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The short answer
A letter of credit is a promise by the Nigerian buyer's bank to pay you when you present documents that match its terms, so your risk shifts from the buyer to the bank. In Nigeria it is opened against the buyer's registered Form M, which names the LC as the payment mode, and under UCP 600 the bank has five banking days to examine your documents.
For a Spanish company selling to a Nigerian buyer it has never met, a letter of credit (LC) is often the safest route short of payment in advance. It is also the route with the most paperwork, and most LC problems are the seller's own documents. Knowing how the LC connects to Nigeria's Form M helps you avoid them.
How an LC works, step by step
- You and the buyer agree the sale, the Incoterm and that payment will be by LC.
- You issue a proforma invoice; the buyer files a Form M with its authorised dealer bank, naming the LC as the payment mode (Sterling Bank lists LC among the modes on the form).
- Once Customs registers the Form M, the buyer's bank issues the LC and sends it to a bank in Spain, which advises it to you.
- You check the LC terms carefully and ask for amendments before shipping if anything cannot be met.
- You ship within the LC's latest shipment date and collect the documents it requires.
- You present documents to the nominated bank within the presentation period.
- The banks check the documents; if they comply, you are paid, either at sight or at the agreed later date.
The link to the Form M
Sterling Bank's Form M guidance explains that the form is mandatory for all imports into Nigeria, that the proforma behind it can be valid for at most 90 days, and that goods should ship only after the Nigeria Customs Service registers it. For an LC, this means your proforma must match what you will invoice: product descriptions, quantities, unit prices, HS codes and the Incoterm. If the LC and the Form M disagree, the buyer has to amend the form, and that takes time. See the Form M for Spanish sellers for the buyer's side.
Deadlines under UCP 600
Most LCs are issued subject to the ICC's UCP 600 rules. A Razorpay summary of the rules (updated June 2026) sets out the deadlines that matter:
- Bank examination
- Five banking days following the day of presentation (Article 14(b))
- Presentation period
- Within 21 days after the shipment date, unless the LC sets a shorter period, and never after expiry
- Shipment date
- The on-board date must not be later than the latest shipment date
- Refusal
- A bank that refuses must send a single notice listing all discrepancies (Article 16); it cannot raise new ones later
Electronic presentation is possible where the LC allows it. The ICC published eUCP version 2.1 in June 2023 as a digital supplement to UCP 600.
Documents an LC typically asks for
Each LC sets its own list, but expect most of these on a sale to Nigeria:
- Commercial invoice, often signed, quoting the Form M number.
- Full set of clean on-board bills of lading, or an air waybill.
- Packing list and weight list.
- Certificate of origin.
- Insurance certificate, if you insure under the Incoterm agreed.
- Product certificates required in Nigeria, such as SONCAP for regulated goods.
- Combined certificate of value and origin, if requested.
Common discrepancies, and how to avoid them
- Goods description on the invoice differs from the LC wording; copy it exactly.
- Bill of lading dated after the latest shipment date, or presented too late.
- Missing or wrongly issued certificates, such as origin, inspection or insurance.
- Names and addresses that do not match the LC.
- Incoterm on the invoice different from the LC.
Confirmed or unconfirmed?
An unconfirmed LC relies on the Nigerian bank alone. A confirmed LC adds the promise of a second bank, often in Spain or another major centre, so you are paid even if the issuing bank cannot transfer the currency. Confirmation costs a fee and depends on whether a bank is willing to take on the Nigerian bank's risk. Ask your Spanish bank for a quote before agreeing the price with the buyer, and factor in the advising and negotiation charges on your bank's tariff.
When an LC is not worth it
For small, repeat orders from a buyer with a good payment record, the cost and paperwork of an LC may outweigh the protection. A documentary collection, where banks exchange documents for payment without promising to pay, is cheaper but less secure. Compare the options in how a Spanish business gets paid by a Nigerian buyer and, from the Nigerian side, LC versus open account.
Where Pryme fits
LC payments go through the banks named in the credit. Around them, a Pryme Business Account can hold euros and dollars for freight, inspection and insurance costs, with Swap showing the rate and fee before you approve, and invoicing that keeps your invoice wording consistent from proforma to final.
Questions people ask
Does a Nigerian buyer need a Form M to open a letter of credit?
Yes. The Form M is mandatory for imports and records the payment mode; the LC is opened against the registered form.
How long does a bank have to check LC documents?
Under UCP 600 Article 14(b), five banking days following the day of presentation.
What is the deadline to present documents under an LC?
Within 21 days after shipment unless the LC sets a shorter period, and always before the LC expires.
Should a Spanish seller ask for a confirmed LC from Nigeria?
Confirmation adds a second bank's promise to pay. It costs more, but protects you if the Nigerian bank cannot transfer the currency.
Sources
- Sterling Bank: FAQs on Form M (updated Mar 2022) · accessed Oct 2026
- Razorpay: UCP 600 articles explained (updated Jun 2026) · accessed Oct 2026
- ICC: eUCP version 2.1 (29 Jun 2023) · 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.