Forex Crisis Crashes Nigeria’s Foreign Trade Payments By 57%

Posted by African Examiner Business News, Latest Headlines Monday, September 2nd, 2024

(AFRICAN EXAMINER) – Statistics released by the Central Bank of Nigeria (CBN) have revealed that Nigeria’s Letter of Credit payments dropped by 57 per cent in the first seven months of 2024.

According to the CBN’s weekly International Payments Data published on its website, the country’s Letter of Credit payments dropped to $391.91m from $912.35m within the same period in 2023.

A Letter of Credit is a mode of payment used for the importation of visible goods. It is a written undertaking given by s bank (issuing bank) at the request of its customer in which the bank promises in writing to pay the exporter a certain sum within a certain time frame in return for goods, as long as the customer provides the bank with the proper paperwork.

In the period under review, the country’s LCs payment shed about $520.44m.

An analysis of the CBN data showed that the highest LC payments this year were recorded in February at $102.59m, followed by July at $79.65m and $58.33m in January.

In March, LCs payments stood at $43.53m compared to $269m in the same month in 2023, rose to $54.02m in April 2024 and dropped to $21.48m in May before rising to $32.26m in June.

The development comes following the sale of about $122.67m to 46 authorised dealers by the CBN, in its determination to promote stability and reduce market volatility in the foreign exchange market.

A statement signed by the Bank’s Director in charge of Financial Markets, Dr. Omolara Duke, disclosed that of the total sale, $67,500m was sold to 27 dealers, while the sum of US$2.5m was bought from one authorised dealer on July 10, 2024.

The range of the bid for the July 10, 2024 sales was ₦1,480.0/US$- ₦1,500.0/US$, while the value date for the payments, going by the settlement cycle of two days, is July 12, 2024.

Similarly, on July 11, 2024, the sum of $55,171m was sold to 19 authorised dealers at ₦1,540.0/US$, and no FX was purchased. The value date for the payments of the spot sale is July 15, 2024.