Acting President Yemi Osinbajo on Tuesday signed into law two Acts of Parliament that had earlier been passed by the National Assembly.
According to a statement by the Senior Special Assistant to the Acting President on Media and Publicity, Mr. Laolu Akande, the Acts signed into law will ultimately facilitate access to more affordable credit for Nigerians.
The assented Acts are the Secured Transactions in Movable Assets Act, 2017 (otherwise known as the Collateral Registry Act) and the Credit Reporting Act, 2017.
According to the statement, the Collateral Registry Act ensures that the Micro, Small and Medium Enterprises 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 of accessing financing and tackle one of the major obstacles faced by the MSMEs,” Akande said.
The Credit Reporting Act provides for credit information sharing between credit bureaux 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, which need such information to determine an individual’s credit-worthiness and whether or not to grant loan applications to such an individual.
The statement read in part, “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 per cent of private enterprises, typically the 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.”
It added, “Traditionally, banks only give loans to businesses that can provide fixed land and property as collateral. This shuts out the MSMEs, which usually own only movable assets like motor vehicles and equipment.
“The Collateral Registry Act, 2017, will give confidence to lenders to utilise the Registry and thereby make credit available to the 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 21, 2017, the leadership of the National Assembly was reported to have 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.
That promise was kept by the National Assembly last week with the Acts forwarded to the Acting President for assent.