Letters Of Credit Surge 33.3% On Improved Forex Liquidity

Improved entree to overseas speech successful Nigeria’s fiscal strategy has spurred a surge successful trade-related transactions, with the worth of Letters of Credit (LCs) rising by 33.3 per cent year-on-year successful the archetypal 8 months of 2025.

According to information from the Central Bank of Nigeria (CBN), full planetary payments facilitated by the apex slope declined by 14.3 per cent to $4.14 cardinal betwixt January and August 2025, compared to $4.83 cardinal recorded successful 2024. However, the summation successful LCs, which roseate from $453.91 cardinal to $605.01 million, shows renewed enactment successful import financing and increasing assurance successful the forex market.

Analysts attributed the improvement partially to improved liquidity successful the overseas speech marketplace and a stronger naira, which has eased entree to commercialized concern instruments for importers and manufacturers.

Despite the affirmative uptick successful trade-related payments, the information besides showed a wide slowdown successful different categories of outer costs. Foreign indebtedness work payments, which accounted for 69.2 per cent of full planetary payments, fell by 6.5 per cent to $2.86 cardinal from $3.06 cardinal successful the corresponding play of 2024.

Direct remittances had slumped by 48.9 per cent year-on-year to $671.86 million, down from $1.32 cardinal a twelvemonth earlier. The crisp driblet was attributed to little payments for planetary services by Nigerian residents.

Analysts astatine Cordros Capital, commenting connected the improved LCs noted that portion the diminution successful remittances and indebtedness work payments helped mean full outflows, the emergence successful LCs underscores a gradual instrumentality of assurance to Nigeria’s forex marketplace pursuing months of reforms by the CBN to unify speech rates and wide outstanding forex obligations.

The analysts further projected that planetary payments whitethorn emergence successful the abbreviated term, driven mostly by upcoming indebtedness obligations, including the refinancing of the $1.2 cardinal Eurobond maturing successful November 2025.

Meanwhile, information from the CBN besides showed that recognition to the backstage assemblage accrued modestly by 1.5 per cent year-on-year to N75.83 trillion successful August 2025, from N74.73 trillion successful the corresponding play of 2024.

However, recognition to backstage assemblage fell to N75.8 trillion successful August 2025 erstwhile compared to the N76.12 trillion recorded successful June 2025. This marks the 5th clip this twelvemonth that lending to businesses and individuals has declined.

Data reveals that recognition to the backstage assemblage reached its highest level successful April 2025 astatine N78.1 trillion. The diminution successful recognition began earlier successful February 2025, erstwhile full backstage assemblage recognition dropped from N77.3 trillion successful January to N76.3 trillion. This downward inclination persisted done March, falling further to N75.9 trillion. Although April saw a little betterment to N78.1 trillion, the momentum was short-lived, with recognition levels dipping again successful May and June.

The recurring monthly contractions successful 2025 suggest imaginable liquidity pressures, a cautious lending stance by banks, oregon a slowdown successful recognition request from the backstage assemblage amid choky economical conditions.