Letter of Credit (Ghana)

A Letter of Credit in Ghana communicates the sender's formal position on the matter and the response it requires.

In Ghana, Letters of Credit are issued by commercial banks licensed by the Bank of Ghana (BoG) under the Banks and Specialised Deposit-Taking Institutions Act 2016 (Act 930). The Bills of Exchange Act 1961 (Act 55) provides the statutory foundation for bills of exchange and related payment instruments in Ghana, applying to negotiable instruments used in trade finance transactions. The primary international framework governing Letters of Credit — including those issued by Ghanaian banks — is the Uniform Customs and Practice for Documentary Credits (UCP 600), published by the International Chamber of Commerce (ICC), which is incorporated by reference into almost all Letters of Credit issued by Ghanaian banks.

The Bank of Ghana supervises all foreign exchange transactions in Ghana under the Foreign Exchange Act 2006 (Act 723), including Letters of Credit for import and export transactions. A Ghanaian importer applying for an import Letter of Credit must comply with the Bank of Ghana's Foreign Exchange Manual and the import licensing requirements administered by the Ghana Revenue Authority (GRA) and the Ghana Standards Authority (GSA). Copies of the LC application must be retained for inspection under Section 4 of the Foreign Exchange Act 2006 (Act 723).

A Letter of Credit operates through a network of banks: the issuing bank (in Ghana) and a corresponding or confirming bank in the seller's country. The Ghana Association of Bankers (GAB), which represents all Bank of Ghana-licensed banks, supports inter-bank LC operations through the SWIFT messaging network. Major issuing banks in Ghana include GCB Bank Limited, Standard Chartered Bank Ghana Limited, Ecobank Ghana Limited, Absa Bank Ghana Limited, and Stanbic Bank Ghana Limited.

A Letter of Credit in Ghana is distinct from a Bank Guarantee (which is a contingent obligation), a Standby Letter of Credit (SBLC, which functions like a guarantee and is activated on default), a Bill of Exchange (which is a payment order drawn by the seller on the buyer), and a Promissory Note. The distinguishing feature of a documentary credit is that it is a primary obligation of the issuing bank — not conditional on the underlying commercial contract — and is subject only to the doctrine of strict compliance with the stated documents.

A Letter of Credit in Ghana is required in trade and finance transactions where the buyer and seller do not know each other well enough to trade on open account terms and need the independent credit of a Bank of Ghana-licensed bank to secure the payment obligation.

A Letter of Credit is required when a Ghanaian company imports goods from an overseas supplier — for example, industrial machinery from China, pharmaceutical products from India, or consumer goods from Europe — and the foreign supplier requires a bank-guaranteed payment instrument before shipping the goods to Ghana. The importer applies to a Bank of Ghana-licensed bank for the issuance of the LC.

A Letter of Credit is needed when a Ghanaian exporter of commodities — cocoa exported through the Ghana Cocoa Board (COCOBOD), gold exported by licensed companies under the Minerals and Mining Act 2006 (Act 703), or non-traditional exports — requires an LC from the overseas buyer's bank before releasing the goods, to eliminate credit risk on the foreign buyer.

A Letter of Credit is required when a large infrastructure or construction project in Ghana — financed by the World Bank, African Development Bank, or bilateral development partners — requires payment to international contractors and suppliers through documentary credits, as specified in the project's financial agreement.

A Letter of Credit is needed when a company registered under the Companies Act 2019 (Act 992) engaged in domestic wholesale trade — for example, a fuel importer distributing to petrol stations in Accra and Kumasi — requires a domestic LC to assure the local commodity supplier that payment is guaranteed by a Bank of Ghana-licensed bank.

A Letter of Credit is required when a Ghanaian bank acting as an issuing bank for a customer needs to document the credit terms, the required shipping documents (bill of lading, commercial invoice, packing list, certificate of origin, inspection certificate), and the presentation deadline in a format consistent with UCP 600 and the Bank of Ghana's foreign exchange regulations.

Parties in Ghana should engage the trade finance department of a Bank of Ghana-licensed bank to issue a Letter of Credit, as the process involves compliance with foreign exchange regulations under the Foreign Exchange Act 2006 (Act 723), import licensing requirements, and SWIFT messaging protocols.

A valid Letter of Credit in Ghana issued under UCP 600 and the Bills of Exchange Act 1961 (Act 55) must contain the following essential elements.

LC Reference and Type: Unique LC reference number assigned by the issuing bank; the type of credit — irrevocable (most common), revocable, confirmed, unconfirmed, transferable, or standby; whether the credit is payable at sight (immediately on presentation of compliant documents) or by deferred payment (at a future date).

Issuing Bank and Applicant: Full name, SWIFT BIC code, and address of the issuing bank (a Bank of Ghana-licensed institution such as GCB Bank, Standard Chartered Ghana, or Ecobank Ghana); full name, address, and account number of the applicant (the Ghanaian buyer or importer).

Beneficiary: Full name and address of the beneficiary (the seller or exporter); the bank account details where payment is to be made; and, where applicable, the name and SWIFT BIC of the advising or confirming bank in the seller's country.

LC Amount: The maximum amount payable under the LC in the specified currency (Ghana Cedis for domestic LCs; USD, EUR, or GBP for import LCs) — stated as a fixed amount or with a tolerance (e.g., +/- 10%) to allow for partial shipments; the amount must comply with the Bank of Ghana's foreign exchange position limits.

Expiry Date and Place: The last date by which the beneficiary must present documents to the nominated bank; the place of presentation (typically the beneficiary's counters or the counters of the confirming bank in the seller's country).

Required Documents: A precise list of the documents the beneficiary must present to obtain payment — typically: a signed commercial invoice; a full set of clean on-board ocean bills of lading or airway bills; a packing list; a certificate of origin; a pre-shipment inspection certificate from a Ghana Standards Authority (GSA) approved inspection company where required; and an insurance certificate.

Shipment Terms: The port or place of loading and destination port (e.g., Tema Port in Greater Accra Region, Ghana's main seaport); Incoterms (e.g., CIF Tema, FOB Shanghai) under the ICC Incoterms 2020 rules; the latest shipment date; and whether partial shipments or transhipments are permitted.

Applicable Rules: Statement that the credit is subject to UCP 600 (Uniform Customs and Practice for Documentary Credits, ICC Publication No. 600); and, for standby credits, URDG 758 or ISP98 as applicable.

Governing Law: Ghana law for domestic credits, with the High Court (Commercial Division) in Accra as the jurisdiction for disputes. For international credits, the applicable law is that of the issuing bank's jurisdiction — Ghana — unless otherwise specified. Forms-legal.com provides this template as a starting point; parties should work with a Bank of Ghana-licensed bank for the actual issuance of any Letter of Credit.