Selling on credit in Nigeria without losing the goods

Selling on credit in Nigeria: why the whole market runs on it, what the receivables figures show, and the rules that let you give terms without losing your capital.

Sooner or later, a customer will ask:

“Can I pay you after I sell?”

That is normal.

Credit is part of how Nigerian wholesale and distribution works.

The mistake is not giving credit.

The mistake is giving:

too much

too early

to:

the wrong customer

without a clear payment date.

For an importer, every unpaid carton is working capital that cannot buy the next shipment.

So the rule is simple:

credit must be earned.

Why importers feel the pressure #

Your cash moves in opposite directions.

Upstream, your Chinese supplier normally wants money before the goods leave China.

Research on Nigerian importers has documented how distance and weak cross-border enforcement make advance payment and repeated relationships important in international sourcing.

Downstream, Nigerian retailers and distributors frequently want terms.

Omni Retail's 2026 Nigeria survey found:

74% of retailers said credit was important

and another:

18% said it was somewhat important.

Only 8% said they did not need it.

That is the squeeze.

China wants cash.

Nigeria wants credit.

You are standing in the middle.

Credit can grow sales and still destroy cash flow #

Suppose you import:

₦30 million worth of stock.

You sell:

₦20 million on 30-day credit.

On paper, you have made sales.

But the money is still sitting with customers.

If your next China order needs ₦15 million today, those unpaid invoices cannot pay the supplier.

This is why you must track:

sales

and:

cash collected

as two separate numbers.

A business can be selling very well and still run out of cash.

Even Nigeria's biggest consumer companies are carrying more debtors #

This problem is not limited to small traders.

BusinessDay reported that trade receivables across ten major Nigerian consumer companies rose to about:

₦515.3 billion in Q1 2026

from:

₦423.4 billion a year earlier.

The article describes companies increasingly extending credit to distributors and retailers as customer purchasing power remains under pressure.

These are businesses with:

• finance teams
• credit departments
• lawyers
• audited distributors
• access to bank funding

You probably do not have those protections.

So copy the commercial reality.

Do not copy the size of the exposure.

Rule 1: no credit on the first order #

This is one of the easiest protections.

A new customer should first show that they can:

order

pay

receive stock

and:

come back.

A sensible starting structure is:

Order 1 — cash

Order 2 — cash

Then discuss limited credit.

Someone asking:

“Give me ₦5 million goods on credit so I can prove I can sell them”

is asking you to finance their experiment.

Let them prove themselves with their own money first.

Rule 2: give a credit limit, not unlimited trust #

Do not tell a customer:

“You have 30 days.”

and leave the amount open.

Set two things:

Credit limit

and:

Payment period.

For example:

Maximum exposure: ₦2 million

Payment term: 14 days

Now the risk has a ceiling.

Even if the customer normally orders ₦10 million, their approved credit may still be only ₦2 million.

The rest is cash.

Rule 3: do not stack unpaid consignments #

This is where relationships become dangerous.

Customer owes:

₦3 million.

Then says:

“Send another ₦4 million. I need fresh stock so I can make the money to pay you.”

Now you are owed:

₦7 million.

One more shipment and the customer is effectively using you as their bank.

A safer rule is:

previous credit must be cleared before another credit consignment leaves.

If you decide to make exceptions, make them deliberately.

Not because:

“He is my person.”

Rule 4: start with short terms #

Do not begin a new customer on:

60 or 90 days.

Start with something you can monitor.

For example:

7 days

or:

14 days.

If they perform properly, you can review it.

Short terms expose problems quickly.

A customer who cannot pay a 14-day invoice on day 14 may not become safer because you wrote 60 days on the paper.

Check the customer before giving credit #

Do not credit-check only banks and big companies.

A trader asking for your goods is asking for your money.

Ask for:

• CAC details
• valid ID
• physical shop address
• warehouse address
• bank details
• two supplier references

Then verify them.

Visit the shop or warehouse #

Do not give ₦10 million in goods to somebody whose warehouse you have never seen.

Check:

Does the business exist?

Do they actually stock the type of goods they claim to sell?

Can trucks reach the location?

Is the stock secure?

Is there obvious fire or flood exposure?

Who else operates there?

Credit risk is not only:

“Will this person run away?”

It is also:

“What can happen to my goods while they are trying to sell them?”

Warehouse risk is credit risk #

The Christmas Eve 2025 fire at the Great Nigeria Insurance building on Lagos Island is a brutal example.

BusinessDay documented a trader who lost nearly ₦25 million worth of imported goods that had been purchased with cooperative financing.

The goods disappeared in the fire.

The debt did not.

BusinessDay also reported that traders collectively lost more than ₦5 billion worth of stock, much of it uninsured.

That matters when you give someone stock on credit.

Your debtor may be honest.

Their warehouse can still burn.

Ask for two supplier references #

This takes twenty minutes.

Ask the customer:

“Who already supplies you on credit?”

Call two of them.

Ask:

Do they pay on time?

How long have you supplied them?

What credit limit do you give them?

Have they ever defaulted?

Would you still supply them on credit today?

That last question is often more useful than:

“Is he a good person?”

Put the deal in writing #

Do not rely on:

“We have known each other for years.”

Write down:

• seller
• buyer
• goods
• quantity
• invoice amount
• payment date
• delivery date
• credit limit
• consequences of late payment
• guarantor/security where applicable

You do not need twenty pages for every carton.

But you need enough paperwork to show:

who owes what and when it became due.

Use the correct legal name #

If you are supplying:

ABC Ventures Ltd

write:

ABC Ventures Ltd

not:

Mr Chinedu

because that is who you speak to on WhatsApp.

Keep:

• CAC records
• invoice
• delivery note
• signed acknowledgement
• payment evidence

together.

If the relationship eventually becomes a legal dispute, those documents matter.

Delivery proof matters #

Do not let:

“We never received the full quantity”

become the argument three weeks later.

Have the customer sign for:

• number of cartons
• quantity
• date
• invoice number

Where appropriate, record the name of the employee who received the goods.

A credit sale should leave a paper trail.

What security should you take? #

The answer depends on the size of the exposure.

Options can include:

personal guarantee

post-dated cheque

bank guarantee

asset/security arrangement

or other professionally documented security.

But do not confuse having a cheque with having cash.

Security only matters if it can actually be enforced.

For significant exposures, have a Nigerian lawyer structure the arrangement properly rather than relying on a template downloaded from the internet.

A personal guarantee can matter #

If you are extending meaningful credit to a small company, you may consider asking the owner/director to personally guarantee the debt.

Why?

Because sometimes the company has:

₦10 million debt

and:

₦200,000 worth of assets.

You want to understand exactly who stands behind the obligation.

For larger transactions, get the guarantee drafted properly.

Decide your stop rule before anyone owes you money #

Do not create the rule while the customer is begging for one more week.

Write your internal policy first.

For example:

1–3 days late: reminder.

7 days late: no new credit supply.

14 days late: formal demand/escalation.

Beyond agreed threshold: recovery process.

Your numbers may differ.

The important thing is consistency.

Stop supplying unpaid customers #

There is an important competition-law distinction here.

Nigeria's FCCPA restricts withholding supply from a dealer merely because that dealer discounted below a resale price.

Sections 65 and 66 deal specifically with that type of resale-price maintenance behaviour.

That is different from refusing additional credit to somebody who has not paid an overdue invoice.

You do not have to continue increasing your exposure to a debtor.

Keep the reasons clear.

Non-payment is a credit issue.

Punishing someone for discounting is a competition-law issue.

Do not mix them.

What should you do when a customer misses payment? #

Do not start with anger.

Start with information.

Ask:

Why has payment not arrived?

Then establish:

How much stock has sold?

How much remains?

When exactly will payment come?

What amount can be paid immediately?

Get the revised commitment in writing.

Then decide whether the situation is:

temporary delay

or:

the beginning of a bad debt.

Stop fresh credit first #

The first response to an unpaid credit account should usually be:

no further credit exposure.

Do not send more goods because:

“They need them to make the money to pay.”

That may be true.

It can also double your loss.

If you still want to supply them:

cash only

until the account is regularised.

Use market reputation carefully #

Traditional Nigerian markets often have strong trader associations and supplier networks.

Where appropriate, a market association can sometimes help resolve a genuine commercial dispute.

The same applies to supplier references.

A trader who depends on credit from five suppliers normally values their reputation.

But keep recovery lawful and professional.

Do not turn debt collection into threats, harassment or public humiliation.

Litigation is not your first credit-control tool #

Court action can make sense when:

• amount is significant
• documents are strong
• debtor has identifiable assets
• debtor is a real registered entity
• commercial recovery has failed

But litigation costs time and money.

The better strategy is to design the credit arrangement so that most bad customers never receive large enough exposure to seriously damage you.

Credit control starts before the sale.

Not after default.

Try a cash discount before offering credit #

This is underused.

Customer asks:

“Give me 30 days.”

You can respond:

“Cash on delivery gets 2% discount.”

Now the customer has a choice.

For example:

30-day price:

₦10,000

Cash price:

₦9,800

A 2% discount may be cheaper than:

• financing 30 days
• chasing payment
• losing FX/replacement value
• absorbing a bad debt

Do the arithmetic.

Cash price and credit price do not have to be identical #

Credit has a cost.

If you give somebody 30 days, you are taking:

• financing risk
• default risk
• collection cost
• replacement-cost risk

So it can be reasonable to have:

cash terms

and:

credit terms

provided your pricing and customer treatment remain lawful and commercially transparent.

Our pricing imported goods guide explains how this fits into your selling price.

Credit should grow with performance #

A sensible progression can look like this:

Stage 1

Cash only.

Stage 2

Small credit limit.

Stage 3

Larger limit after repeated on-time payment.

Stage 4

Longer terms only when the commercial benefit justifies them.

Do not start a stranger at Stage 4.

Review credit limits regularly #

A customer who deserved ₦5 million of credit six months ago may not deserve it today.

Things change.

Ask:

Are they paying later?

Is their order frequency falling?

Are they suddenly requesting much larger quantities?

Have supplier references changed?

Has the market for the product weakened?

Credit limits should move with the business.

Watch for warning signs #

Be careful when a customer:

• asks for much more credit suddenly
• keeps changing promised payment dates
• wants another delivery before paying the first
• avoids giving supplier references
• refuses to sign delivery documents
• says their bank transfer is always “pending”
• begins paying only when threatened with supply suspension
• has stock piling up unsold

One warning sign does not automatically mean fraud.

Several together mean your exposure should not increase.

Track ageing, not just total debt #

Do not keep one figure:

Customers owe us ₦20 million.

Break it down.

For example:

Not yet due: ₦9m

1–7 days overdue: ₦4m

8–30 days overdue: ₦3m

31–60 days overdue: ₦2m

60+ days overdue: ₦2m

That tells you much more about the health of the book.

A ₦20 million receivable book where everything pays next week is different from one where ₦8 million has been overdue for three months.

Your credit book should never consume the next shipment #

This is one useful discipline.

Know how much capital you need to reorder.

Suppose your next China shipment requires:

₦25 million.

If customers currently owe:

₦22 million

and you only have ₦5 million cash,

your distribution network is now controlling whether you can reorder.

That is dangerous.

Set an overall credit ceiling for the entire business, not just per customer.

A simple first-credit policy #

For a new importer, something like this is easier to control:

First two orders: cash.

Initial credit term: 7–14 days.

Initial limit: only a small part of the customer's normal order.

New credit: only after previous credit is settled.

References: two checked suppliers.

Documentation: invoice + delivery acknowledgement + written terms.

Late payment: credit suspended.

Then improve terms for customers who prove themselves.

The customer credit checklist #

Before goods leave your warehouse on credit:

CUSTOMER

✓ CAC/business identity checked?

✓ Shop or warehouse visited?

✓ Decision-maker identified?

REFERENCES

✓ Two suppliers called?

✓ Payment history checked?

LIMIT

✓ Maximum naira exposure set?

TERM

✓ Exact due date written?

DOCUMENTS

✓ Invoice?

✓ Delivery note?

✓ Signed acknowledgement?

SECURITY

✓ Guarantee or other security where appropriate?

EXPOSURE

✓ No old unpaid consignment being ignored?

CASH FLOW

✓ Can your business still fund the next shipment if this customer pays late?

If the last answer is no, the credit is too large.

The short answer #

Selling on credit can help an importer grow in Nigeria.

But it should work like this:

cash first → small credit → proven repayment → larger terms.

Not:

friendship → ₦10 million stock → prayer.

Know the customer's business.

Visit the warehouse.

Check supplier references.

Put the due date in writing.

Set a credit limit.

Do not stack unpaid consignments.

Stop fresh credit when payment is overdue.

And remember that a sale is not complete just because the goods have left your warehouse.

For an importer, the sale is complete when:

the money is back in your account and ready for the next order.

Next, read how to find distributors in Nigeria.

Then use pricing imported goods in Nigeria to separate your cash and credit pricing.

And for the wider sales strategy, see how to sell imported goods in Nigeria.

First published 23 Sep 2026. Last checked 23 Sep 2026 by The ChinaBridge desk. Something here out of date? Tell us in the comments and we will fix it.