UPDATE ON THE CENTRAL BANK OF NIGERIA’S CIRCULAR REF NO: BSD/DIR/GEN/LAB/08/037 TO ALL NIGERIAN BANKS ON THE GRANTING OF FOREIGN CURRENCY LOANS TO NON-DOLLAR GENERATING BUSINESSES
As part of its ongoing attempts at stabilizing the value of the Naira as against other foreign currencies, the Central Bank of Nigeria (CBN) issued a circular to all Nigerian banks on the 4th of August 2015, prohibiting Nigerian banks from granting foreign currency loans to customers who solely generate Naira denominated revenues from their businesses.
In the circular, the CBN directs Nigerian banks to only grant foreign currency loans to customers with foreign currency revenues; and in addition, to cease from converting loans originally disbursed in Naira into foreign currency loans.
The rationale behind this new CBN directive is targeted towards:
(i) reducing the pressure on the domestic supply of foreign currency occasioned by the activities of bank customers (who do not generate foreign currency receivables) who source foreign currency from the autonomous market to service their loans;
(ii) enhancing the stability of the domestic foreign exchange market;