Currency dealers expressed concern over mounting losses and decreasing demand for the dollar as the naira continued to appreciate in both the official and parallel markets. The Central Bank of Nigeria (CBN) implemented a 12 percent reduction in the bureau de change (BDC) exchange rate to N1,117.5 per dollar, contributing to the naira’s strengthening.
In a related development, the CBN announced a ban on the use of foreign-denominated collaterals for naira loans, except for Eurobonds issued by the Federal Government of Nigeria or guarantees of foreign banks, including Standby Letters of Credit.
Dr. Adetona Adedeji, Director of the Banking Supervision Department at the CBN, stated that the use of foreign currency collaterals for naira loans is prohibited to address the prevailing situation where bank customers use foreign currency for naira loans.
The ban aims to regulate the financial sector and prevent potential risks associated with foreign currency-denominated collaterals. By exempting certain instruments like Eurobonds and guarantees of foreign banks, the CBN seeks to ensure stability and mitigate risks while promoting prudent financial practices in the Nigerian banking system.