The Central Bank of Nigeria (CBN) in its latest circular dated 8th of April 2024, notified Bureau De Change operators (BDCs) of the sale of $10,000 to each BDC at a rate of N1,101/$1, while also banning the use of foreign currency-denominated collaterals for naira loans; except under specific conditions. While directing BDC operators to sell to eligible customers at a spread of not more than 1.5 percent above the purchase price, the CBN asked operators to submit proof of payment and other documents at the appropriate CBN branches for disbursement.
This development is coming after $10,000 was sold to BDCs in March at a rate of N1,251/$. However, the Association of BDC Operators appealed to the Apex Bank to reduce the exchange rate below the N1,251/$ it pegged for its members.
Likewise, the CBN has banned the use of foreign currency-denominated collaterals for obtaining naira loans, except under certain conditions. According to the Acting Director of the Banking Supervision Department, Dr. Adetona S. Adedeji, “The Central Bank of Nigeria has observed the prevailing situation where bank customers use Foreign Currency (FCY) as collaterals for Naira loans.
“Consequently, the current practice of using foreign currency-denominated collaterals for Naira loans is hereby prohibited, except, where the foreign currency collateral is:
“Eurobonds issued by the Federal Government of Nigeria; or
“Guarantees of foreign banks, including Standby Letters of Credit
“In this regard, 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-weighted 150% for Capital Adequacy Ration computation, in addition to other regulatory sanctions.”
