Nigeria’s foreign trade transactions through Letters of Credit (LCs) rose by 4.4% year-on-year to $269.83 million in the first four months of 2025, up from $258.46 million recorded during the same period in 2024, according to new data from the Central Bank of Nigeria (CBN).
Letters of Credit are bank-issued guarantees of payment for imports once goods are shipped. They are a critical tool in international trade, especially for economies reliant on foreign inputs and raw materials.
The increase in LC usage suggests a renewed level of confidence in Nigeria’s external sector, largely attributed to steady improvements in the country’s foreign reserves. Until recently, Nigerian importers faced significant hurdles securing LCs due to weak reserve levels, often requiring full prepayments before foreign suppliers would initiate shipments—placing additional financial strain on businesses.
Monthly Trends Reflect Ongoing Volatility
Despite the year-on-year improvement, month-on-month (MoM) data for the first four months of 2025 reflect continued volatility:
- January: $64.55 million
- February: Jumped 48% to $95.6 million
- March: Dropped sharply by 54.4% to $43.53 million
- April: Rebounded by 47.7% to $64.3 million
These fluctuations highlight that while confidence is returning, stability in LC utilization remains fragile, potentially influenced by seasonal demand, shifting forex dynamics, or macroeconomic uncertainties.
A Sign of Economic Healing?
The growth in LC-backed trade may signal early signs of recovery in Nigeria’s broader economic framework, particularly amid government efforts to stabilize the naira, restore investor confidence, and boost the country’s foreign exchange buffer.
As foreign reserves continue to build and CBN-led reforms take shape, industry watchers will be closely monitoring whether the momentum in trade facilitation tools like LCs can be sustained and scaled to support broader trade and economic growth.
