***Passes Factoring Regulation Bill for Second Reading
The Senate on Wednesday advanced deliberations on the Factoring Regulation Bill, 2024 (SB.474), approving it for second reading — a major step toward easing cash-flow bottlenecks for small businesses and unlocking over $1 billion in annual financing for Nigeria’s micro, small, and medium enterprises (MSMEs).
Sponsor of the Bill, Senator Asuquo Ekpenyong (Cross River South), said the legislation seeks to tackle one of the most stubborn challenges facing MSMEs — delayed payments that leave many small firms cash-strapped, stifling growth and job creation.
Ekpenyong noted that Nigeria’s over 40 million MSMEs — the backbone of the economy — often endure payment delays of 30 to 90 days after delivering goods or services, a situation that cripples their ability to meet payroll, restock, or expand.
“This cycle of delayed payment weakens small businesses, limits their survival, and slows down economic growth,” Ekpenyong told colleagues during plenary.
The Bill seeks to institutionalize and regulate factoring — a financing model that allows businesses to sell verified invoices to licensed financial institutions or “factors” at a small discount, gaining near-instant access to working capital.
Under the arrangement, a factor advances up to 90 percent of an invoice’s value upfront and collects full payment from the buyer when due.
Ekpenyong explained that factoring, unlike conventional bank loans, depends on the buyer’s creditworthiness and the authenticity of the invoice rather than the SME’s collateral or credit history.
“Factoring allows businesses to access financing based on the strength of their sales, not their fixed assets,” he said.
The Bill designates the Securities and Exchange Commission (SEC) as the regulator responsible for licensing and supervising factoring institutions, ensuring transparency, consumer protection, and enforceable invoice transfers. It also complements ongoing financial reforms such as e-invoicing and digital receivables registries, expected to enhance verification and reduce fraud.
Drawing from international precedents, Ekpenyong cited Mexico’s Cadenas Productivas initiative and India’s TReDS platform as successful examples, noting that similar reforms in Chile, Brazil, and South Africa have unlocked billions in SME financing.
“With clear regulations, Nigeria can unlock over $1 billion annually for small enterprises — funds that will directly support production, employment, and value chains,” he added.
The Bill also provides for periodic reporting on factoring volumes, buyer concentration, and MSME participation, while mandating transparent, plain-language contracts and standardized cost disclosures to strengthen financial literacy.
Ekpenyong emphasized that the Bill represents a structural reform rather than another short-term lending scheme.
“By passing this Bill, we’ll enable Nigerian businesses to hire faster, restock sooner, and expand stronger — without relying on costly, collateral-backed debt,” he said.
The Bill, first introduced on June 11, 2024, has now been referred to the relevant Senate committees for further legislative scrutiny and report.
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