Nigeria's Foreign Trade Payments Plunge 33%: International Edition
Despite a better availability of foreign currency led to Nigerian Letter of Credit payments dropping by 33.28 percent during the twelve-month span of 2024 when contrasted with the corresponding timeframe from the prior year.
The figure decreased by $435.51 million, falling from a total of $1.31 billion in letter of credit payments through official channels in 2023 to $873.1 million in 2024.
According to the data on international payments supplied by the Central Bank of Nigeria via their website and acquired by our correspondent, this information has been gathered. Sunday PUNCH .
A letter of credit is a method of payment utilized for importing tangible merchandise.
This involves a commitment made by a bank (the issuing bank), acting upon the request of its client, where the bank pledges in writing to pay the exporter a specific amount within a defined period when provided with appropriate documentation from the client corresponding to the received merchandise.
This substantial decline underscores the difficulties Nigeria encounters in global trade and monetary exchanges, which may lead to various economic consequences for the nation.
Letters of credit play a vital role in international commerce, ensuring exporters get paid reliably.
A significant reduction in these payments may suggest a decrease in import-related activities, potentially due to factors like foreign currency scarcity, tighter import rules, or various economic limitations.
The distribution of LC payments for the year 2024 indicated that the largest sum of $150.86 million was disbursed in October, whereas the smallest amount of $21.49 million was recorded at another point during the same year.
Additional examination of the CBN figures revealed that the LC for January 2024 stood at $58.33 million, marking approximately a 46 percent decrease from $107.78 million recorded in January 2023.
In February 2024, however, it was valued at $102.6 million, marking a 40.33 percent decrease year over year from the $123.95 million recorded in February 2023.
The trend persisted into March 2024, where payments fell to $43.54 million, marking an 83.6 percent decrease year-over-year from $269.49 million recorded in March 2023.
The trend persisted into March 2024, as payments fell to $43.54 million, marking an 83.6 percent decrease year-over-year from $269.49 million recorded in March 2023.
The figures fell to $54.03 million in April 2024, marking a decrease of 64.58% from the $152.52 million recorded in April 2023. It then reached its lowest point in May 2024 at $21.49 million, which represents a plunge of 64.4% compared to the $60.29 million reported in May 2023.
Furthermore, LC was recorded at $32.3 million in June 2024, marking a 59 percent year-over-year decrease from $79.18 million in June 2023. In contrast, for July 2024, the CBN announced $79.65 million, which represents a 12 percent rise compared to $71.14 million in July 2023.
A 12 percent year-over-year growth in July 2024 was observed after the CBN sold approximately $122.67 million to 46 authorized dealers with the aim of fostering stability and decreasing market volatility within the foreign exchange sector.
In August 2024, an amount of $62 million was paid out. In September, this figure dropped slightly to $52.15 million. The month of October saw a significant payment of $150.86 million, followed by $88.1 million in November. Finally, in December, another substantial sum of $128.05 million was disbursed.
Limited access to foreign currency probably made it difficult for businesses to open letters of credit.
Likewise, meeting debt repayment obligations and fulfilling other typical financial duties could be contributing factors to the decline.
Between January 2024 and February 2025, Nigeria spent a total of $5.47 billion on payments for external debts, according to data released by the Central Bank of Nigeria.
The statistics posted on the central bank’s official site highlight the increasing strain that debt commitments are placing on the nation’s foreign exchange reserves and overall financial stability.
In a previous discussion, Tunde Amolegbe, who leads Arthur Steven Asset Management Limited, suggested that the downturn was anticipated due to fluctuating currency rates, soaring costs for custom clearance processes, and the departure of key global firms along with the shutdown of various domestic manufacturers.
Nevertheless, he mentioned that the circumstances could get better, albeit marginally, thanks to the recent tax exemptions provided for importing certain vital food items.
“He mentioned that stability in the foreign exchange market, reduced interest rates, and a unified tax system could also be beneficial.”
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