Bankers in Nigeria say that the country's milk importers will have to open letters of credit (L/Cs) after the central bank ordered lenders to stop processing milk imports on a credit basis.

The Central Bank of Nigeria (CBN) has added milk to the growing number of imported goods and commodities on which credit restrictions apply.

Economic rationale

The CBN is progressively trying to restrict access to foreign currency for imports to boost local production.

Nigerian milk producers meanwhile have been offered cheap credit by the central bank to support the development of domestic production.

CBN governor Godwin Emefiele has responded to criticism from supporters of milk imports by saying Nigeria spends between US$1.2-1.5 billion annually on milk imports that could easily be replaced with local production.

L/C usage

In a circular to lenders, CBN said "all authorised dealers are hereby directed to discontinue the processing of imports of milk and its related products on bills of collection basis."

"For the avoidance of doubt, the mode of payment in respect of milk and its related products shall henceforth be on the basis of L/Cs only. Please ensure strict compliance", the statement concluded.

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