Need for stakeholders to promote the Collateral Registry

Nigerians have been so busy lately trying to resolve issues in the meaning of the term “Restructuring”. As a result, they appear to have signally deferred attention to other equally important things. When Nigeria’s political elite begin to split hair about any subject matter, the wise take their leave, knowing that the subject matter may be dead on arrival. Except they get resurrected by some trado-medical incantations (as they sometimes do, if the interest of the politicians are at stake), such dead issues get quietly buried. And the shoes continue to pinch.

Clearly, very few people will honestly claim ignorance of the problems stoking the embers of agitation in Nigeria and threatening to shatter one of the most beautiful countries in the world. Fewer still will spend much time wondering what to do with a constitution that turns a federation to a unitary state and erroneously, if not mockingly, continues to call it a federation (may be from military lexicon). However, given the vested interests, which mostly diverge from the national interest, even veteran exorcists and plastic surgeons, like we seem to have in the National Assembly, may have a hard time cutting live parts to paste over dead tissues of any constitution whatsoever. We leave that to the experts.

The focus on political issues seems to have victimized the Secured Transactions in Movable Assets Act, 2017, otherwise called the Collateral Registry Act, 2017, and the Credit Reporting Act, 2017, which were greeted with very weak reactions. This has highlighted an already festering malaise in the Nigerian polity, particularly, the economic and financial community – low appetite for technical knowledge and the near absence of volunteer spirit. I consider it a national service on the part of all to take every legal step to ensure we properly implement these twin laws to enable us maximally profit from their proven benefits.

Baring a few positive and particularly rapid reactions from some organizations, which I describe as unusual quarters, and have long since commended, there was little or no enthusiastic response to these landmark legislation. Some may argue that things may be going on elsewhere of which one may not be aware. That is true. However, for a loud people like us, good jobs, even when trivial, are usually announced on roof tops. Besides, publicity is one of the most important favours we must do ourselves in regard to these laws. We should therefore know what everyone is doing to promote the successful implementation of the laws that hold great promise for MSMEs.

My biggest surprise was the apparent non-reaction from some of the core stakeholders and likely beneficiaries of the reforms – finance companies, mortgage banks, microfinance banks, Nigerian Association of Small and Medium Enterprises (NASME) and Small and Medium Enterprises Development Agency of Nigeria (SMEDAN). These entities for which I believe the two laws combined are a hay maker and a life saver, seems to be completely overwhelmed or uninterested. To the best of my knowledge, they have not made any audible sound since the law was passed. Meanwhile, if we had the collateral registry before now, the mountain of non-performing loans of the lenders among them and the financial purgatory faced by the MSMEs may have been mitigated. They may need to know that some people are reading their muted reaction more as ignorance and resentment.

Let’s face it, microfinance banks were set up to make loans based on trust in an environment in which trust has gone on a long vacation, even among the clergy. In short, they were created to make unsecured loans because of the absence of collaterals among their target clients. That is a hard place to be. All of a sudden, there is a law that converts the hitherto unbankable assets of entities that are predominantly, if not exclusively their clients, to bankable assets, and somebody says pass? There is need for some work accompanied by if you like some “media noise” What knowledge or experience do we actually have in movable asset-based lending? Very little. How do you motivate MSMEs

We are taking for granted that MSMEs will gladly use their chattels to borrow money? There are some rigidities to clear. Some of us may not know that there are some socio-cultural impediments to pledging private property for loans in some parts of the country. In some cultures, people feel ashamed of taking loans to run their businesses. Even worse is to give as security a personal property associated with them. Their friends will laugh at them.  We seem to think it is easy to convince the economically active poor to transfer their limited property to a lender in an domain where some people see bank loans as their share of the national cake. There is a lot to be done.

My push for educating our people on the subject and publicizing it is buoyed by the enormity of its potentials to lift the informal sector. It has done so elsewhere and to be clear, this thing is novel to us. Nigeria is not only among the first countries in Africa to introduce a collateral registry, it is the fourth country in Sub-Saharan Africa (SSA) to do so. That is a big deal. Nigeria is not famous for leading  change especially in many good things since the fall of apartheid.The best way to commend Nigeria and the active Acting President is for stakeholders to take it further.

As for the cost of the entailed training and publicity, I had advised that the regulators build it into their CSR programmes since the MFBs are mostly falling in and out of financial anointing. We can all share in the cost of promoting a viable lending environment for the SME sector. The reward will show in fewer job-seekers on our streets. Next time, I will show how the Collateral Registry will impact supervision of certain financial institutions.

Emeka Osuji