Between January and September, eight banks gained a total of N26.73billlions from Letter Credits issued for international trade transactions, indicating a 23 percent increase as against the N21.68billion in the previous year.
The letter credit is issued by banks to guarantee that a seller will receive a buyer’s payments on time and for the full amount. The banks generate funds for issuing letters of credits. According to the bank’s financial reports, United Bank of Africa Plc and First Bank Plc showed improved earnings of 13.86bn and 8.41bn respectively which top the list within the nine months.
Other banks assessed; Access Bank, FCMB, Fidelity Bank, Jazi Bank, Sterling Bank, dropped in their revenue on LCs possessed in the same period. Access Bank with 1.5bn declined from N2.3bn in 2019, FCMB Plc with 350.39m declined from N614.84m, Fidelity Bank N763m dropped from N1.05bn, Jaiz Bank N123.65m from N325.34m, Sterling Bank 822m from N876m and Union Bank N877m from N968m in 2019.
This reduction might not be unconnected to the scarcity of forex which began when the oil prices crashed in the international market in March.
To control this abuse, the Central Bank of Nigeria had in August directed all dealers and stakeholders to desist from opening of Form M whose payments are rooted through buying company, agent or any third party adding that all authorized dealers should only open Form M for Letter of Credit, bills for collection and other forms of payment in favour of the ultimate suppliers of the product or service.