Nigerian banks and their counterparts in other clans have notified their corporate customers of delays in processing Letters of Credit (LCs), following the ongoing Russia and Ukraine war and the attendant sanctions.
LCs, according to the International Trade Administration, are one of the most secure instruments available to international traders. An LC is a commitment by a bank on behalf of the buyer that payment will be made to the exporter, provided that the terms and conditions stated in the LC have been met, as verified through the presentation of all required documents.
Access Bank Plc on Tuesday sent a statement to its corporate customers updating them on international transactions.
“Our hearts go to Ukraine and everyone affected by the Russian/Ukraine conflict. Access Bank is diligently observing these events and the subsequent economic situation in Europe as a whole,” the bank said.
According to the bank, the impact of sanctions placed on Russia would border on international transactions such as trade finance (letters of credit, bills of collection, and exports), International Money Transfer Operations (IMTOs), and international card payments. Consequently, there may be delays with transactions to and from this region.
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“While we will monitor to ensure international transactions are processed seamlessly, we are trusting that this crisis will be resolved,” the bank added.
Responding to the development, Ayodeji Ebo, managing director/CBO, Optimus by Afrinvest, said the implication is that scarcity of the commodities coming from these regions will lead to high prices of existing and new imports due to higher replacement cost.
Wheat is a major commodity being imported from Russia which serves as dominant inputs to several food items in Nigeria. This will lead to further rise in the prices of these items, Ebo said.
Standard Chartered Group on Monday said it does not currently undertake any transaction involving the Covered Regions, following the Ukraine and Russia sanctions.
On February 21, 2022, the U.S. issued an Executive Order (E.O.) targeting the Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine (the “Covered Regions”).
In other clans, some banks have stopped issuing letters of credit (LC) to cover purchases of Russian crude, according to Argus Media, a London based independent media organisation.
The International Monetary Fund (IMF) on Tuesday in its April 2022 Global Financial Stability Report (GFSR), warned that government finances could come under even more pressure, and further squeezing banks, as the global economy slows following the global crisis.
