….…Bill sponsored by Sen. Asuquo Ekpenyong seeks to unlock over $1bn annually for small businesses
The Senate on Wednesday led the debate on the Factoring Regulation Bill, 2024 (SB. 474), a proposed legislation aimed at easing access to finance for Micro, Small and Medium Enterprises (MSMEs) by addressing the persistent challenge of delayed payments for goods and services.
Leading the debate, the sponsor of the Bill, Senator Asuquo Ekpenyong Jnr (Cross River South), said the legislation represents a bold structural reform that would enable Nigerian businesses to convert their verified invoices into immediate working capital, thereby breaking the cycle of weak cash flow that hinders growth across the MSME sector.
According to him, “Across the country, small businesses deliver goods or services, issue invoices, and then wait thirty, sixty, or even ninety days before receiving payment. In the meantime, they struggle to pay workers, purchase raw materials, or accept new orders. This cycle of delayed payments weakens both our enterprises and the wider economy.”
Ekpenyong emphasized that factoring provides a proven alternative by allowing MSMEs to sell their receivables to licensed finance companies or banks at a small discount and receive up to 90 percent of the invoice value upfront. The factor, he noted, later collects payment from the buyer when due, using the buyer’s creditworthiness as the basis for financing rather than the seller’s collateral.
“Unlike traditional bank loans that depend on collateral, factoring is based on verified transactions and the buyer’s capacity to pay. This makes it a more inclusive and transparent system of financing for millions of MSMEs that are excluded from conventional credit,” the senator explained.
The Bill, which was first read on June 11, 2024, seeks to provide the legal and regulatory framework for factoring as a financial service under the supervision of the Securities and Exchange Commission (SEC). It includes provisions for licensing, disclosure of costs and fees, enforceability of invoice transfers, and measures to protect both MSMEs and investors.
Ekpenyong said the legislation would also complement Nigeria’s ongoing digital reforms such as e-invoicing, electronic receivables registries, and supply-chain finance programs, which help prevent fraud and enhance transparency.
Highlighting the global success of factoring, the senator cited examples from Mexico, India, Chile, Brazil, and South Africa, where government-backed and private factoring programs have unlocked billions of dollars in working capital for small suppliers.
“Industry analysis indicates that with clear rules and effective supervision, Nigeria could unlock over US$1 billion annually for small businesses through factoring — funds that will go directly into supporting jobs, production, and local value chains,” he added.
The Bill further mandates periodic reporting on factoring volumes, delinquency trends, and MSME participation, while promoting financial literacy through plain-language contracts and standardized disclosure templates to ensure that small businesses fully understand the terms of engagement.
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Senator Ekpenyong urged his colleagues to support the Bill at Second Reading, stressing that it is not a short-term intervention but a structural reform designed to strengthen Nigeria’s business ecosystem and promote sustainable economic growth.
“This Bill converts invoices that MSMEs already hold into usable capital. By passing it, we empower Nigerian businesses to hire faster, restock sooner, and grow stronger—without resorting to expensive collateral-backed loans,” he added.
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