As part of efforts to ease doing business in
Nigeria, Acting President Yemi Osinbajo has
signed two bills passed by the National
Assembly into law that will facilitate access
to more affordable credit for Nigerians.
This is contained in a statement issued by
Mr Laolu Akande, Senior Special Assistant to
the Vice President on Media & Publicity.
The bills which have now become ‘Acts’ are
the Secured Transactions in Movable Assets
Act, 2017 (otherwise known as Collateral
Registry Act) and the Credit Reporting Act,
2017.
‘The Collateral Registry Act’ ensures that
Micro, Small and Medium Enterprises
(MSMEs) in Nigeria can register their
movable assets such as motor vehicles,
equipment and accounts receivable in the
National Collateral Registry, and use same as
collateral for accessing loans. This in turn
will increase their chances at accessing
financing and tackle one of the major
obstacles faced by MSMEs.
On the other hand, ‘The Credit Reporting
Act’ provides for credit information sharing
between Credit Bureaus and lenders (such
as banks), as well as other institutions that
provide services on credit such as
telecommunication companies and retailers.
(A Credit Bureau is defined as a company
that collects information relating to the
credit ratings of individuals and makes it
available to financial institutions, who need
such information to determine an
individual’s credit-worthiness and whether
or not to grant loan applications to such
individuals.)
Access to credit is critical to economic
growth and is considered to be the motor
for driving private sector development.
However, in Nigeria more than 70% of
private enterprises, typically MSMEs, have
limited or no access to credit. Credit
applications get rejected due to insufficient
credit history and information for the lender
to use to make a reasonable judgement, as
well as unacceptable collateral. The two new
Acts remove those obstacles for MSMEs.
Traditionally, banks only give loans to
businesses that can provide fixed land and
property as collateral. This shuts out MSMEs
which usually own only movable assets like
motor vehicles and equipment. The
Collateral Registry Bill, 2017, will give
confidence to lenders to utilise the Registry
and thereby make credit available to MSMEs
and individuals through the use of their
movable assets as collateral.
The Credit Reporting Act now enables
lenders to make reasonable judgement on
whether or not to extend credit to an
individual, and reduces the cases of bad
loans.
On February 21st, 2017, the leadership of
the National Assembly publicly committed to
passing the two bills as part of the 60-Day
National Action Plan for Ease of Doing
Business initiated by the Presidential
Enabling Business Environment Council
(PEBEC). That promise was kept by the
National Assembly last week with the Bills
forwarded to the Acting President for
assent.
With the passage of these Acts, the existing
Central Bank of Nigeria (CBN) Guidelines
regulating the operations of the National
Collateral Registry and Credit Bureaux have
now been replaced by formal legal
frameworks.
The passage of these Acts would facilitate
the achievement of the goals of the
Presidential Enabling Business Environment
Council (PEBEC) set up by President
Muhammadu Buhari in July 2016 and
chaired by the Vice-President to
progressively make Nigeria an easier place
for businesses to start and thrive.
