Business

Banks Get Three-month Deadline To Stop Forex-backed Loans

Published

1 year ago

April 9, 2024

The Central Bank of Nigeria on Monday stepped up its fight to boost foreign exchange liquidity in the economy with a new circular mandating Deposit Money Banks to stop the use of foreign currencies as collateral for naira loans within 90 days.

The development happened as the naira rose against the greenback at both the official and parallel markets on Monday.

The CBN has continued to deepen its battle to free dollar liquidity stocked up in the financial system by deploying various measures aimed at shoring up the naira against the United States dollar.

On Monday, the Olayemi Cardoso-led CBN issued a new circular, expressing concerns over the use of foreign currencies as collateral for naira loans.

The circular made available on its website and titled “The use of foreign-currency-denominated collaterals for naira loans”, was referenced BSD/DIR/PUB/LAB/017/004.

Although this is not the first time the bank has prohibited the use of FCY, it said it had observed the use of foreign currency by bank customers as collateral for naira loans. Hence, the decision to prohibit its use.

In 2023, in a confidential letter to commercial lenders, the apex bank issued a stern directive against naira overdrafts backed by foreign currency deposits.

In the leaked letter dated August 17, 2023, and signed by the Director of Banking Supervision, Mr. Haruna B. Mustafa, the CBN said the development followed its findings from a recent supervisory review.

It was uncovered that the banks had been offering naira overdraft facilities secured with foreign currency deposits.

Despite this warning, the new directive indicates that banks have continued to engage in such practices.

In the latest circular signed by the acting Director, Banking Supervision Department, Adetona Adedeji, the apex bank said it observed the use of foreign currency by bank customers as collateral for naira loans.

As such, the regulator directed banks to trim all existing loans with foreign currency collaterals to 90 days or attract a 150 per cent capital adequacy ratio computation as part of the bank’s risk.

The new directive means a borrower may no longer use dollar deposits in their domiciliary bank accounts as collateral to obtain naira loans.

According to stakeholders, the practice is partly due to the need to hedge against foreign currency spikes which can be costlier than interest rates.

“The Central Bank of Nigeria has observed the prevailing situation where bank customers use foreign currency 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 Ratio computation, in addition to other regulatory sanctions,” the circular read.

The CBN’s stance against such practices arises from concerns of currency mismatch, which could introduce substantial financial risks for banks.

Rather than convert their dollars to naira, some borrowers will rather borrow in naira as the cost of buying the dollars back might be higher than the interest rate they pay for borrowing in naira.

However, this can have a ripple effect on the exchange rate due to its speculative tendencies.

The CBN maintained that it was on a mission to ensure adequate foreign exchange in the market even as the naira gains strength.

Eurobonds, according to the Hong Kong and Shanghai Banking Corporation, are bonds issued offshore by governments or corporations denominated in a currency other than that of the issuer’s country.

Eurobonds are usually long-term debt instruments and are typically denominated in US dollars.

Letters of Credit, according to the International Trade Administration, are contractual commitments by the foreign buyer’s bank to pay once the exporter ships the goods and presents the required documentation to the exporter’s bank as proof.

As a trade finance tool, Letters of Credit are designed to protect both exporters and importers.

The PUNCH reports that in the apex bank’s previous circular to all the banks signed by its former Director, Corporate Communications Department, Ibrahim Mu’azu, the bank said its attention was drawn to the increasing use of foreign currencies in the domestic economy as a medium of payment for goods and services by individuals and corporates.

It also observed that some institutions price their goods and services in foreign currencies and demand payments in foreign currencies rather than the domestic currency (the Naira), which is the legal tender in Nigeria.

The CBN stated, “For the avoidance of doubt, the attention of the general public is hereby drawn to the provisions of the CBN Act of 2007, which states inter-alia that “the currency notes issued by the Bank shall be legal tender in Nigeria…for the payment of any amount.”

Furthermore, the Act stipulates that any person who contravenes this provision is guilty of an offence and shall be liable on conviction to a prescribed fine or six months imprisonment.

Business

‘We Like Greek Gifts,’ Nigerians Blast NUPENG Over Dangote’s Fuel Price Reduction

Published

9 hours ago

September 13, 2025

Editor

The decision of the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) to warn Nigerians against accepting Dangote Refinery’s recent fuel price reduction has drawn heavy backlash on social media, with many citizens mocking the union and embracing what they described as “much-needed relief.”

Dangote had announced lower petrol pump prices in several states alongside a new scheme to deploy compressed natural gas (CNG) trucks directly to filling stations, a move expected to reduce logistics costs.

But NUPENG dismissed the offer as a “Greek gift,” alleging that the refinery was undermining workers’ rights, sidelining the union, and pushing drivers into a rival association.

However, netizens have lambasted the union, querying that during hard times, NUPENG has never supported the masses.

On X (formerly Twitter), Nigerians quickly turned NUPENG’s warning into a trending topic, using humour and sarcasm to lampoon the union.

Oloye Somorin Osifeso (@OloyeSomorin) wrote: “We like Greek gifts in my garage.”

Just Jude (@JustJude) asked bluntly: “Is it your deception?”

Oladele (@Oladele) quipped: “As Dangote Refinery dey offer Nigerians Greek gift, why can’t NUPENG too offer Nigerians French gift?”

Agbalaka (@Agbalaka) queried: “Can they tell Nigerians what exactly they are fighting about?”

CBN Gov Akinsola (@Akinsola) joked: “Then give us Trojan gift now 😆. Man do man. Man no go vex.”

Omobalaji (@Omobalaji) teased: “NUPENG, oya surprise us with Arabian gifts.”

Habdulakeem Bahdmus (@BahdmusHabdulakeem) added: “If Dangote is showering Nigerians with Greek gift, NUPENG can also set up a Roman gift now.”

Femi Yekinni (@FemiYekinni) steered it back to reality: “We thank them for their advice. Now, @DangoteGroup pls how do we schedule deliveries to Badagry?”

Curtis Abbi (@CurtisAbbi) slammed the union: “Nigerians will manage the Greek gift. @officialNUPENG9, what gift have you given Nigerians in your entire years of existence? NUPENG should offer Nigerians their own Somalian gift 🤣.”

Akin Adejola (@AkinAdejola) echoed the sentiment: “LOL. I can bet Nigerians don’t mind the gift. NUPENG should gift Nigerians same ‘Greek gift’ too if they have any goodwill. NUPENG is the enemy of progress in the oil & gas sector.”

Adeola Akinwande (@adeolarewaju9) criticised union leaders: “Does NUPENG remember Nigerians at hard times? They have all failed Nigerians the same way the @NLCHeadquarters has failed. They are living big on unionism and cashing out big time. Without unionism, some of their excos are nobody. They should stop the crocodile tears.”

Okunwa U. U. Azikiwe (@OkunwaUUazikiwe) argued: “Competition has created jealousy by the previous monopoly in the sale of fuel. They have lost control, and it is paining them that they are no longer in control. SMH!!!”

Solihull Abdulkareem (@SolihullAbdul) chipped in: “NUPENG or whatever, do you want the market to be monopoly? You’ve been doing what you want for many years. It’s time for change, just accept it and move forward.”

Temidayo (@Temidayo) asked: “It’s a lie. What benefits has your union provided for Nigerians? Middlemen syndrome has been room for corruption. Your association should go and buy shares in Dangote and work together to make Nigeria great.”

And LegalTech Sam Akanbi (@SamAkanbi) summed up: “Nigerians no longer want your Nigerian gift, we want the Greek gift. If you have a better offer, we’d abandon Dangote’s Greek gift and take yours. But for now, let the Greek gift go round.”

Recall that NUPENG earlier alleged that Dangote Refinery was forcing truck drivers to abandon its union for a rival group, the Direct Trucking Company Drivers Association (DTCDA).

The union also accused Dangote of undermining collective bargaining rights and violating a Memorandum of Understanding (MoU) signed under government supervision.

Dangote, however, denies the claims, insisting that union membership remains voluntary and that its delivery scheme is designed to cut costs and ease supply.

The federal government has intervened, with the Ministry of Labour and the Department of State Services mediating between both parties.

Business

Dangote Refinery Reduces Fuel Price Nationwide, Provides Update On Petrol Distribution

Published

1 day ago

September 12, 2025

Editor

Dangote Refinery has reduced its premium motor spirit retail price nationwide.

This is as it announced Monday, September 15, 2025, as the new date to begin the direct petrol distribution initiative.

The initiative, which Dangote Group had earlier announced would kick off on August 15, 2025, would see the $20 billion plant distribute petrol and diesel to consumers with its 4,000 compressed natural gas trucks at zero logistics cost.

The 650,000-barrel-per-day refinery said its new gantry price is N820 per litre, the same price announced last month.

Business

FG Gives Criteria For Opening Bank Accounts

Published

1 day ago

September 12, 2025

Editor

From January 1, 2026, all Nigerians and non-residents will be required to obtain a Tax Identification Number, Tax ID, to open or operate bank accounts.

The development followed the enactment of the Nigeria Tax Administration Act, 2025, recently signed into law by President Bola Tinubu.

Section 8(2) of the Act makes the Tax ID compulsory for banking, insurance, stock broking, and other financial services. It also extends the requirement to contracts with federal and state governments.

For non-residents, Section 6(1) mandates registration for tax purposes, requiring them to obtain a Tax ID if they supply taxable goods and services or derive income from Nigeria.

To enforce compliance, Section 7(3) empowers tax authorities to assign a Tax ID to individuals or entities who fail to register. The Act also allows for suspension or deregistration of a Tax ID if a business ceases operations temporarily or permanently, provided tax authorities are notified within 30 days.

The legislation is aimed at expanding Nigeria’s tax net and boosting revenue collection. Analysts say the policy could significantly improve tax compliance rates nationwide.

Financial institutions are expected to adjust their systems and processes ahead of the January 2026 rollout.