The Central Bank of Nigeria (CBN) has extended the timeline for the issuance of letters of credit from 24 hours to five working days as the country continues to struggle with foreign exchange scarcity.
In the approved 2020 service charter of the CBN, the timeline for the issuance and management of letters of credit was 24 hours.
However, the newly approved 2023 service charter shows that the timeline is now five working days.
Also, Nairametrics observed that the CBN extended the timeline for the registration of Form M and NXP from 24 hours to two working days.
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Earlier in June 2023, the CBN announced the unification of all segments of the forex market, collapsing all windows into a single official window for FX transactions.
Although this was part of an effort to drive liquidity and stability in the forex market in Nigeria, it appears to have had a counter-effect, as it triggered further instability in the market.
Nairametric reported that the naira lost nearly a fifth of its value as it traded at N951.2/$ on the official Investor and Exporter forex window on Wednesday.
This has affected local and international trade, especially the import of goods and services in the country, with reports stating that foreign suppliers have started rejecting letters of credit from Nigerian businesses.
For the importation of visible goods, a letter of credit is a mode of payment.
As requested by the customer, the bank promises in writing to pay the exporter a certain sum within a certain time frame in return for goods, as long as the customer provides the bank with the proper paperwork.
Also, to import goods denominated in foreign currency into Nigeria through the CBN Single window, all importers are required by law to fill out Form M. All exporters are required by law to fill out the Nigeria Export Proceed Form (NXP) before sending goods outside of the country.
The current forex crisis in the country likely triggered the increase in the timelines for letters of credits, Forms M and NXP in the newly approved service charter by the Governor of the CBN, Yemi Cardoso.
According to a statement from the CBN, the service charter is a prerequisite of the Business Facilitation Act 2022 that is meant to drive the ease of doing business in Nigeria.
It enables the CBN to comply with SERVICOM’s directions on improving customer service delivery.
The CBN on Thursday said that the charter defined the bank’s working relationship with its external customers, adding that it reaffirmed CBN’s commitment to provide effective and timely service to its stakeholders and consumers.
In the foreword of the revised document, Cardoso stressed the CBN’s commitment to providing more responsive and citizen-friendly governance through excellent, efficient, responsible, and transparent service delivery.
Speaking with Nairametrics on the extended timeline, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Mr Muda Yusuf, said that the extension may be an effort by the CBN to manage cash flow and help build confidence in the process so that there is no disruption in the transactions.
