CBN Halts Use of Foreign Currencies as Collateral for Naira Loans

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The Central Bank of Nigeria (CBN) has issued a directive instructing banks to cease accepting foreign currency as collateral for loans denominated in naira. This directive, communicated via a circular published on the CBN’s website on Monday, aims to address a concerning trend observed by the central bank.

 

In the circular, the CBN highlighted its observation of bank customers utilizing foreign currencies as collateral for loans issued in naira. In response, the CBN has implemented an immediate prohibition on this practice.

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This move by the CBN underscores its commitment to maintaining stability in the Nigerian financial system and ensuring the integrity of the naira. By disallowing the use of foreign currency as collateral for naira-denominated loans, the CBN aims to mitigate potential risks associated with currency fluctuations and enhance the resilience of the domestic banking sector.

 

The decision to enforce this prohibition aligns with the CBN’s broader efforts to safeguard the Nigerian economy and promote responsible financial practices among banks and their customers.

 

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As banks adjust their lending practices in compliance with the CBN’s directive, stakeholders across the financial landscape will monitor the impact of this policy change on lending dynamics and overall economic stability.

 

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