Why Payment from Nigeria to India Is Complicated
Paying an Indian exporter from Nigeria involves three layers of complexity: Nigeria's foreign exchange controls, the CBN's Form M requirement, and the trust question — how does an Indian supplier ship goods to someone they have never met, and how does a Nigerian buyer pay for goods they have not yet received?
The CBN requires all import payments above USD 10,000 to be processed through a licensed authorised dealer bank and backed by a valid Form M. Informal transfers (hawala, crypto, unofficial forex bureaux) are outside this framework and expose both parties to legal risk. The practical payment methods for legitimate commercial imports are: Letter of Credit (LC), Telegraphic Transfer / Wire Transfer (TT), and Documents Against Payment (DP).
Telegraphic Transfer (TT / Wire Transfer)
How it works: You instruct your Nigerian bank to wire a USD payment directly to your Indian supplier's bank account, referencing your Form M number. The supplier ships after receiving payment (advance TT) or you pay after receiving documents (TT on documents).
Advance TT (most common for spare parts): You pay 100% — or a deposit of 30–50% — before the supplier ships. The supplier then ships and sends you the documents. This is the standard arrangement for established supplier relationships.
Risks for the buyer: You are relying entirely on the supplier's integrity. If they ship substandard goods or fail to ship at all, your recourse is limited to commercial and legal channels in India — slow and expensive. This is why vetting your supplier before the first TT payment is critical. See our guide on how to vet an Indian spare parts exporter.
Risks for the seller: If the buyer receives goods and refuses to pay the balance (where partial advance was agreed), the seller has limited recourse. Suppliers typically protect themselves by releasing documents (B/L, CCVO, invoice) only after full payment for first-time buyers.
CBN process: Your bank will require: the commercial invoice, the Form M number, and sometimes a Board Resolution. The bank deducts from your USD account (or buys forex at the prevailing rate). Processing typically takes 1–3 working days. Banks charge a transaction fee — confirm with your bank before quoting payment to your supplier.
Best for: Established relationships where both parties trust each other, or first-time orders with a partial advance deposit.
Letter of Credit (LC)
How it works: Your Nigerian bank (issuing bank) opens a Letter of Credit — a formal bank guarantee to pay the supplier's Indian bank (advising/confirming bank) a specified amount, provided the supplier presents compliant documents within a set timeframe.
The supplier ships, presents the required documents (invoice, B/L, packing list, CCVO, SONCAP if applicable) to their bank, and the Indian bank releases payment once documents are verified. The Nigerian bank then debits your account.
Why it protects both parties: The buyer knows the supplier only gets paid if they present the exact documents specified in the LC — the goods must have shipped, the documents must match, and the shipment must comply with all LC terms. The seller knows that as long as they comply with the LC terms, payment is guaranteed by a bank — not just the buyer's word.
The catch: LCs are expensive and operationally heavy. Your Nigerian bank charges an opening fee (typically 1–2% of the LC value), and the Indian bank charges an advising/confirmation fee. There is significant paperwork on both sides, and any discrepancy in the documents — a wrong date on the invoice, a missing clause on the B/L — can cause the bank to reject the documents and delay payment.
Best for: Large first-time orders (USD 50,000+) with a new supplier, or where the buyer needs documentary protection against substandard shipment.
Documents Against Payment (DP / Cash Against Documents)
How it works: The supplier ships the goods and sends the shipping documents (B/L, invoice, packing list, CCVO) to their bank, which forwards them to your Nigerian bank. You pay your bank, and your bank releases the documents to you. You can then use the B/L to collect the container.
The key difference from TT: You pay only when the documents arrive at your Nigerian bank — you have proof the goods have shipped before you release payment. You cannot receive the B/L without paying.
Risks: You are paying before you have inspected the goods. The container could arrive with quality issues, short quantities, or wrong parts — and your money is already gone. The B/L is the document of title, not a quality certificate.
Best for: Repeat orders from suppliers you have worked with before, where the relationship is established but you want the security of bank-controlled document release rather than a direct supplier TT.
Which Method to Use — A Practical Guide
| Situation | Recommended Method |
|---|---|
| First order, new supplier, small value (under USD 10,000) | Advance TT with 30–50% deposit, balance on document presentation |
| First order, new supplier, large value (USD 30,000+) | LC — the documentary protection justifies the bank fees |
| Repeat order, trusted supplier | Advance TT or DP — simpler and cheaper than LC |
| Supplier you have done 5+ orders with | Advance TT — relationship established, LC overhead not needed |
One practical note on the Naira/USD rate: All these methods require you to have or acquire USD. The official CBN rate and the parallel market rate differ. Your bank will process the international payment at the official window rate — confirm the applicable rate with your bank before committing to a USD price with your supplier, as the Naira cost of your order depends on which rate applies at the moment the bank processes the transfer.