Nigeria’s Letter of Credit payments plummeted by 57.04% to $391.91m in the first seven months of 2024, compared to $912.35m in the same period last year, according to the Central Bank of Nigeria’s International Payments Data. This significant drop is attributed to factors such as the exit of multinationals, high customs duties, and foreign exchange instability, which have hindered Nigeria’s foreign trade.
The data shows a decline of $520.44m in LC payments, with the highest payments recorded in February ($102.59m) and July ($79.65m). Analysts, including Tunde Amolegbe and Rotimi Fakayejo, cite the unstable exchange rate, customs clearing charges, and exit of major companies as contributing factors.
However, some experts, like Tajudeen Ibrahim, see a positive outlook due to improved dollar liquidity and companies paying down on their LCs. Others, like Tajudeen Olayinka, suggest that the slowdown may be due to importers exploring alternative credit options or reduced demand for imports.
The decline in LC payments has both positive and negative implications, including potential scarcity of foreign goods, increased desire for local production, and improvement in Nigeria’s Balance of Trade and Exchange Rate in the long run. However, it may also cause economic drag and high inflationary pressure in the short term.
