Senate wants Nigeria to reap from €2.6 trillion global Market …As Bill scales 2nd reading

The factoring, assignments and receivables financing bill scaled second reading in the second reading in the Senate on Thursday.

The Bill is to enable Nigeria tap into €2.6 trillion global factoring market.

The Chairman Senate committee on Banking, Insurance and other financial institutions, Senator Mukhail Adetokunbo Abiru who sponsored the bill said it presents one of the best opportunities to introduce something new and impactful into the regulatory environment for MSMEs in Nigeria.

According to him, the passage of the Bill will not only promote a suitable regulatory and legal environment to support the rapid development of factoring services, but would also contribute towards integrating Nigeria into the global factoring market and enable it tap into €2.6 trillion global factoring market.

“Despite the increasing prominence of factoring globally and in Africa, Nigeria is yet to tap into this financing mechanism. According to the Afreximbank, which is the major promoter of factoring in Africa, the continent accounted for less than 1 per cent of global factoring volumes in 2017. The Bank also noted that factoring volumes in Africa grew from Euro 14.9 billion in 2009 to approximately Euro 22.3 billion in 2017, with most of those volumes concentrated in South Africa, Tunisia, Morocco, Egypt, Mauritius, and Kenya. Enacting this Bill into law is a critical step in positioning Nigeria to take advantage of the African factoring market which is above €41.8 billion now and is expected to reach €50 billion by 2025. This would go a long way in closing the trade/MSMEs finance gap in the country,” he said.

Abiru added that debt factoring has gained global recognition as a financing mechanism because it helps with improving a company’s cash flows and enhanced credit management.

“It also enables a company to have increased competitiveness in the global marketplace, especially in structured trade finance.  In Nigeria, for instance, the Central Bank of Nigeria (“CBN”) recognises debt factoring as one of the permissible activities of finance companies and the Nigerian Export Promotion Council (“NEPC”) has also introduced factoring and forfeiting as instruments for the financing of export and trade to boost the volumes of export from the country. It is for that reason that this bill is being sponsored to create a regulatory framework that would facilitate the development of debt factoring as an alternative means of financing for domestic and international trades in Nigeria and to provide an enabling environment for it to thrive,” he said.

He said the Bill has no financial implication and no compendium is attached as required by Order 76 (3) of the Senate Standing Orders, 2023 as amended and  urged the senators to support the Bill to be read a second time.

The Bill was subsequently read for the second time and referred to the committee for public hearing.