What changed
RBI has informed AD Category-I banks about a new line of credit agreement between Exim Bank and the Nigerian Export-Import Bank. The LOC of USD 20 million is effective from May 10, 2012, with a 36-month window for opening LCs and 42 months for disbursement. At least 90% of contract value must be sourced from India.
What it means for you
Banks can now facilitate Indian exports to Nigeria under this LOC, ensuring compliance with FEMA and RBI guidelines. The 90% local sourcing rule and commission restrictions (max 5% with prior RBI approval for after-sales service) require careful documentation. This opens a structured financing channel for exporters targeting the Nigerian market.
What you must do
- Inform exporter clients about the LOC terms and direct them to Exim Bank for full details.
- Ensure all shipments under this LOC are declared on GR/SDF forms as per RBI instructions.
- Process agency commission only after full contract value realization and compliance with prevailing rules.
- For after-sales service exports, verify RBI approval before allowing commission up to 5% of invoice value.
Who it affects
AD Category-I banks, Exporters dealing with Nigeria, Exim Bank
What is the last date for opening Letters of Credit under this LOC?
The last date for opening LCs is May 9, 2015, which is 36 months from the effective date of the agreement (May 10, 2012).
Can exporters pay agency commission without RBI approval?
For exports not involving after-sales service, commission can be paid from the exporter's own resources or EEFC account after full payment realization. For after-sales service exports, prior RBI approval is needed, and commission is capped at 5% of invoice value.