AI agents for business finance: what they can and can't do
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The short answer
You can charge late-payment interest on a Nigerian client's invoice if your signed contract says so: a stated rate, a start date and the currency it is charged in. A clause added only to the invoice is weaker. Enforcing it across the border is slow, because Nigeria is not a party to the Hague Service Convention and US judgments have no fast-track registration route in Nigeria, so the clause works mainly as leverage.
Contract first, invoice second
A late-payment charge is a contract term. If the client agreed to it before the work began, in a signed agreement or an accepted proposal, you have something to point to. If it first appears in small print on an invoice after the work is delivered, the client can say they never agreed. Put the clause in the engagement letter, repeat it on each invoice, and keep the client's written acceptance.
Our contract points for Nigerian clients covers the rest of the agreement; this article deals with the late-payment clause only.
What a workable clause contains
- Due date stated as a calendar date or a number of days after the invoice date.
- Rate and basis: a monthly or annual percentage, and whether it is simple or compounding. Simple interest is easier to defend and to calculate.
- Start point: from the day after the due date, or after a grace period.
- Currency: interest on a dollar invoice accrues in dollars; on a naira invoice, in naira. If the invoice is in naira but indexed to dollars, say which amount carries interest.
- Governing law: the law that decides whether the clause is valid. US states and Nigeria each have rules on interest and penalties, and a rate that looks like a penalty rather than compensation can be cut down. Ask a lawyer in the chosen jurisdiction before you set the figure.
- Order of payments: say whether part-payments go to interest or to the oldest invoice first.
- Recovery costs: whether the client bears reasonable collection costs.
Worked example (illustrative)
Your contract says invoices are due in 30 days and unpaid sums carry simple interest of 1.5% a month, pro rata by day. You invoice $4,000 and the client pays 75 days after the due date.
- Monthly interest
- 1.5% × $4,000 = $60
- Months late
- 75 days ≈ 2.5 months
- Interest due
- $60 × 2.5 = $150
- Total to request
- $4,150
Many freelancers waive the $150 in exchange for prompt settlement of the $4,000. That is still a use of the clause: it gives you something to concede.
Enforcing it from the US
If the client simply refuses, the practical routes are a firm letter, a lawyer's letter in Nigeria, or court action. Each step costs more than the last.
- Reminder sequence. A polite reminder at the due date, a firmer one at 14 days, a final notice that names the accrued interest. The Nigeria library has invoice reminder templates.
- Letter before action from a Nigerian lawyer. A demand on a Lagos or Abuja firm's letterhead often moves a client who ignored emails. See the letter before action guide.
- Suing in the US. The State Department says Nigeria is not a party to the Hague Service Convention; service can be by mail, by an agent such as a local attorney, or by letters rogatory (page last updated 14 June 2023). Winning a judgment is only half the job.
- Enforcing a US judgment in Nigeria. A June 2026 Mondaq guide notes that no order under the Foreign Judgments (Reciprocal Enforcement) Act extends it to the US, so a creditor usually brings a fresh action in Nigeria based on the judgment, which must be final and for a fixed sum.
For a modest invoice, the cost of steps 3 and 4 can exceed the debt. That is why the clause, deposits and staged billing matter more than the lawsuit.
Reducing what is at risk in the first place
Interest compensates for delay; it does not make a reluctant client pay. The terms that protect you most are the ones that limit how much is outstanding at any time.
- Deposit before work starts, commonly a share of the fee, credited against the final invoice.
- Milestone billing so no more than one stage is ever unpaid.
- A pause right: the contract lets you stop work while any invoice is overdue, without breaching it.
- Ownership on payment: rights in the deliverables pass only when the invoice is paid in full.
- A named payer: the person at the client who approves invoices, so reminders reach the right desk.
Nigerian companies often deduct withholding tax from service invoices, so a payment that looks short may not be late at all. Check that before charging interest on the difference; our guide to Nigerian withholding tax on fees explains how to read the remittance.
Tax: unpaid fees are not a deduction
Most freelancers use the cash method. The IRS says cash-method taxpayers generally cannot take a bad debt deduction for unpaid fees they never included in income (Topic 453, reviewed 24 September 2026). You were never taxed on the unpaid invoice, so there is nothing to write off. Interest you do collect is income in the year you receive it.
Where Pryme fits
With a Pryme Business Account you can issue invoices from the app and receive naira from Nigerian clients into naira account details in your name, which makes it easier to see what has been paid against each invoice. The Finance agent can prepare reminders for you to approve; nothing is sent without your approval.
Questions people ask
Can I charge interest on an overdue invoice to a Nigerian company?
Yes, if your contract provides for it. State the rate, when it starts and the currency, and get the client's written agreement before work starts.
What late fee percentage is allowed?
It depends on the law that governs the contract. US states and Nigeria each limit penalty-like charges; ask a lawyer in that jurisdiction before fixing the rate.
Can I sue a Nigerian client in a US court?
Possibly, but service in Nigeria is by mail, agent or letters rogatory, and a US judgment then needs a fresh action in Nigeria to be enforced.
Can I deduct an unpaid invoice on my taxes?
Usually not. The IRS says cash-method taxpayers generally cannot deduct unpaid fees they never reported as income.
Sources
- US Department of State: Nigeria judicial assistance information (last updated 14 Jun 2023) · accessed Oct 2026
- Mondaq: Enforcing UK and US judgments in the Nigerian Federal High Court (24 Jun 2026) · accessed Oct 2026
- IRS Topic no. 453, Bad debt deduction (reviewed 24 Sep 2026) · 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.