See more as Foreign trade payments in letter and credit fall by 146 per cent in 2024

• Nigeria’s foreign trade payments through Letters of Credit (LC) have decreased after the first nine months in 2024
• Data shows that the decrease was consistent across the year, from the first quarter to the third quarter
• The decrease in LC payments reflects a slowdown in importation activities, driven by rising customs duties

The Central Bank of Nigeria has revealed that Nigeria's foreign trade payments through Letters of Credit (LC) have plunged to $434.05 million in the first nine months of 2024.

This represents a 146.5% year-on-year (YoY) decrease when compared to $1.07 billion recorded in the same period of 2023.

Letter payment drops significantly Photo credit: wakila
Source: Getty Images

A Letter of Credit (LC) is a mode of payment used for the importation of visible goods.

It is a written undertaking given by a Bank (issuing Bank) at the request of its customer (applicant), in which the Bank obligates itself to pay the exporter (seller/beneficiary) up to a stated amount within a prescribed time frame upon presentation of stipulated documents that conform to the terms and conditions of the documentary credit.

The use of LC payments is often seen as an indicator of a country's creditworthiness and can reflect shifts in import trade volumes.

Foreign payments in 2024

A breakdown of the data shows that in the first quarter of 2024 (Q1’24), LC payments fell by 15.6% to $204.4 million, down from $242.23 million in Q4'23.

The decline continued in Q2'24, with LC payments dropping by 47.3% quarter-on-quarter (QoQ) to $107.8 million, Vanguard reports.

Similarly, in Q3'24, there was a 13.9% decrease to $193.8 million from $225.06 million in Q3'23.

What do the numbers mean?

The decline in LC payments means that there is a slowdown in importation activities, which analysts attribute to a combination of factors, including rising customs duties, stringent import regulations, and the depreciation of the naira.

Additionally, the rising exchange rate is making importation highly unattractive, and those who do import are passing the cost onto consumers, contributing to the current inflation numbers.

CBN approves 14 new IMTOs

Legit.ng reported that the Central Bank of Nigeria has granted preliminary approval to fourteen more new foreign money transfer companies.

IMTOs provide cross-border fund transfer services to beneficiaries in Nigeria for people and organizations who live outside.

In theory, approval is the acceptance of a proposal under certain conditions, such as fulfilling additional requirements for ultimate authorization

Source: Legit.ng