A manufacturer in Spain or Asia lands a first order from a buyer in Lagos, Abidjan or Dakar, and the payment question comes down to one decision: how much risk do you carry between the moment the container leaves and the moment you actually see the money. Get it wrong and you either lose the deal to a competitor offering easier terms, or you release a bill of lading to a buyer who never pays. There is no single correct instrument for every shipment, but there is a way to reason through the choice that most exporters skip because their forwarder or bank never lays it out for them.
What the risk looks like once the goods are at sea
Once a container is loaded, the exporter has already spent the money on production, freight and insurance. From that point the buyer holds the stronger position: a change of mind, a cash-flow problem, or a better offer from another supplier can turn into a renegotiation attempt on arrival. Demurrage and storage charges accrue whether or not the buyer pays, and abandoned containers at West African ports are common enough that port authorities have standing procedures for them. The payment method chosen decides who absorbs that exposure, and at what cost.
Irrevocable letter of credit: how it works, and where it breaks
An irrevocable letter of credit (L/C) is issued by the buyer’s bank, transmitted by SWIFT, and advised to the exporter through a bank in the exporter’s own country. The issuing bank commits to pay once the exporter presents documents that match the L/C exactly: commercial invoice, packing list, bill of lading, certificate of origin, and an insurance certificate where the exporter carries cover under the agreed Incoterm. Payment is against documents, not the physical condition of the goods, which is why the wording has to be checked clause by clause before the container is booked.
The most common cause of delay is discrepancies: a date that doesn’t match between invoice and bill of lading, a missing stamp, a goods description worded differently from the L/C text. A discrepant presentation doesn’t cancel the L/C, but it lets the issuing bank withhold payment until the buyer waives the discrepancy, handing negotiating leverage back to the buyer at the worst possible moment. Agree the wording with the buyer before shipment, and have someone other than the salesperson check the documents against it before they reach the bank. Where the issuing bank has limited standing outside its home market, the exporter’s own bank can add its confirmation, meaning it pays even if the issuing bank fails to — at a cost that, where correspondent relationships are thin, needs building into the sale price from the outset.
Documentary collection: cheaper, with no bank guarantee
Under documentary collection, the exporter’s bank forwards the shipping documents to the buyer’s bank with instructions, but neither bank guarantees payment. Under Documents against Payment, the buyer’s bank releases the documents, and with them the ability to clear customs, only once the buyer pays. Under Documents against Acceptance, documents are released against the buyer’s signature on a bill of exchange promising to pay later, so the goods can be collected before the exporter is actually paid.
The appeal is cost: no issuance or confirmation fees, just standard collection charges. The limit is that if the buyer refuses to pay or accept the draft, the exporter is left with a container at a foreign port and a choice between paying for its return, selling it locally at a discount, or abandoning it. It fits a buyer with an established track record, lower-value shipments where an L/C isn’t worth the cost, or a step down from L/C terms once a relationship has proven reliable.
What tends to go wrong specifically in West Africa
Two issues come up repeatedly. Not every bank in every West African country has a direct correspondent relationship with European or Asian banks, so payments and documents route through intermediaries, adding time and sometimes fees nobody quoted upfront. And in some markets the buyer’s bank needs central bank clearance or hard-currency allocation before it can remit payment abroad, stretching the timeline well beyond what the terms specify, through no fault of the buyer. Neither problem is solved by the payment instrument itself, but both are worth checking before shipment.
A working checklist before agreeing terms
- Get the buyer’s bank name and SWIFT code early, and check whether a correspondent relationship exists.
- Decide whether the L/C needs confirmation before quoting a price, since that cost has to sit in the margin somewhere.
- Get the draft L/C wording before booking freight, and compare it line by line against your invoice, packing list and certificate of origin.
- Never ship against an L/C you have not seen issued and reviewed.
- For documentary collection, agree in writing who covers demurrage if the buyer delays payment or acceptance.
Neither instrument removes the risk; it only decides who carries it, and at what price. A confirmed irrevocable L/C is the closest thing to safe for a first shipment or a high-value order, but it costs money and demands paperwork discipline built in before the goods are booked. Documentary collection is cheaper and quicker, and it’s the right tool once trust with a buyer has been established through completed orders. The choice belongs in the commercial negotiation, not left to whichever term the buyer proposes first.
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