Collateral Act, Credit Bureau Act: Rosy future for Nigerian SMEs


A couple of days ago the Acting President, Professor Yemi Osinbajo signed into law two revolutionary bills, the Collateral Act Bill and the Credit Bureau Bill. The two bills are part of a groundbreaking pathway into a rosy future for the Small and Medium Size businesses, much as it is an outlet for the executive to impact positively in the lives of Nigerians. How far the two laws will go, in the main, largely depends on the political will of the executive to go the whole hog in making the two laws run their course without let or hindrance.

In a layman lexicon, the laws have created an avenue for small businesses to access loans. The Collateral Act Law is clearer when looked at through the prism of graphic exemplification. What sector is the largest employer of labour in Nigeria? Without mincing word, 79 percent goes into small scale businesses, and it is beyond doubt that the greatest problem facing SMEs is lack of access to capital to grow the business.

We are mindful of the fact that electricity and skilled labour are impediments to the growth of SMEs, but fund is the major problem. For instance, if business reinvested 2million at the commencement of the business, but now intends to spend 7million to acquire new engine to grow the business, the owner of the business cannot access the loan more than his or her savings.

The Collaterised Law in this instance will make it possible for business A to register its assets, which is more than 10 million, and then it can now approach the bank directly for loan at a rate that is lower than the market rate, which the Central Bank has set aside for all banks.

The Law in essence, will take into cognizance assets, moveable and immovable, tangible and intangible of businesses which can be registered to secure loans.  The law makes it possible for banks to loan SMEs depending on their registered assets.

In the view of this newspaper, the above explanatory introduction may have opened the window into understanding the law. The law has merit and government should go beyond rhetoric to ensure that they have teeth.

One of the consequences of the laws is that the Federal Inland Revenue will now be in position to   capture assets of businesses that have hitherto been hiding from it, a situation that has led to loss of billions.  This will give FIRS leverage to increase revenues due to more registered businesses.

The laws have capacity to give businesses access to new funds, and this will improve SMEs ‘standing and position, and in the process more employment opportunities are created. It will also lead to a surge in the Corporate Affairs Commission.  The firms in the United States and other European countries thrive on credit, for instance the monthly Consumer Credit in Britain alone, excluding mortgages is around 140billion.

The second law, Credit Bureau Law is self-explaining. The Bureau keeps a register of all those borrowers particularly those that defaulted.  It registers all loans. If business ‘A’ borrows money in bank X, it can also go to bank H and borrows without detection, but with Credit Bureau Law, it will be detected that business A is still indebted to bank X. The law has many opportunities, a capacity to grow employment, as professionals will be employed in the sector and value chain.

It is the conviction of this newspaper that the two laws have the facility to grow the economy, create jobs and add value to business, but a lot depends on the will power of the government to beyond mere passage into the realm of action.

There are many laws in the past, with capacity to open up business, but which have been forgotten and poorly implemented, because of the lackadaisical attitudes of successive administrations to the plight of the economy.

It is imperative that government ensures that these new laws work. It is the only way to go, if as a people we are serious about getting out of the self-induced recession. The heart and artery of any economy is the small and medium size businesses, and it is of vital importance that government deploys its heft into the success of these laws.

We are gladdened that the Federal Government realized the import of the two bills before signing them into law. It would seem, in our view, the surmounting of the first hurdle; the other hurdle is for it to give the new law “teeth”. And if the Buhari administration could work around the whole process, it would be the lasting legacy of the administration, and a testament of its foresight.



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