How Letters of Credit Are Confirmed in Nigerian Trade Explained

A letter of credit (LC) is a bank’s promise to pay a seller when shipping terms are met — but a seller may still worry about the buyer’s bank or country. A confirmed LC adds a second bank’s guarantee, giving the exporter extra security. It builds on the basics in our letter of credit guide.

How confirmation works

• The issuing bank — the importer’s bank, which opens the LC.
• The confirming bank — often in the exporter’s country, adds its guarantee.
• The exporter — is now paid by a bank it trusts, on compliant documents.

Cost and the FX angle

Confirmation adds a fee, reflecting the extra risk the confirming bank takes — worthwhile when country or bank risk is a concern. For the Nigerian importer, the payment is still in foreign currency, so the exchange rate and the Form M process matter, and a forward contract can smooth the naira cost.