The phrase "import finance" gets used loosely in Lagos trade circles to mean anything from a bank letter of credit to a friend advancing cash for a Tokunbo shipment. If you are a Nigerian SME importer trying to make an informed decision about how to fund your next shipment, that loose usage is a problem. Each financing structure has a different cost, a different timeline, different eligibility requirements, and a different risk profile. Choosing the wrong instrument costs you money or time — sometimes both.
This guide covers the main options available to Lagos traders in 2025: the conventional bank LC, invoice financing and trade credit lines, working capital advances, and the informal credit market. For each, we describe what it costs, how long it takes, when it makes sense, and what its genuine limitations are. We will tell you where Trade Lenda fits and, equally important, where it does not.
Option 1: The Commercial Bank Letter of Credit
A letter of credit (LC) is a payment commitment issued by a Nigerian commercial bank on behalf of the importer, guaranteeing the overseas supplier payment upon presentation of specified documents (usually the bill of lading, commercial invoice, and packing list). It is the globally recognized standard for import finance and is required by many overseas suppliers — particularly in China, India, and Turkey — who will not ship on open account terms to new Nigerian customers.
What it costs
LC fees at Nigerian commercial banks typically include an issuance commission (0.5–1.5% of LC value), a correspondence fee (₦15,000–₦50,000 fixed), CBN Form M processing, and FOREX charges based on the prevailing I&E window rate at allocation time. For a ₦50M import LC, total bank costs including FX spread are typically in the range of ₦750,000–₦1,500,000, depending on the bank and the importer's relationship tier.
How long it takes
22–35 days from application to fund disbursement is the realistic range. The process involves internal bank credit review (5–8 days), correspondent bank confirmation (4–7 days), CBN FX allocation (5–12 days), and compliance sign-off plus disbursement (2–5 days). First-time applicants or importers with thin banking relationships typically experience the longer end of this range.
When it makes sense
Bank LCs are the right choice when: the overseas supplier specifically requires an LC as a payment condition; the transaction value is above ₦500M where bank involvement provides added counterparty protection; the importer has an established bank relationship with favorable terms; or the importer is building a credit history with a bank for future larger transactions. If you are regularly importing from a single supplier and building toward a long-term credit facility with a Nigerian bank, the LC process is worth managing even when it is slow.
Limitations
Bank LCs require collateral or a credit limit with the bank. First-time importers or businesses without a current account history at the bank will struggle. Commodity categories under CBN restrictions may face FX allocation problems regardless of creditworthiness. And the timeline means goods often incur demurrage or storage costs while the LC is being processed.
Option 2: Invoice Financing and Trade Credit Lines
Invoice financing — also called invoice discounting or receivables financing — involves using an outstanding invoice as collateral to access working capital. For importers, this typically means an already-received purchase order or confirmed sales invoice from a domestic buyer serves as the basis for a capital advance. The lender advances a percentage of the invoice face value (commonly 70–85%), and the importer repays when the buyer pays.
Trade credit lines are revolving facilities extended by a lender against the importer's overall trade history, allowing multiple drawdowns up to a credit limit without re-applying for each transaction.
What it costs
Invoice financing rates in Lagos vary significantly by provider. Non-bank alternative lenders operate at 2–5% per 30-day period on the advance amount. Some banks offer trade credit lines at rates closer to their commercial lending base, but these are typically only available to established corporate clients with 2+ years of banking history. The effective annual cost of invoice finance at 3% per 30-day period is around 36% annualized — which sounds high but must be compared against the cost of not having the capital (demurrage, lost sales, supplier relationship erosion).
How long it takes
Alternative lenders typically process invoice financing applications in 2–5 business days. Once a credit line is established, individual drawdowns can settle in 24–48 hours. This is the speed advantage of non-bank trade finance over the bank LC.
When it makes sense
Invoice financing works best when: you have a confirmed domestic buyer (the invoice is the collateral); you need working capital quickly to clear goods or fund a production run; and the cost of the finance is clearly less than the cost of the delay. For an importer who can clear ₦80M of goods and sell within 30 days at a margin that covers the 2.5–4% advance cost, invoice financing is commercially rational even if it looks expensive by annualized rate comparisons.
Limitations
Not all import transactions have a clean domestic buyer invoice at the point of finance. If you are importing for stock rather than against a confirmed order, invoice financing requires a different structure. And if the domestic buyer is slow to pay, the importer bears the gap-period cost. Invoice financing is not suitable as a permanent replacement for working capital — it is a bridge instrument.
Option 3: Working Capital Advances Against Import Invoices
This is the core of what Trade Lenda provides. A working capital advance against an import invoice means the lender advances capital against the importer's inbound invoice — the commercial invoice from the overseas supplier — rather than waiting for a domestic sale to create a receivable. The advance allows the importer to pay the supplier, clear customs, and receive goods, with repayment aligned to the trade cycle (typically 30–90 days from advance).
What it costs
At Trade Lenda, import invoice finance carries a facility fee of 2.5–4.5% per tenor, plus a flat processing fee of ₦25,000 per application. For a ₦30M import invoice on a 60-day tenor at 3.5%, the total cost is ₦1,075,000 (₦1,050,000 facility fee + ₦25,000 processing). That is the all-in cost — no correspondent bank charges, no hidden FOREX spread on the advance itself.
How long it takes
48 hours from application submission to capital decision is our target for qualifying trades. The AI scoring step runs in roughly 15–30 minutes. The human underwriter reviews and makes a decision same business day. Disbursement follows within the same business day for approved applications received before 2pm WAT.
When it makes sense
Working capital advances are well-suited for: importers with established NCS customs history who need capital faster than a bank can provide; transactions in the ₦5M–₦500M range where a full bank LC relationship is not yet established; and situations where goods are already at port and demurrage risk is immediate. It is also the right structure when the overseas supplier does not require a bank-issued LC and is comfortable with advance payment or open account terms to a new Nigerian importer backed by a financing facility.
Limitations
We are clear about where this structure has limits. Importers with less than 12 months of NCS clearance history will not have enough data for our scoring model to work confidently — we need a behavioral track record. Transactions above ₦500M may exceed our current advance limits and belong with the commercial banking system. And importers whose overseas suppliers specifically require a bank-issued LC instrument (not just payment, but the LC document itself) need a bank, not an alternative lender.
Option 4: Supplier Credit and Open Account Terms
Some importers, particularly those with established long-term relationships with overseas suppliers, negotiate supplier credit — payment terms of net-30, net-45, or net-60 from shipment date. Under open account terms, the supplier ships on trust and the importer pays later, which effectively means the supplier is financing the trade.
What it costs
Supplier credit has no explicit interest rate, but it typically comes at a price in terms of FOB pricing. Suppliers offering open account terms price in the financing risk — meaning the per-unit price on net-30 terms is usually 3–8% higher than cash-in-advance pricing. This cost is invisible in the financing terms but real in the P&L.
When it makes sense
Open account supplier credit works when the relationship is established, the supplier is large enough to absorb the receivable risk, and the importer's volumes justify the special terms. Chinese manufacturers often offer open account only to importers with 18+ months of transaction history and minimum order volumes. For SME importers in Lagos, getting to open account terms is a medium-term goal, not a starting point.
Option 5: Informal Finance
The informal credit market for Nigerian trade — cooperative society loans, personal network advances, "esusu" trade credit groups, and high-yield short-term lending from trading company investors — is large and genuinely fills gaps that formal finance does not. We are not dismissing it.
But informal trade finance in Lagos typically prices at 5–15% per month, carries no documentation protection if there is a dispute, and creates personal liability rather than business liability. For importers with no other options and a time-sensitive shipment, informal finance is sometimes the only rational choice. For importers who have viable alternatives, the cost differential is significant. A ₦20M advance at 8% per month informal rate versus 3.5% per 60-day tenor through Trade Lenda is the difference between ₦1.6M and ₦700,000 in financing cost on the same transaction.
Choosing the Right Structure for Your Next Shipment
The choice is not always one structure exclusively. Many experienced Lagos importers use a combination: a bank trade credit line for their largest recurring transactions where the bank relationship adds supplier credibility, and an alternative lender for speed-sensitive or opportunistic transactions where they cannot wait 3–4 weeks. Building both relationships in parallel makes sense as your import volumes grow.
The framework we recommend for SME importers evaluating options:
- Does your supplier require a bank-issued LC? If yes, you need a bank relationship. Build one.
- Is the transaction time-sensitive (demurrage accumulating, goods at port)? Alternative lenders and working capital advances are the right tool.
- Do you have 12+ months of NCS clearance history? If yes, AI-scored alternative finance becomes accessible. If no, focus on building that track record.
- Is the invoice value above ₦500M? Commercial banking system is more appropriate at that scale.
- Are you importing for confirmed orders or for stock? Confirmed orders support invoice finance structures more cleanly.
Nigerian import finance in 2025 has more structured options than it did five years ago. The informal-vs-bank binary is no longer the only choice. If you are an active importer and want to understand which structure fits your specific transaction, our trade finance team is available to discuss your situation.