The significance of refinanced letter of credit in cross-border financing in Nigeria

Mercy Femi-Olagundoye and Rufus Ishola Akintoye

African Journal of Economic and Sustainable Development, 2024, vol. 9, issue 3, 201-218

Abstract: The volume of import, letter of credit (LC), foreign portfolio investment (FPI), and foreign direct investment (FDI) were analysed to ascertain the impact of each of the three variables on import trade. This is to appraise the significance of cross-border financing on trade in Nigeria. The study used descriptive statistics, a pair-sampled t-test and ordinary least square regression. The study showed that FDI does not have a significant impact, but FPI has a negative significant impact on import trade while trade lines using LC have impact on import trade in Nigeria. The trends revealed peaks and troughs in the volume of LC, FPI, and FDI and it was also established that over 60% of LC paid by first-tier commercial banks and merchant banks in Nigeria were settled using credit lines. The credit line from the result facilitates trade and ensures trade flow.

Keywords: credit line; letter of credit; import trade; foreign direct investment; FDI; foreign portfolio investment; FPI; foreign exchange; Nigeria. (search for similar items in EconPapers)
Date: 2024
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