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The short answer
Under FOB, the supplier loads the goods on the ship and you arrange and pay for sea freight, so risk passes to you at loading. Under CIF, the supplier pays freight and minimum insurance to the Nigerian port, but risk still passes to you once the goods are on board. FOB gives you more control over cost; CIF is simpler if you have no freight forwarder.
What the two terms mean
FOB and CIF are Incoterms, a set of trade rules published by the International Chamber of Commerce. They tell buyer and seller who arranges each part of the journey, who pays for it and when the risk of loss or damage moves from seller to buyer. Your proforma invoice will name one, for example "FOB Shanghai" or "CIF Lagos", and that choice flows into your Form M and your costings.
- FOB (Free On Board)
- The seller clears the goods for export and loads them on the vessel at the named port of shipment. Risk passes to you once the goods are on board. You contract and pay for the sea freight.
- CIF (Cost, Insurance and Freight)
- The seller pays for sea freight to the named destination port and for port-to-port insurance. Risk still passes to you once the goods are loaded at the port of shipment. ICC guidance says the seller's insurance need only meet the minimum cover (Institute Cargo Clauses C).
Both terms are designed for sea or inland waterway shipments only. The ICC notes that for container and multimodal shipments, FCA is often a better fit than FOB, because containers are usually handed over at a terminal rather than loaded by the seller.
The detail most importers miss
Under CIF the supplier pays the freight, but risk is already yours from the moment of loading. If the goods are damaged at sea, you claim on the insurance the supplier bought, which may be minimum cover chosen by them. Many buyers assume CIF means the seller is responsible until Lagos. It does not.
Side by side
| Question | FOB | CIF |
|---|---|---|
| Who books the ship? | You (or your forwarder) | Supplier |
| Who pays sea freight? | You | Supplier, built into the price |
| Who insures the sea leg? | You, if you choose to | Supplier, minimum cover |
| When does risk pass to you? | On loading at origin port | On loading at origin port |
| Your control over freight cost | High | Low |
| Effort for you | More | Less |
How the choice changes your naira cost
Example only. Emeka imports spare parts. The supplier offers two prices: US$10,000 FOB, or US$11,200 CIF Lagos. His forwarder quotes US$800 for freight and US$60 for better insurance with wider cover.
- FOB route: US$10,000 + US$800 + US$60 = US$10,860, with fuller insurance he chose himself.
- CIF route: US$11,200, with minimum insurance.
- At an example rate of ₦1,500 per dollar, FOB saves him US$340, or ₦510,000, and gives him better cover.
The FOB route is not always cheaper. A supplier shipping large volumes may get lower freight rates than a small importer can, and some forwarders add charges at destination. Ask for both quotes and compare the full landed cost, not just the invoice.
There is also a timing effect. Under FOB you pay the forwarder separately, often in dollars and sometimes before the goods arrive, so you need foreign currency on hand at two points instead of one. Under CIF, freight is folded into the supplier's invoice and paid through the same import payment. Small importers with tight cash flow sometimes prefer CIF for this reason alone, even when it costs a little more. Whichever you choose, write down the dates each payment is due so you are not caught short when the rate moves. Our guide to how the official exchange rate is set explains why the rate on each date can differ.
Finally, check what insurance you are actually getting. Minimum cover under Institute Cargo Clauses C protects against major events such as the vessel sinking, but not every kind of loss or damage in transit. If your goods are fragile or high value, ask the supplier to buy wider cover, or buy your own under FOB, and compare the cost against what a single damaged shipment would cost you.
Landed cost: the number that matters
Whatever the term, work out the full landed cost per unit before you set your selling price. That means the goods, freight, insurance, customs duty and levies, port and terminal charges, clearing agent fees, haulage to your warehouse and bank charges, all converted into naira. The duty side is assessed by customs on the value of the goods, so speak to a licensed clearing agent for the figures that apply to your product. Our guide to pricing imported goods when the naira moves shows how to build a buffer into that price.
Which should you choose?
- First imports, no forwarder: CIF is simpler. Ask the supplier which insurer they use and what the cover is.
- Regular imports with a trusted forwarder: FOB or FCA usually gives you better control over cost, timing and insurance.
- Container cargo: ask your forwarder whether FCA suits better than FOB.
- Whatever you choose: make sure the term on the proforma invoice, the Form M and the final invoice are the same.
For the full payment sequence, see how to pay a foreign supplier from Nigeria.
Where Pryme fits
Pryme does not book freight or process Form M. It helps you see and control the costs around a shipment. With a Pryme Business Account you can hold USD for freight and supplier balances alongside your naira, and convert only when you choose, with Swap showing the rate first and the fee on its own line. The Finance agent can prepare a landed-cost sheet for each shipment for you to review.
Questions people ask
Is FOB or CIF better for importing into Nigeria?
FOB gives you more control over freight and insurance and can cost less if you have a good forwarder. CIF is simpler for first-time importers but the supplier chooses the freight and minimum insurance.
Under CIF, who is responsible if goods are damaged at sea?
Risk passes to the buyer once the goods are loaded at the port of shipment. You would claim on the insurance policy the seller arranged.
Can I use FOB for air freight?
No. FOB and CIF are for sea and inland waterway transport only. Other Incoterms, such as FCA, suit air and container shipments.
Why does my bank ask for the FOB value?
Advance payment limits under the CBN's 2026 manual are set as a percentage of the FOB value of the goods.
Sources
- ICC Academy: FCA and FOB Incoterms 2020 explained · accessed Oct 2026
- ICC Academy: CIF and CIP Incoterms 2020 explained · accessed Oct 2026
- Key regulatory update in Nigeria: the CBN Foreign Exchange Manual 2026 (Mondaq) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.