Nigeria’s settlement of foreign trade transactions via Letters of Credit rose by 3.68% year-on-year to $267.96 million in the first four months of 2025, up from $258.46 million recorded during the same period in 2024.
The figures were revealed in the International Payments Data published by the Central Bank of Nigeria on its website on Sunday.
A Letter of Credit is a written undertaking issued by a bank (the issuing bank at the request of an importer, guaranteeing payment to an exporter within a specified time frame, provided that the exporter presents the required documents confirming shipment of goods.
It serves as a secure payment mechanism commonly used in the importation of visible goods, ensuring that the exporter receives payment once all stipulated terms and documentation are satisfied.
The CBN data revealed fluctuations in monthly Letter of Credit transactions, indicating variability in Nigeria’s trade activity.
In January 2025, LC transactions stood at $64.55m, compared to $58.33m in January 2024. February recorded the highest monthly volume at $95.59m, though this represented a 6.84 per cent drop from $102.6m in February 2024.
In March, LC transactions declined to $43.53m, down from $54.03m in the same month of 2024. April showed a recovery, with LCs rising to $64.29m, marking a 19 per cent increase from March 2025 but a 1.6 per cent decline from April 2024.
Despite a modest year-on-year increase over four months, monthly trends in Nigeria’s LC usage show marked the volatility.
February recorded a 48% surge from January, followed by a sharp 54.4% drop in March, before rebounding in April with a 47.7% rise.
Analysts attribute the recent improvement in LC uptake to renewed confidence in Nigeria’s external sector, bolstered by steady growth in net foreign reserves throughout the year.
Until recently, Nigerian importers faced significant challenges in opening LCs due to limited access to foreign exchange and weak external reserves, often relying on advance payments to secure imports. The recent uptick in LC activity points to a gradual improvement in FX conditions and a restoration of confidence in the external sector, helped by steady growth in net foreign reserves.
Still, access to foreign currency remains constrained for many businesses, while Nigeria’s external debt servicing continues to strain the reserves—underscoring persistent vulnerabilities in the foreign exchange landscape.
Meanwhile, the CBN data also revealed substantial foreign exchange outflows for debt servicing in 2025, with $2.01 billion spent between January and April—representing a 50% increase from the same period last year.
Economic experts warn that these rising obligations could threaten the sustainability of Nigeria’s trade finance recovery, despite recent improvements in access to Letters of Credit.
