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Nigerian banks allowed to accept banking shares as collateral

The Central Bank of Nigeria (CBN) has stated that the country’s banks are allowed to accept banking shares as collateral for lending.

The Central Bank of Nigeria headquarters in Abuja.

The Central Bank of Nigeria headquarters in Abuja.

According to a press release by the CBN, deposit money banks (DMBs) reserve the right to accept whatever security they deem suitable as collateral for their commercial lending purposes.

The CBN Board at its 15 April 2010 meeting approved rules and regulations on margin lending.

The Board noted that the large exposure of banks to the capital market was a major contributor to the recent banking crisis and it therefore decided to ring-fence depositors of banks against any speculative or high risk trading activities in order to protect depositors’ funds.

A maximum cap of 10% aggregate exposure to margin lending in the loan portfolios of individual banks has been set.

The CBN and Securities & Exchange Commission (SEC) are in the process of finalising the framework on the guidelines and rules that will guide operations and activities surrounding lending specifically meant for trading in stocks in the capital market. Details of these guidelines would soon be made public.


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