-Biafra agitator Simon Ekpa arrested in Finland on terrorism charges

Simon Ekpa, the controversial leader of the pro-Biafra faction Autopilot, was arrested by Finnish authorities…
November 22, 2024

Here’s the latest as Israel-Hamas war enters Day 413

ICC issues arrest warrants for Israel's Netanyahu, Gallant and Hamas leader The International Criminal Court…
November 21, 2024

Nigeria comes top in instant payment system inclusivity index in Africa

Nigeria’s instant payment system is projected to advance to the maturity inclusion spectrum ahead of…
October 27, 2024

Nigeria awarded 3-0 win over Libya after airport fiasco

Nigeria have been awarded a 3-0 victory over Libya, and three vital points, from their…

NEWSSCROLL TEAM: 'Sina Kawonise: Publisher/Editor-in-Chief; Prof Wale Are Olaitan: Editorial Consultant; Femi Kawonise: Head, Production & Administration; Afolabi Ajibola: IT Manager;
Contact Us: [email protected] Tel/WhatsApp: +234 811 395 4049

Copyright © 2015 - 2024 NewsScroll. All rights reserved.