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Letters of Credit
A Letter of Credit (LC) is a mode of payment used for the importation of visible goods.A Letter of Credit (LC) is a mode of payment used for the importation of visible goods.
Product Information
Description
Value Proposition/Gain
Key/ Important Features
Description
A Letter of Credit (LC) is an acceptable mode of payment used for the importation of visible goods.
It is a written undertaking given by a Bank (issuing Bank) at the request of its customer (applicant), in which the Bank obligates itself to pay the exporter (seller/beneficiary) up to a stated amount within a prescribed time frame upon presentation of stipulated documents that conform to the terms and conditions of the documentary credit.
Parties to LC transaction are:
- Buyer/Importer/Applicant i.e the customer requesting LC to be issued.
- Seller/Exporter/Beneficiary i.e the Recipient of the LC.
- The Issuing Bank – which gives the written undertaking.
- Advising Bank/Seller’s Bank i.e the bank that advises the LC to the beneficiary.
Value Proposition/Gain
- it minimizes risk for both the buyer and the seller.
- L/C protects the buyer since payment is only required after the goods have been shipped or delivered to the buyer.
- Also protects the seller since the bank is guaranteeing the payment as well as conducting a verification process to ensure the legitimacy of the buyer.
- Suppliers Credit can be enjoyed through unconfirmed deferred LC.
Key/ Important Features
Letters of credit can be confirmed or unconfirmed and are irrevocable upon Issuance. Payment can be made at Sight, Deferred Payment, and Mixed payment or by Acceptance.
Documents required for LC issuance
- An approved Form M by the Nigeria Customs.
- Application Form for Letter of Credit
- Customer’s Instruction Letter
- Funding (Naira or Foreign currency as desired by client.
Trade facility is also available for eligible customers.
