Market News

Nigeria import activity drops in Q1 despite FX sales - PUNCH

MAY 27, 2024

Nigeria’s letter of credit payments have plummeted by 63 per cent in the first quarter of 2024 compared to the same period in the previous year, according to the International payments data of the Central Bank of Nigeria.

The total letter of credit payments made via official channels for Q1 2024 was $204.47m, reflecting a shortfall of $344.75m compared to Q1 2023 of $549.22m.

A letter of credit is a mode of payment for the importation of visible goods. As requested by the customer, 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.

A breakdown of the payments shows that January 2024 recorded a significantly lower payment of $58.33m, followed by an increase in February 2024 to $102.6m, but still far below the corresponding month in 2023. The trend continued in March 2024, with payments dropping to $43.54m.

In the period under review Nigeria’s foreign exchange reserves depleted towards the end of Q1 2024, the CBN governor, Yemi Cardoso, reportedly said that “ the decreasing reserves were primarily due to debt repayments and other standard financial obligations, rather than efforts to defend the naira.”

Meanwhile, The CBN started selling dollars to Bureau De Change operators in February 2024 and reduced the allocation by 50 per cent in March, selling FX at a rate of N1,251/$1 then 1021/$ in April.


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