In the past year, there has been a notable decline of 33.28% in Nigeria’s fulfillment of Letter of Credit payments, despite an increase in the availability of foreign exchange. The total amount of payments dropped from $1.31 billion in 2023 to $873.1 million in 2024, as reported by the Central Bank of Nigeria.
A Letter of Credit is a common method of payment used for importing goods, where a bank guarantees payment to the exporter upon receiving the necessary documentation from the importer. The decrease in these payments raises concerns about Nigeria’s international trade and financial transactions, which could have various implications for the economy.
The decrease in Letter of Credit payments may indicate reduced import activities due to factors such as foreign exchange shortages, stricter import regulations, or other economic challenges. Analysis of the data revealed fluctuations in payments throughout the year, with varying amounts recorded each month.
The decline in payments could be attributed to limited access to foreign currency, difficulties in meeting debt repayments, and other financial obligations. Furthermore, Nigeria’s external debt servicing between January 2024 and February 2025 amounted to $5.47 billion, highlighting the country’s growing debt burden.
Industry experts attribute the decline in payments to factors like exchange rate instability, rising customs charges, the departure of international companies, and the closure of local manufacturing plants. However, there is optimism that the situation could improve with recent tax waivers on essential food imports and measures like FX market stability, lower interest rates, and a streamlined tax system.