Pressure is expected to reduce on the foreign exchange market, following the upward review of the limit on foreign currency borrowing by the Central Bank of Nigeria (CBN).
The CBN yesterday increased the limit on banks’ foreign currency borrowing to 125 percent of shareholder funds after some banks breached its regulatory limit, due to the recent fall in the value of the naira, according to a circular on its website.
The new regulation replaces a 2014 rule capping foreign borrowing, including Eurobonds, at 75 percent of shareholders’ funds as Nigeria tries to manage widespread capital shortfalls at lenders, due to a currency crisis and bad loans.
Furthermore, the CBN said the Net Open Position, whether long or short, of the overall foreign currency assets and liabilities, taking into cognisance both on and off-balance sheet items, should not exceed 10 percent of shareholder funds unimpaired by losses, as against 20 percent previously.
HOPE MOSES-ASHIKE
