The Nigerian Senate on Wednesday took a major step toward strengthening access to finance for small and medium enterprises (MSMEs) as it debated the Factoring Regulation Bill, 2024 (SB. 474), sponsored by Senator Asuquo Ekpenyong Jnr (Cross River South).
Leading the debate at plenary, Senator Ekpenyong said the bill seeks to establish a clear legal and regulatory framework for factoring — a financial service that allows small businesses to sell verified invoices to finance companies or banks at a discount, enabling them to receive immediate payment instead of waiting for months.
According to him, the legislation aims to tackle one of the most persistent challenges faced by small businesses in Nigeria — delayed payments and weak cash flow — which often hinder their ability to pay workers, buy raw materials, or expand operations.
“Across the country, MSMEs deliver goods or services, issue invoices, and then wait thirty, sixty, or sometimes ninety days before receiving payment,” he said. “Factoring offers a tested solution by converting those invoices into usable capital.”
The senator explained that under the proposed law, licensed factoring companies would be regulated by the Securities and Exchange Commission (SEC), given that the practice involves trading receivables as financial assets.
He said the bill would provide safeguards, transparency mechanisms, and legal backing for invoice transfers, ensuring disputes are minimized and MSMEs can access financing safely.
“Unlike bank loans that depend on collateral, factoring relies on the buyer’s creditworthiness,” Ekpenyong noted. “This bill empowers small businesses to access financing on the strength of their sales, not their fixed assets.”
Senator Ekpenyong highlighted that similar reforms in Mexico, India, Chile, Brazil, and South Africa have unlocked billions of dollars in working capital for small businesses, boosted production, and created jobs.
He projected that, with proper regulation, Nigeria could unlock over US$1 billion annually for small businesses through factoring, directly strengthening employment and local value chains.
The bill also mandates periodic reporting on market trends, buyer concentration, and MSME participation to ensure regulatory oversight, while promoting financial literacy through plain-language contracts and transparent cost disclosures.
“This is not another short-term credit scheme,” the lawmaker emphasized. “It is a structural reform that converts invoices MSMEs already hold into usable capital. By passing this Bill, we will empower Nigerian businesses to hire faster, restock sooner, and grow stronger.”
The Senate President, Godswill Akpabio, commended Senator Ekpenyong for sponsoring the bill and referred it to the Senate Committee on Banking, Insurance and Other Financial Institutions for further legislative action after scaling second reading.
