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Financial markets

Improved Foreign Exchange Liquidity Boosts Trade Activity in Nigeria's Financial Markets

Strategic Insights

— 1 min read

Improved foreign exchange liquidity and a stable naira have led to 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. This surge in LCs underscores a rebound in import financing and renewed confidence among manufacturers and traders accessing the official forex window. Analysts attribute the surge to improved dollar liquidity, tighter monetary discipline, and policy consistency under the Central Bank of Nigeria's (CBN) ongoing foreign exchange reforms.

Key Takeaways:

  • The value of Letters of Credit (LCs) rose 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.
  • The surge in LCs is attributed to improved dollar liquidity, tighter monetary discipline, and policy consistency under the CBN's ongoing foreign exchange reforms.
  • Foreign debt service payments fell by 6.5 per cent to $2.86 billion from $3.06 billion in the corresponding period of 2024.
  • Direct remittances declined sharply by 48.9 per cent year-on-year to $671.86 million from $1.32 billion recorded a year earlier.
  • 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 LCs reflects improving business sentiment, and importers are gradually regaining trust in the formal banking channels for their trade transactions.
  • Analysts at Cordros Capital noted that the sustained improvement in FX liquidity and relative naira stability has made trade instruments like LCs more accessible.

Statistics:

  • Value of Letters of Credit (LCs) rise: 33.3 per cent year-on-year to N605.01 million in the first eight months of 2025.
  • Value of Letters of Credit (LCs) in 2024: N453.91 million in the same period of 2024.
  • Foreign debt service payments: $2.86 billion (6.5 per cent decrease from $3.06 billion in 2024).
  • Direct remittances: $671.86 million (48.9 per cent decrease year-on-year from $1.32 billion).

Sources:

  • Central Bank of Nigeria (CBN) data.
  • Cordros Capital.

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