To improve access to finance for micro, small and medium enterprises (MSMEs), the Central Bank of Nigeria (CBN) has released regulations for collateral registry to ensure prudent lending policy.
One of the major factors hindering access to credit facilities that commercial banks may set aside for MSMEs is the fear of payment default.
But with the collateral registry, to be operated by the CBN, the stage may have been set to stimulate responsible lending to MSMEs by creating an enabling environment to ensure easy access to credit.
The document provides a mechanism for efficient registration of security interests in movable property and realisation of such interests in the event of a default.
The registry is also expected to provide information about existing relationships between lenders and borrowers as relates particularly to movable and immovable collateral as well as other ancillary functions.
The document, signed by the CBN Governor, Godwin Emefiele, and posted on the bank’s website, stipulates that the CBN boss shall appoint a registrar to supervise and administer the registry, and issue guidelines to govern the functions and operations of the collateral registry from time to time.
“The collateral registry shall accept for registration financing statements in the prescribed form which shall be electronically transmitted.
“The collateral registry shall be accessible at all times except if precluded by maintenance, technical and security constraints,” it added.
According to the CBN, the determination of whether goods are consumer goods, equipment, farm products or inventory is to be made at the time when the security agreement is concluded, and the secured creditor may rely on representations of the debtor as to the intended use.
“These regulations apply to all security interests in movable property created by an agreement that secures payment or other performance of an obligation, regardless of the form of the transaction, the type of movable property or the nature of the secured obligation.
“Any individual or entity may be a secured creditor under these regulations subject to priority created in favour of a third party under any existing laws,” it added.
All financing leases entered into after the regulations have become effective would be subjected to registration in the registry and its provisions.
On the incidence of creating security interest, a security agreement would be effective and “create a security interest as between the parties according to its terms.”
In terms of the information required to register financing statement, the document explained that “in the case of an individual, the biometric based unique identifier, that is, national identity card or passport, gender, name, address including telephone and date of birth of the debtor, the name and address of the secured creditor or a representative of the secured creditor; a description of the collateral; and the maximum amount for which the secured obligation may be enforced.”
But if the debtor is an individual who is neither a citizen nor a resident of Nigeria, “the secured creditor shall enter the debtor’s passport number and the name that appears in the passport issued by a foreign government.”
