In the volatile 2026 trade climate, the Letter of Credit (LC) remains the ultimate safety net for Nigerian importers. While other methods like ‘Open Account’ are faster, an LC ensures that your money only leaves your bank when the supplier proves the goods are on the ship.
1. How an LC Works in 2026
An LC is a bank’s guarantee to pay your supplier. In 2026, these are processed through the National Single Window. Once your Form M is approved, your bank issues the LC. If your supplier presents documents that match the LC exactly (down to the last comma), the bank must pay.
2. Sight vs. Usance LCs
- Sight LC: Payment is made as soon as the bank verifies the documents. Best for new supplier relationships.
- Usance (Deferred) LC: Payment is made at a later date (e.g., 90 or 180 days after shipment). In 2026, this is a popular Trade Finance tool for managing Naira liquidity.
3. The Cost of Confirmation
In 2026, many foreign suppliers require a ‘Confirmed LC.’ This means a top-tier global bank (like Citibank or HSBC) adds its guarantee to your Nigerian bank’s promise. This adds a 1.5% to 3% fee but is often the only way to get high-value machinery shipped to Lagos.
Conclusion
An LC protects you from ‘non-performance’ by the exporter. To start the process, you’ll first need an approved Form M. For a full list of required paperwork, see our 2026 Documentation Checklist.