Nigeria's letter of credit (L/C) payments have experienced a significant drop in 2024, declining by 57 per cent in the first seven months of the year.

Payments fell to US$391.91 million, compared to US$912.35 million during the same period in 2023.

This sharp decline is largely attributed to the country's ongoing forex crisis, which has destabilised foreign exchange markets and led to difficulties in financing imports.

Causes and mitigation

Several factors have contributed to this drop, including high customs duties, fluctuating exchange rates, and the exit of multinational companies from Nigeria.

The Central Bank of Nigeria has attempted to mitigate these issues by injecting liquidity into the market, but the situation remains challenging.

Slowing trade

Importers have faced reduced access to foreign exchange, which has slowed down trade activities and the issuance of L/Cs.

Analysts have noted that while the reduction in L/C payments may curb the outflow of foreign exchange, it also hampers the ability of businesses to import essential goods, potentially exacerbating inflation and further economic strain in the country

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.