- Foreign exchange cannot be used as collateral for loans denominated in local currency, according to the Nigerian Central Bank.
- The CBN warned of harsh penalties for banks that disobeyed the most recent guideline in a letter sent to them on April 8.
Stopping the Naira’s Decline
The Central Bank of Nigeria (CBN) has ordered banks to stop using foreign currencies as collateral for loans in local currency because of the continuous shortages of US dollars.
Through its banking supervision section, the CBN sent a letter to all Nigerian banks announcing this decision, which went into effect right away.
Nigerian monetary authorities have been announcing a number of initiatives since the beginning of the year with the goal of revitalizing the country’s official foreign exchange market.
The local currency’s decline versus the US dollar and other strong currencies is also intended to be stopped by these actions.
As stated by Bitcoin.com News, some of these precautions include barring approved dealers from utilizing cash when disbursing personal or business travel expenses.
International oil corporations now have additional standards to fulfill before they may repatriate money to offshore accounts, according to the CBN.
The CBN warned of serious repercussions for banks that disobey the most recent directive in a letter dated April 8.
“In this context, all existing loans secured by dollar-denominated collaterals, aside from the ones previously mentioned, must be repaid within ninety days; if not, such exposures will be subject to additional regulatory sanctions and be risk-weighted at 150% when calculating the Capital Adequacy Ratio.”
In related events, the Nigerian Central Bank declared that it will sell $10,000 to Bureau de Change operators at a 1:101 NGN to USD exchange rate. The foreign currency will then be sold by BDCs at a premium that will not go above 1.5%. The official exchange rate between US dollars and Nigerian naira at the time of writing was 1:1,251.
Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
