Acting President Yemi Osinbajo, SAN, has signed into law two bills from the
National Assembly that will ultimately facilitate access to more affordable
credit for Nigerians.
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.
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Business