CBN cuts limit on banks’ foreign currency borrowings

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rp_Emefiele-cbn.jpgNigeria’s central bank cut the limit on banks’ foreign currency borrowings to 75 percent of shareholders’ funds from 200 percent, according to a central bank circular seen by Reuters.

The new regulation, in a document dated Oct. 24, replaces a 2001 rule capping foreign borrowings at 200 percent of shareholders’ funds.

It also requires banks to have adequate liquid foreign assets including cash and government securities to cover maturing foreign obligations and a contingency arrangement with other financial institutions to cover loan repayment.

The bank is trying to manage exchange rate risks and curb pressures on the naira from excess demand for dollars.