Incoterms Explained for Nigerian Exporters

What Are Incoterms?

Incoterms (International Commercial Terms) are a set of standardised trade terms published by the International Chamber of Commerce (ICC). They define the responsibilities of buyers and sellers in international transactions — specifically, who is responsible for freight costs, insurance, customs clearance, and the risk of loss or damage at each stage of the journey.

Using the correct Incoterm in your sales contract protects you from unexpected costs and disputes. The current version is Incoterms 2020.

The Most Common Incoterms for Nigerian Exporters

There are 11 Incoterms in total, but Nigerian agricultural exporters will most commonly encounter the following:

EXW — Ex Works

The seller makes the goods available at their premises (warehouse or farm gate). The buyer is responsible for everything from that point — loading, inland transport, export customs clearance, freight, and import clearance.

EXW places maximum responsibility on the buyer and minimum on the seller. It is rarely used for agricultural exports because it requires the buyer to manage Nigerian export procedures, which most international buyers are not equipped to do.

FOB — Free On Board

The seller is responsible for delivering the goods to the named port of shipment (e.g. Lagos or Apapa) and completing export customs clearance. Risk transfers to the buyer once the goods are loaded on board the vessel.

FOB is the most commonly used Incoterm for Nigerian agricultural exports. It is straightforward, well understood by both parties, and places the freight and insurance costs on the buyer — which is typically what international buyers prefer.

CIF — Cost, Insurance and Freight

The seller pays for freight and insurance to the named port of destination. Risk, however, transfers to the buyer once the goods are loaded on board the vessel at the port of origin — the same point as FOB.

CIF is often preferred by buyers who want a single landed cost. For sellers, it means arranging and paying for freight and insurance, which adds complexity. Ensure your freight and insurance costs are accurately factored into your CIF price.

CFR — Cost and Freight

Similar to CIF, but the seller does not arrange insurance. The seller pays freight to the destination port, and risk transfers at the port of origin. The buyer is responsible for insuring the goods during transit.

DDP — Delivered Duty Paid

The seller is responsible for delivering the goods to the buyer's named destination, including all freight, insurance, and import duties. This places maximum responsibility on the seller.

DDP is rarely used by Nigerian exporters because it requires the seller to manage import customs clearance in the buyer's country — a complex and costly undertaking. Avoid DDP unless you have a well-established logistics partner in the destination country.

Which Incoterm Should You Use?

For most Nigerian agricultural exporters, FOB is the recommended starting point. It is widely understood, clearly defines your responsibilities, and is the standard term used in commodity trading.

As your export business grows and you develop relationships with freight forwarders and insurers, you may consider offering CIF pricing to buyers who prefer it — as it can command a slightly higher price.

Always state the Incoterm clearly in your Proforma Invoice and Sales Contract, along with the named port or place. For example: "FOB Lagos, Incoterms 2020".