The Central Bank of Nigeria took a significant step on Monday to bolster foreign exchange liquidity by issuing a new circular instructing Deposit Money Banks to cease using foreign currencies as collateral for naira loans within 90 days.
This move coincided with the naira's rise against the US dollar in both official and parallel markets.
The CBN's ongoing efforts to increase dollar liquidity in the financial system and support the naira against the dollar have led to various measures being implemented.
One such measure is a new circular issued by the CBN, led by Olayemi Cardoso, expressing concerns about the use of foreign currencies as collateral for naira loans.
Despite previous warnings from the CBN, some banks have continued to offer naira overdraft facilities secured with foreign currency deposits, leading to the recent directive to stop this practice.
