Chinese manufacturers reject Nigeria’s Letters of Credit, says CBN

Chinese manufacturers are refusing Letters of Credit (LCs) from Nigerian importers, insisting on cash payment only, the Central Bank of Nigeria (CBN) Director, Trade and Exchange, Olakanmi Gbadamosi has disclosed.
Speaking on Wednesday at the 2014 Wema Bank Customer Trade Structured Finance Forum held in Lagos, Gbadamosi regretted that despite improved banking regulation in Nigeria and the CBN Cash-less banking policy, the Chinese exporters still reject LCs from Nigeria.
A LC is document issued by a financial institution, or a similar party, assuring payment to a seller of goods or services provided certain documents have been presented to the bank. The LC serves as a guarantee to the seller that it will be paid regardless of whether the buyer ultimately fails to pay.
It ensures that the risk that the buyer will fail to pay is transferred from the seller to the letters issuer. The letter can also be used to ensure that all agreed standards are met by the supplier, provided that these requirements are reflected in the documents described in the letter of credit.
Gbadamosi, who was represented by CBN Deputy Director, Trade and Exchange, Mrs. Onyinye Ahuchiogu said the practice is affecting Chinese trade volume with the country and should to be addressed.
“At CBN, we are very much aware of that because I want to tell you authoritatively that at that end, some people monitor foreign exchange flows. We do know that so much money goes to China, cash, not LCs. The demand for cash is against the CBN cash-less banking policy,” he said.
Continuing, he said: “I do know that that the cash-less policy is gaining ground everybody is going cash-less, but China has refused. I think it is a bilateral issue and we have suggested that it should be tackled because this people are doing business in our environment and they are making profit. They are enjoying our environment. Despite security challenges in Nigeria, businesses are still thriving”. He said the CBN is looking at ways of resolving the challenge.
He said the CBN is committed to ensuring that banks fund their accounts, two days before the bid date for foreign exchange adding that importers can source for funds either through the official window or interbank.
“As a business man, you can source fund from any segment, depending on the transaction you want to execute. But in Nigeria, we have a list of eligible bank transactions, which we expect that importers chose only from this list. It is also our expectations that banks educate their customers about these transactions, and the supporting documents needed for effective import,” he said.
He said Form ‘M’ completion is expected from anyone doing business in Nigeria as it helps the CBN to know who is buying what, and what needed to be done to meet customers’ needs. He said that importers of goods worth less than $250,000 annually are to carry out minimal documentation but they still have to do the Form ‘M’.

Leave a Reply


President expresses sympathy, urges patience over border closure

President Yoweri Museveni has expressed sympathy to the citizens of Uganda and Rwanda that have been affected by the closure of the Katuna border and called for patience, saying a lasting solution is being sought to solve the problem. He expressed opti…

President, King Oyo to co-host 1st monarchs’ summit

President Yoweri Kaguta Museveni and Omukama Oyo Nyimba Kabamba Iguru of Tooro Kingdom will co-host the first ever World Monarchs’ Summit that is slated to take place in Tooro Kingdom in September this year.The summit is expected to bring together the …