Nigerian businesses are reporting that it has become tougher for them to obtain letters of credit (L/Cs) as the country's banks adopt a more cautious lending approach.

Now it seems that both businesses and consumers are being asked to show they have either cash or other collateral before banks consider extending credit to them.

Under pressure

An executive at an international consumer goods firm with manufacturing operations in Nigeria has told the Reuters news agency that it is now much harder to obtain credit from banks and the terms offered by the banks are now much less flexible.

Banks are now insisting on collateral up front against L/Cs, he says, which puts additional pressure on cash flow and pushes his firm's cost of funds up from 13 per cent last year to 18 per cent this year.

Equity participation

Consumers are also finding it tougher to obtain credit for big-ticket items such as motor vehicles.

"Banks now require consumers to increase their equity participation to 30-35 percent from 10 per cent to access credit to buy a new car," national sales manager for Hyundai importer Stallion Motors, Andy Ihejirika, told Reuters.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.