Nume Ekeghe

Improved foreign exchange liquidity and a more stable naira have spurred renewed trade activity in Nigeria’s financial markets, with the value of Letters of Credit (LCs) rising by 33.3 per cent year-on-year to N605.01 million in the first eight months of 2025, compared to N453.91 million recorded in the same period of 2024, according to Central Bank of Nigeria (CBN) data.

Analysts said the sharp increase in LCs underscores a rebound in import financing, renewed confidence among manufacturers and traders accessing the official forex window.

Analysts attributed the surge to improved dollar liquidity, tighter monetary discipline, and policy consistency under the CBN’s ongoing foreign exchange reforms, which have enhanced transparency and stability in the Nigerian Foreign Exchange Market (NFEM).

“The sustained improvement in FX liquidity and relative naira stability has made trade instruments like LCs more accessible. It signals a gradual return of confidence among importers and local manufacturers who previously struggled to access forex for raw materials and intermediate goods,” noted analysts at Cordros Capital.

Despite the uptrend in trade-related flows, the CBN data also showed a general moderation in other categories of international payments. Foreign debt service payments, which accounted for 69.2 per cent of total international payments, fell by 6.5 per cent to $2.86 billion from $3.06 billion in the corresponding period of 2024.

Similarly, direct remittances declined sharply by 48.9 per cent year-on-year, to $671.86 million from $1.32 billion recorded a year earlier, driven largely by lower payments for international services by Nigerian residents.

According to Cordros Capital, while lower debt service and remittance outflows helped moderate total international payments, the increase in LCs highlights growing momentum in trade financing and signals a tentative recovery in external sector confidence after months of volatility.

“The rise in Letters of Credit reflects improving business sentiment. Following the CBN’s clearance of forex backlogs and market reforms, importers are gradually regaining trust in the formal banking channels for their trade transactions,” the firm said.