Nigeria’s Letter of Credit Payments Drop 57% to $391.9m in Seven Months

By Adedapo Adesanya

Nigeria’s Letter of Credit payments dropped by 57 per cent to $391.9 million in the first seven months of 2024, according to data released by the Central Bank of Nigeria (CBN).

A Letter of Credit is a financial payment document issued by a bank or other institution that guarantees a buyer’s payment to a seller will be received on time and for the correct amount.

It is a written undertaking given by a bank (issuing bank) at the request of its customer in which the bank promises in writing to pay the exporter a certain sum within a certain time frame in return for goods, as long as the customer provides the bank with the proper paperwork.

According to the CBN’s weekly International Payments Data published on its website, the country’s Letter of Credit payments dropped to $391.91 million from $912.35 million within the same period in 2023, indicating a difference of $520.44 million.

An analysis of the CBN data showed that the highest LoC payments this year were recorded in February at $102.59 million, followed by July at $79.65 million and $58.33 million in January.

In March, LoCs payments stood at $43.53 million compared to $269 million in the same month in 2023, but rose to $54.02 million in April 2024 and dropped to $21.48 million in May before rising to $32.26 million in June.

This followed the sale of about $122.67m to 46 authorised dealers by the CBN, in its determination to promote stability and reduce market volatility in the foreign exchange market.

A statement signed by the Bank’s Director in charge of Financial Markets, Mrs Omolara Duke, disclosed that of the total sale, $67,500 million was sold to 27 dealers, while the sum of $2.5 million was bought from one authorised dealer on July 10, 2024.

The range of the bid for the July 10, 2024 sales was N1,480.0/US$- N1,500.0/US$, while the value date for the payments, going by the settlement cycle of two days, is July 12, 2024.

Similarly, on July 11, 2024, the sum of $55,171 million was sold to 19 authorised dealers at N1,540.0/US$, and no FX was purchased. The value date for the payments of the spot sale is July 15, 2024.