by

Sadiq S. Ahmed
OUTLINE FOR DISCUSSION
International trade is the exchange of goods and
services across international borders or territories
 IMPORT

Imports are classified into two;

 VISIBLE IMPORT

• Any person intending to import physical

goods into Nigeria shall in the first
instance process Form ‘M’ through any
Authorized dealer bank irrespective of
the value and whether or not payment is
involved

– All Imports to Nigeria are effected on a CFR.

 IMPORT TRADE PROCESS

Establish Form M Bank review and

Secure an Import
and submit to Validate form M and
Contract
Bank online Transmit to Customs

Supplier ship goods Importer advise Customs review

& forward shipping Supplier to arrange and approve/reject
Documents to shipment Form M
Importers Bank

Bank forward final Customs review final Importer pays

Shipping documents Documents and against shipping
to Customs Generate PAAR documents received

Clear goods Pays Custom duty Importer Lodge SGD

 INVISBLE IMPORT

• Imports of services consist of all services

rendered by non-residents to residents of
a country or purchases by residents
outside the economic territory of a country,
eg Consultancy by non-resident,
expenditure by resident in another country
on tourism, education, medical etc.
INVISBLE IMPORT
IMPORTS
 EXPORT

 All Export out of Nigeria are effected on a CFR or FOB basis.

 EXPORT TRADE

Processing of NXP
Secure an Export Warehousing and
form and Ness
Contract Inspection
Payment

Arranging Customs Inspection

Delivery of goods to Pre-Export at port
the shipping line Documentation

Submission Forwarding
Arranging Post-Export of Post-export Post-export
Documentations documentations to documentations to
Exporter’s bank Importer’s bank

Certification of Export Receipt of Export Importer pays

proceeds to CBN proceeds by the against shipping
by Exporter's bank Exporter’s Bank documents received
EXPORTS
EXPORT TRADE
TRADE DOCUMENTS
FORMS OF INTERNATIONAL TRADE
PAYMENTS

Advance Payment

Open Account

Documentary Collections

Letters of Credit
 Description
• Buyer pays for goods before the Seller ships
• Applicable when there is no trust in a market controlled by
Sellers

Risks
• Performance risk of Seller
Advance • Capital tied down by buyer
• Lack of control of goods
Payment • Possible transit risk implications
• Goods may arrive with poor quality

Other Features
• Goods shipped at seller’s convenience
• Buyer finance i.e seller enjoys float
 Description
• Seller ships first and buyer pays later
• Applicable when there is no trust in a market controlled by
buyers or where trade is between related companies-
usually parent and sister companies

Risks
Open • Payment risk of buyer
• Capital tied down by seller
Account • Lack of constructive control on goods by seller

Other Features
• Buyer enjoys seller’s credit
• Seller may need to borrow until payment is received from
counter party (If there is)

NB: This payment mode is not allowed in Nigeria

 Description
• Seller is able to collect payment from an overseas buyer
through an intermediary bank an against delivery of
certain documents
• Banks are only liable for the correct execution of the
collection instructions and do not make any commitment
to pay
Bills for • Governed by the provisions of Uniform Rules for
Collection Collections (URC)

Risks
• Buyer can refuse or delay payment
• Can refuse to accept a tenor or usance draft/bill of
exchange

Other Features
 It is a compromise between open account and advance
payment
 When is it advisable to secure payment by means of Bills for Collection?

 Seller and buyers know each other to be reliable

 Credit standing & trustworthiness of buyer
 No doubt about the buyer’s willingness to pay

Bills for  Excellent long term relationship

Collection  Seller and buyers are related parties i.e. parent

company/subsidiaries e.g. PZ Cussons UK and PZ
Cussons Nig Plc
 Seller feels strong competitive pressure especially
from importing country
 Previous business experience with the importing
country
PARTIES IN BILLS FOR COLLECTION
PAYMENT
2
Documents
Seller/
Remitting
Drawer
Bank
1

Documents
3

Documents

4
Importer/ Collecting/
Drawee Presenting Bank
PARTIES IN BILLS FOR COLLECTION
 Description
• ‘Any arrangement, however named, or described, that is
irrevocable and thereby constitutes a definite
undertaking of the issuing bank to honor a complying
presentation’ –UCP600
• A bank undertakes to pay for a shipment, provided the
exporter submits the required documents in conformity
Letters of with the terms and conditions stated on the LC
• Governed mainly by UCP 600
Credit
Risks
• Credit risk-issuing bank's bankruptcy

Other Features
 letters of credit are a balanced payment method in terms
of risk issues for both exporters and importers
 LETTERS OF CREDIT PROCESS
(1) Sales Agreement
Applicant Beneficiary
(5) Shipment
(Importer) (Seller)

(2) LC
Application (10) Release (6) Presentation (9) Payment
Of Document

(4) Advising LC

(7) Send documents

(3) Opening of LC
Issuing Bank Advising Bank
(8) Payment
PARTIES IN LETTERS OF CREDIT PAYMENT
TYPES OF LETTERS OF CREDIT
Wishing you the best of
luck

Thank You