Nigeria’s foreign trade conducted through Letters of Credit (LCs) saw a 4.4% increase year-on-year, rising to $269.83 million in the first four months of 2025, up from $258.46 million during the same period in 2024, according to data from the Central Bank of Nigeria (CBN).
Letters of Credit are financial instruments issued by banks that guarantee payment for imported goods once shipment is confirmed. They are crucial for facilitating trust between international trading partners.
For years, Nigerian importers struggled to secure LC arrangements due to concerns over the country’s weak foreign reserves, often forcing them to make advance payments for goods before shipping. However, the recent uptick in LC usage signals renewed confidence in Nigeria’s external sector, driven by a steady improvement in foreign reserves this year.
Despite the overall annual growth, the CBN’s monthly data shows fluctuations in LC transaction volumes:
- January 2025: $64.55 million
- February 2025: rose sharply by 48% to $95.6 million
- March 2025: dropped significantly by 54.4% to $43.53 million
- April 2025: rebounded by 47.7% to $64.3 million
The inconsistent month-on-month trend suggests that while confidence is growing, market volatility and global trade dynamics still impact LC-based transactions.
