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•To sell $10,000 to BDCs at N1,101/$1
By Chinwendu Obienyi
TO ensure compliance with regulatory requirements and maintaining stability in the banking sector, the Central Bank of Nigeria (CBN) yesterday, announced the prohibition of bank customers from utilizing foreign currency (FCY) as collateral for naira-denominated loans.
This was even as the apex bank revealed that it is planning on selling $10,000 to
1,588 eligible Bureau De Change operators at the rate of N1,101 to the dollar.
In a circular titled; Letter to all banks, which was signed by the Acting Director, Banking Supervision Department, CBN, Dr Adetona Adedeji, the apex bank said that it has observed the prevailing situation where bank customers use foreign currency (FCY) as collaterals for Naira loans.
The bank noted that consequently, the current practice of using foreign currency-denominated collaterals for Naira loans is hereby prohibited except where the FCY is Eurobonds issued by the Federal Government of Nigeria or Guarantees of foreign banks including Standby letters of credit.
The letter stated that, “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-weighed 150 per cent for Capital Adequacy Ratio computation, in addition to other regulatory sanctions”.
The directive underscores the CBN’s commitment to ensuring the stability and integrity of the Nigerian banking system while promoting prudent lending practices and safeguarding against currency-related risks.
The apex bank, while emphasizing that the directive was in the best interest of maintaining a sound and resilient banking sector in Nigeria, said, “Banks and financial institutions are urged to adhere strictly to these new guidelines to avoid regulatory penalties”.
Meanwhile, the CBN in another circular, revealed that it is set to sell $10,000 to BDC operators in the country at N1,101/$1 while adding that the operators should sell at a spread of not more than 1.5 per cent above purchase price.
The circular read, “We write to inform you of the sale of $10,000 by the CBN to BDCs at the rate of N1,101/$1. The BDCs are in turn to sell to eligible end users at a spread of not more than 1.5 per cent above the purchase price.
All eligible BDCs are therefore directed to commence payment of the Naira deposit to the underlisted CBN Naira deposit account numbers effective from April 8, 2024 and submit confirmation of payment with other necessary documentation for disbursement at the appropriate CBN branches.”
It further noted that all BDCs are advised to strongly adhere to the rules and conditions as stipulated in its earliest letters/circulars.
The development comes after the Association of Bureau De Change Operators of Nigeria (ABCON) at the weekend, appealed to the CBN to adjust and lower its applicable exchange rate below the N1,251/$ it pegged for its members.
ABCON National President, Aminu Gwadabe, stated this in a letter to the CBN Director, Trade & Exchange Department, obtained by Daily Sun.
Gwadabe lamented that the naira’s speedy recovery made CBN’s selling rate to BDCs very expensive and difficult to offload to retail end buyers, who were going to the undocumented forex operators for cheaper rates.
He further expressed concerns that many BDCs, who funded their accounts for dollar allocations, were yet to receive their allocation of dollars to meet the legitimate critical demand of their clients due to scrutinisation of the BDCs’ documents for collections at the various designated centers while noting that this had made the BDCs vulnerable to exchange rate risk and significant losses.
