SENATE AND ACCESS TO FINANCE LAWS

The access to finance’ laws is aimed at teaching Nigerians how to fish, writes Olu Onemola

We all know that famous saying about giving a man a fish, or teaching the man ‘how’ to fish. That age-long adage draws an eternal distinction between the instant gratification of giving alms and the long-term satisfaction of teaching the intended recipient how to make some alms of their own. Now, with over 180 million people in Nigeria, it is critical for government across all levels to revisit the state of our present-day economy which has a working-age population of 108.59 million, but an ‘official’ unemployment rate of 14.2 per cent and an under-employment rate of 21.0 per cent. These numbers tell a difficult story that needs to be urgently addressed.

This is why, since its inauguration, the Eighth Senate has been working assiduously to pass reforms to Nigeria’s ‘access to finance’ laws. This is all aimed at providing Nigerians with more ‘fishing’ opportunities.’ Under the leadership of the Senate President, Dr. Abubakar Bukola Saraki — who stated last week that “people under 35 years old are the worst affected by the high rate of unemployment and under-employment in our nation” — the Senate is working to create new forms of capital through the passage of bills like the Secured Transactions in Movable Assets Bill.

Everyone knows that no bank will ever lend out money without securing some form of collateral. Everyone also knows that the most accepted form of collateral is landed property. However, millions of MSMEs across the nation do not have fixed infrastructure assets. In this regard, the Secured Transactions Bill that was initiated in the Senate, passed by both Houses of parliament, and signed into law by Acting President Yemi Osinbajo, closes the gap in securing credit and loans for MSMEs by making it possible for them to use their movable assets like cars, computers, and other machinery as their form of collateral to access loans.

This new law will strengthen the financial inclusion of MSME’s as well as stimulate the responsible lending to these enterprises by the creation of a collateral registry. This registry will allow MSMEs and other Nigerians that are seeking loans to register their movable assets with the bank — after which the bank will have “exclusive charge” over the registered asset. This will ensure that the individual or entity will be able to secure their loan, and the bank will also be protected against any risk in the event that there is a failure or non-performance by the individual or business.

In addition to the Secured Transactions Bill, the eighth Senate has also passed the Warehouse Receipts Bill. This bill will allow Nigerians to use their inventory or receipts and other forms of invoices as a form of collateral to secure loans. This bill will also create a new transactional currency that Nigerians will be able to use to approach banking institutions to secure loans in the event of financial liquidity problems.

THE SECURED TRANSACTIONS BILL CLOSES THE GAP IN SECURING CREDIT AND LOANS FOR MSMES BY MAKING IT POSSIBLE FOR THEM TO USE THEIR MOVABLE ASSETS LIKE CARS, COMPUTERS, AND OTHER MACHINERY AS THEIR FORM OF COLLATERAL TO ACCESS LOANS

Additionally, in May this year, keying into the economic diversification agenda of the APC-led central government, the eighth Senate approved the conference committee report on the bill for an act to Amend the Agricultural Credit Guarantee Scheme Fund Act, 2016”. This bill, which is aimed at expanding the reach of the Agricultural Credit Guarantee Scheme Fund to cover farmers interests and increasing the amount paid into the fund, will also “raise the commitment of the federal government and Central Bank of Nigeria (CBN) towards the scheme and increase the maximum amount needed to attract a waiver of security requirement for credit granted.”

Senator Abdullahi Adamu, who served as the Chairman of the Joint Committee of the Senate and House that considered the final report of the Agricultural Credit Guarantee Scheme Fund Act, emphasised that the bill would not only provide food and promote agriculture in Nigeria, it would also help with the provision of credit facilities to prospective entrants into the sector at single digit rates.

Finally, it is crucial to note that with the passage of some of these access to credit bills, the eighth Senate has not been resting on its previous successes. Over the past few months, the senate president and the Senate Committee on Banking, Insurance and Financial Institutions, chaired by Senator Rafiu Ibrahim, have met with the CBN and heads of commercial banks in the country to address the high interest rates on commercial loans.

Now that a majority of its access to finance laws have either been signed into law or are awaiting assent by the President, the Senate has initiated these discussions with commercial banks because it believes that many banking policies that are currently in place are not favourable to Nigeria’s MSMEs — despite the role that these enterprises play in the development of the national economy.

In the past, the senate president has accentuated the fact that although the Senate understands the economic complexities that set the interest rates in the past, “Nigeria must deliberately frame its monetary policy regime towards support of business.” Doing this will allow the country to meet the demands of the MSMEs that employ 88 per cent of the country’s workforce.

Moving forward, it is time for the executive branch to also wade into this access to credit issue by backing the legislation of the National Assembly up with policy interventions that will reduce interest rates across the board. Doing this will guarantee that individuals and entities will be able to access more loans at affordable rates, which would automatically translate into more jobs for our youth and a more resilient economy that is not reliant on government spending alone.

This is why creating opportunities for anybody — regardless of who they are — to be able to ‘fish’ should always be the first step.