The Central Bank of Nigeria (CBN) has decided to extend the time it takes to issue letters of credit from 24 hours to five working days.
This change comes as Nigeria faces difficulties in obtaining foreign exchange. In the CBN’s 2020 service charter, it was stated that letters of credit would be issued and managed within 24 hours.
However, the newly approved 2023 service charter now states that it will take five working days.
Additionally, the CBN has also extended the time it takes to register Form M and NXP from 24 hours to two working days.
In June 2023, the CBN made an announcement about unifying all segments of the forex market. This meant that all windows for FX transactions would be collapsed into a single official window.
The purpose of this move was to increase liquidity and stability in the forex market in Nigeria. However, it seems that this decision had the opposite effect, as it actually caused more instability in the market.
According to Nairametric, the naira’s value dropped by almost 20%, and it was trading at N951.2/$ on the official Investor and Exporter forex window on Wednesday.
The current situation has had a significant impact on both local and international trade, particularly on the importation of goods and services into the country. There have been reports indicating that foreign suppliers are now refusing to accept letters of credit from Nigerian businesses.
In the case of importing tangible goods, a letter of credit serves as a payment method. The bank commits in writing to pay the exporter a specific amount within a specified timeframe, as long as the customer provides the necessary documentation.
This development has caused disruptions in trade and poses challenges for Nigerian businesses involved in importing goods.
In order to bring goods into Nigeria using foreign currency, importers must fill out Form M as required by law. Similarly, exporters must fill out the Nigeria Export Proceed Form (NXP) before shipping goods out of the country.
The recent forex crisis in Nigeria has likely caused delays in the processing of letters of credit, Forms M, and NXP, as stated in the newly approved service charter by the Governor of the CBN, Yemi Cardoso.
The Central Bank of Nigeria (CBN) has announced that the service charter is a requirement of the Business Facilitation Act 2022, which aims to improve the ease of doing business in Nigeria.
This charter allows the CBN to follow SERVICOM’s guidelines for enhancing customer service.
The CBN stated on Thursday that the charter outlines the bank’s interaction with its external customers and demonstrates its dedication to delivering efficient and prompt service to stakeholders and consumers.
In the introduction of the updated document, Cardoso emphasised the CBN’s dedication to offering better and more user-friendly governance by providing excellent, efficient, responsible, and transparent services.
In an interview with Nairametrics regarding the extended timeline, Mr. Muda Yusuf, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, suggested that the extension could be a strategy by the CBN to handle cash flow and instill confidence in the process to prevent any disruptions in transactions.
