The Central Bank of Nigeria (CBN) has ordered Wema Bank Plc to stop extending foreign currency-secured naira loans to its customers, a practice it said drains dollar liquidity.
“This practice is not only fraught with the risk of currency mismatch, but is capable of limiting FX liquidity in the market, thereby creating scarcity and exerting pressure on the exchange rate,” the CBN said in a circular signed by Director of Banking Supervision, Haruna Mustafa, seen by MoneyCentral.
The CBN ordered Wema Bank to immediately replace foreign currency collateral on existing overdrafts with acceptable asset types within two (2) weeks, failing which the facilities should be unwound.
Wema Bank is a tier-2 Nigerian lender with market capitalisation of N63.9 billion ($829 million). Listed on the NGX, its stock is up 52% in the past year.