WorldStage– A bill seeking to establish a legal framework that would enable small and medium-sized businesses to access quicker financing by converting unpaid invoices into immediate cash passed second reading at the Senate on Wednesday.
Leading debate on the proposed legislation titled, “Factoring Regulation Bill, 2024,” Asuquo Ekpenyong who sponsored it, said the proposal aims to address delayed payments which is one of the most persistent challenges faced by micro, small and medium enterprises (MSMEs).
Ekpenyong noted that across Nigeria, MSMEs often deliver goods or services and then wait up to 90 days before receiving payment, a situation that leaves many unable to pay workers, restock supplies or expand operations.
“This cycle of weak cash flow not only traps small businesses but also slows down our economy’s overall growth,” he said.
The lawmaker described the Bill as a structural reform designed to unlock working capital for over 40 million small businesses that form the backbone of the Nigerian economy.
According to him, factoring, the practice of selling verified invoices to a licensed finance company or bank at a small discount in exchange for immediate payment, offers a tested solution to MSMEs’ cash-flow constraints.
“Unlike a bank loan that depends on collateral, factoring is based on the buyer’s creditworthiness and the validity of the invoice,” Ekpenyong explained. “This allows businesses to access financing on the strength of their sales, not their fixed assets.”
He said the Bill provides a comprehensive regulatory structure under the Securities and Exchange Commission (SEC), ensuring that only licensed entities can engage in factoring while also mandating clear disclosure of costs and fees.
It further makes invoice transfers legally enforceable to prevent disputes and aligns with digital reforms such as e-invoicing and receivables registries that reduce fraud and improve verification.
Ekpenyong added that the framework would encourage large corporations and government agencies to adopt supplier-financing programmes that enable MSMEs to receive early payments at low cost.
Highlighting global precedents, the senator said similar policies in countries like Mexico, India, Chile, Brazil, and South Africa had successfully unlocked billions in working capital for small businesses and strengthened domestic value chains.
He expressed optimism that with clear rules, Nigeria could attract over $1 billion annually through factoring to support production, jobs, and investment confidence.
“This is not another short-term credit scheme,” he stressed. “It is a structural reform that converts invoices MSMEs already hold into usable capital.”
The Bill, which was first read on June 11, 2024, also mandates regular reporting on transaction volumes, delinquency trends, and MSME participation, while promoting financial literacy through plain-language contracts and standard term sheets.
The Bill was approved for second reading by voice vote and regerred to the Committee on Banking, Insurance and Financial Institutions for further legislative action.
