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The short answer
A letter of credit opened by the Nigerian buyer's bank after their Form M is registered commits that bank to pay you when you present the listed documents, usually the invoice, bill of lading or air waybill, packing list and any certificates, without discrepancies. Under UCP 600 you present within 21 days of shipment and the bank has five banking days to check.
A letter of credit (LC) is the classic answer when a South African exporter and a Nigerian buyer do not yet trust each other. The buyer's bank in Nigeria promises to pay the exporter when the exporter presents the documents the LC lists, on time and without discrepancies. The protection is real, but it is a promise about documents, not about goods, and most LC problems are paperwork problems. This guide explains how it works, which documents trigger payment, and where South African exporters get caught.
How the LC fits Nigerian import rules
In Nigeria, the buyer must first open a Form M, the declaration of intention to import, through the National Single Window and their bank. Sterling Bank's Form M guide lists letters of credit among the payment modes, alongside bills for collection and advance payment. A Form M marked 'Valid for FX' lets the buyer buy foreign exchange through the official market to fund the payment; 'Not Valid for FX' means they pay from their own foreign currency. Ask which yours is, because it affects how quickly the Nigerian bank can fund the credit. See Form M documents.
The steps
- Contract agreed: goods, price, currency, Incoterm, latest shipment date, payment by LC.
- Buyer's Form M registered; buyer asks its Nigerian bank to issue the LC.
- The LC reaches you through a South African advising bank. Read every condition at once.
- If you want a South African bank's own promise, ask it to confirm the LC; it will price that risk.
- Ship, then gather the documents exactly as listed.
- Present them to the nominated bank within the time allowed.
- The bank checks them; if they comply, you are paid or the bank commits to pay at the agreed date.
Time limits under UCP 600
Most LCs are issued subject to the ICC's UCP 600 rules. A summary of those rules published by Razorpay sets out the key time points:
- Presentation
- Within 21 days after the date of shipment, unless the LC sets a shorter period, and before expiry
- Bank examination
- Up to five banking days following the day of presentation
- Refusal
- One notice listing all discrepancies; the bank cannot add new ones later
- Late refusal
- A bank that fails to refuse within five banking days cannot later claim the documents do not comply
- Shipment date
- The on-board date must not be later than the latest shipment date
Documents that commonly trigger payment
| Document | What to watch |
|---|---|
| Commercial invoice | Description, quantity and price must match the LC exactly |
| Bill of lading or air waybill | Shipped on board, consignee and notify party as the LC says |
| Packing list | Consistent with the invoice |
| Insurance certificate | Only if you insure (for example under CIF); amount and cover as required |
| Certificate of origin | Issued by the body the LC names |
| Inspection or quality certificate | From the named inspector, if required |
Under CIF, the seller insures, and the ICC Academy notes that CIF requires only Institute Cargo Clauses (C), minimum cover; under CIP it is Clauses (A), all risks. If the LC asks for cover different from what your Incoterm implies, raise it before shipping.
Costs to budget for
Banks charge for advising an LC, for confirming it, for checking documents, for amendments and for discrepancies; the issuing bank in Nigeria has its own charges too. The contract should say who pays which charges, and the LC itself often states whether charges outside Nigeria are for the beneficiary. Ask your South African bank for its tariff before agreeing terms, and compare the cost of confirmation with the size and risk of the order.
Where exporters get caught
- Conditions you cannot meet. A certificate only the buyer can issue, or a shipment date you cannot hit. Ask for an amendment before you ship.
- Small mismatches. A different spelling of the buyer's name, a weight that differs between invoice and bill of lading.
- Late presentation. Counting from the on-board date, not the day you get the papers back.
- Relying on the goods. Banks look at documents; quality disputes are for the contract.
A discrepancy does not end the deal: the buyer can waive it. But it turns a bank promise back into reliance on the buyer, the very thing the LC was meant to avoid.
Where Pryme fits
LCs run through banks, and Pryme does not issue or confirm them. Where a Nigerian buyer moves to open account or advance payment after a few clean shipments, a Pryme Business Account can receive USD or NGN with local account details; the rate and fee are shown before you approve any Swap. Outside Nigeria, Pryme works through regulated partners. See Business multicurrency, getting paid by Nigerian buyers and, for the Nigerian view, LC versus open account.
Questions people ask
Is a letter of credit from a Nigerian bank safe?
It is the issuing bank's promise to pay against compliant documents. For added security, ask a South African bank to confirm it.
How long do I have to present documents under an LC?
Under UCP 600, within 21 days after shipment unless the LC is shorter, and before expiry.
What happens if my documents have a discrepancy?
The bank sends one notice listing discrepancies. The buyer can waive them, but payment then depends on the buyer.
Does the Nigerian buyer need a Form M for an LC?
Yes. The Form M comes first, and LC is one of the payment modes it records.
Sources
- Sterling Bank: FAQs on Form M (modified 13 Mar 2022) · accessed Oct 2026
- Razorpay: UCP 600 articles explained (updated Jun 2026) · accessed Oct 2026
- ICC Academy: Incoterms 2020, CIP or CIF? (7 Oct 2024) · 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.