Nigeria’s foreign trade by Letter of Credit (LC) payments declined by 52.5% Year-on-Year (YoY) to $506.1 million in the first nine months of 2024, compared to $1.07 billion during the same period in 2023, according to the Central Bank of Nigeria (CBN). Letters of credit, a key financial instrument in international trade, saw their issuance timelines extended from 24 hours to five working days amid foreign exchange scarcity and tighter monetary policies. This decline underscores challenges in Nigeria’s trade environment, including restricted imports, reduced global demand, and disruptions in international supply chains.
Monthly data revealed fluctuating trends, with LC payments peaking at $102.6 million in February 2024 and hitting a low of $21.5 million in May. The naira’s devaluation from ₦768.76/$1 in September 2023 to ₦1,601.03/$1 by September 2024 further constrained businesses’ ability to open LCs. However, Nigeria’s external reserves improved significantly, rising from $33.24 billion in September 2023 to $38.35 billion in the same month of 2024, reaching $42.01 billion by December. This growth, driven by crude oil taxes and trade balance improvements, positioned the reserves to finance over nine months of imports.
Analysts warn that declining LC payments may reflect decreased import activity and economic strain, yet the CBN remains optimistic about the economy’s resilience. CBN Governor Olayemi Cardoso highlighted the country’s current account surplus and robust external reserves as critical buffers against shocks. With reserves exceeding international benchmarks, Nigeria’s capacity to sustain imports into 2025 appears stable despite the ongoing trade and foreign exchange challenges.