Bill to boost financing for SMEs scales second reading in senate

The senate has passed for second reading a bill seeking to regulate factoring services in Nigeria to boost access to finance for small and medium enterprises (SMEs).

The bill, sponsored by Asuquo Ekpenyong, senator representing Cross River south, seeks to establish a legal and regulatory framework for factoring — a financial service that allows businesses to sell their invoices to finance companies for immediate cash.

Leading the debate, Ekpenyong, former commissioner for finance in Cross River state, said the proposed law seeks to tackle the lingering problem of delayed payments that continues to constrain small businesses across the country.

He said many MSMEs deliver goods and services but wait 30 to 90 days to receive payment, leaving them unable to pay workers or purchase raw materials.

“MSMEs are the backbone of our economy. Over 40 million strong, they provide the bulk of jobs and contribute significantly to national output,” Ekpenyong said.

“Yet most remain excluded from affordable credit because traditional bank lending depends on collateral they often do not have. Factoring provides a tested solution that converts invoices into usable capital.”

He explained that factoring would allow businesses to sell verified invoices to licensed factors — banks or finance companies — at a small discount, granting them up to 90 percent of the invoice value upfront.

Ekpenyong said the bill empowers the Securities and Exchange Commission (SEC) to license and supervise factoring companies, ensure transparency, and enforce invoice transfers to avoid disputes.

He added that the bill aligns with ongoing digital reforms such as e-invoicing and receivables registries, which enhance verification and reduce fraud.

Supporting the bill, Garba Madoki, senator representing Kebbi south, said interest must be paid on delayed invoices, particularly those issued to government agencies.

“Invoices, particularly government invoices that have a 30-day leave, interest must be paid to those invoices until the day they are paid,” Madoki said.

Also speaking, Yahaya Abdullahi, senator representing Kebbi north, said the bill marks an important milestone for the economy.

“It is an important bill, particularly due to the nature of our economy. Our economy is dominated by small businesses. The issue of factorisation is a very important milestone that we must attain,” Abdullahi said.

He, however, drew the senate’s attention to the fact that Tokunbo Abiru, senator representing Lagos east, had earlier sponsored a similar bill, and urged that both bills be harmonised.

Barau Jibrin, deputy senate president and presiding officer, commended Ekpenyong for sponsoring the bill, describing it as key to strengthening the economy.

“This bill will help in strengthening our economy because the informal sector and SMEs are the backbone of our economy,” Barau said.

Attempts by Osita Izunaso, senator representing Imo west, to have the bill referred to the committee on capital markets, which he chairs, were rejected by the presiding officer.

The bill was thereafter referred to the senate committee on banking, insurance and financial institutions to report back in two weeks.