AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
The short answer
A letter of credit is a bank's promise to pay your supplier once they present the agreed shipping documents, so it protects both sides but costs more and takes longer. Open account means the supplier ships first and you pay later, which is cheapest but needs trust. Most Nigerian SMEs start with a deposit or letter of credit and move towards bills for collection or open account as trust grows.
The question behind every payment method
Every import deal has the same tension. The supplier does not want to ship goods to a buyer in another country who might not pay. You do not want to send money to a factory abroad that might not ship, or might ship the wrong thing. The payment method decides who carries that risk and who pays for reducing it.
In Nigeria the method also has to fit the CBN's foreign exchange rules, which your bank applies once your Form M is registered. See how to pay a foreign supplier from Nigeria for the full sequence.
The four common methods
1. Advance payment
You pay before the goods ship. It is the riskiest position for you and the safest for the supplier. The CBN's 2026 Foreign Exchange Manual allows advance payment for imports of up to 30% of the FOB value, so a full prepayment through the official market is not available. In practice, a deposit is often combined with one of the methods below for the balance.
2. Letter of credit (LC)
Your bank issues a letter of credit in the supplier's favour. When the supplier ships and presents documents that match the LC's terms exactly, such as the bill of lading, commercial invoice and packing list, the bank pays. You are protected because payment depends on proof of shipment. The supplier is protected because a bank, not just you, has promised to pay.
The cost is fees, paperwork and time. Small mismatches in documents, called discrepancies, can hold up payment.
3. Bills for collection
The supplier ships and sends the documents through their bank to yours. Your bank releases the documents, which you need to collect the goods, only when you pay (documents against payment) or accept a bill to pay on a set date (documents against acceptance). There is no bank guarantee, so the supplier relies on your willingness to pay.
4. Open account
The supplier ships and invoices you, and you pay by transfer within agreed terms. It is the cheapest and simplest method, and the riskiest for the supplier. Suppliers usually offer it only after a history of reliable orders.
Side by side
| Method | Your risk | Supplier's risk | Cost and effort |
|---|---|---|---|
| Advance payment | High | Low | Low |
| Letter of credit | Low | Low | High |
| Bills for collection | Low to medium | Medium | Medium |
| Open account | Low | High | Low |
Choosing for your business: a worked example
Example only. Tunde imports solar inverters. His first order with a new manufacturer is worth US$20,000 FOB.
- First order: he pays a deposit of 20% (US$4,000, within the 30% limit) and opens an LC for the balance. If his bank's example rate is ₦1,500 per dollar, the deposit is ₦6,000,000, plus LC fees his bank quotes.
- Third order: the supplier has shipped correctly twice, so they agree documents against payment. Tunde saves on LC fees.
- After a year: the supplier offers 30-day open account terms on smaller top-up orders.
The point is to match the method to the relationship. Paying LC fees on every order forever is expensive; jumping straight to open account with a stranger is reckless.
What the supplier sees
It helps to look at the deal from the other side. A manufacturer abroad selling to a Nigerian buyer for the first time worries about three things: that the buyer will cancel after production starts, that payment will be delayed by foreign exchange paperwork, and that the goods will sit at the port unpaid. A deposit answers the first worry. An LC answers the second and third, because a bank has committed to pay against documents. When you ask for better terms later, point to your record: orders paid on time, documents handled cleanly and no disputes. Suppliers extend credit to buyers who make their lives predictable, and that record is worth more than a polite request.
Keep in mind that terms affect your own cash flow too. Open account with 30 or 60 days to pay can let you sell part of the stock before the balance falls due, which reduces how much working capital you tie up in each shipment.
Questions to ask before you choose
- How long have we traded, and has this supplier ever shipped late or short?
- What does my bank charge for an LC on this value, and how long will it take?
- Can my cash flow handle a deposit plus waiting for goods to clear?
- Has the supplier's company been checked? Our guide on verifying a company before you pay sets out the habits, and the same thinking applies abroad.
Where Pryme fits
Letters of credit and Form M payments go through your authorised dealer bank, and Pryme does not issue LCs. Pryme helps with the cash side of trading. A Pryme Business Account holds NGN, USD, GBP and EUR, so you can keep dollar receipts in dollars while you plan deposits and balances. The Finance agent can prepare a schedule of supplier payments due, and anything above your set ceiling waits for a person to approve. Through Pryme's partnership with VerifyDoc.ai, you can also generate a verifiable statement or receipt that a supplier can check is genuine and unaltered, which can help when building trust towards better terms.
Questions people ask
Is letter of credit safer than bank transfer for importers in Nigeria?
Generally yes for new suppliers, because the bank pays only when shipping documents match the LC terms. It costs more and takes longer than a transfer.
What is documents against payment?
A bills-for-collection method where your bank releases the shipping documents to you only once you pay. You need those documents to collect the goods.
Can I pay 100% upfront to a Chinese or foreign supplier?
Through the official market, the CBN's 2026 manual caps advance payment for imports at 30% of FOB value. The balance is paid by another method.
When should I move to open account terms?
Usually after several orders where the supplier shipped correctly and you paid on time. It is the supplier's decision, as they carry the risk.
Sources
- Key regulatory update in Nigeria: the CBN Foreign Exchange Manual 2026 (Mondaq) · accessed Oct 2026
- CBN Foreign Exchange Manual, 4th Edition (2026) · accessed Oct 2026
- Nigerian Ports Authority: Import and export guidelines · 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.