By Kabiru Abdulrauf
Nigeria’s foreign exchange reforms are beginning to yield visible results. After months of volatility and uncertainty, improved forex liquidity has ignited a rebound in trade-related activity with the value of Letters of Credit (LCs) surging by 33.3 per cent year-on-year between January and August 2025.
According to new data from the Central Bank of Nigeria (CBN), LCs rose from $453.91 million in 2024 to $605.01 million this year, a clear sign that importers and manufacturers are regaining confidence in the nation’s financial system.
While total international payments by the CBN dipped by 14.3 per cent to $4.14 billion, analysts say the spike in LCs underscores a return of faith in Nigeria’s trade finance infrastructure following the apex bank’s sweeping reforms.
“The increase in Letters of Credit suggests improved liquidity and access to forex for importers,” analysts at Cordros Capital noted. “It also signals growing confidence in the market’s ability to meet legitimate trade obligations.”
The renewed activity comes amid ongoing efforts by the CBN to unify exchange rates and clear inherited forex backlogs. The naira’s relative stability in recent months has made trade financing less risky, enabling more businesses to plan imports with certainty.
However, the broader picture remains mixed. Data shows that foreign debt service payments, which make up nearly 70 per cent of total international payments fell by 6.5 per cent to $2.86 billion, while direct remittances plunged by a staggering 48.9 per cent to $671.86 million.
The sharp decline in remittances reflects weaker spending on international services by Nigerian residents and the lingering impact of global inflation on disposable incomes.
Despite the positive forex trend, domestic credit growth remains sluggish. Credit to the private sector rose only 1.5 per cent year-on-year to ₦75.83 trillion in August 2025 but continued its month-on-month decline marking the fifth contraction this year.
For now, the surge in Letters of Credit represents a glimmer of optimism for Nigeria’s trade sector a sign that the government’s forex reforms are slowly restoring order and predictability. But sustaining this progress will require balancing liquidity, interest rates, and debt obligations, including the looming $1.2 billion Eurobond maturity in November 2025.
