Senate moves to ease MSMEs’ access to finance through Invoice Factoring Bill
The Senate on Wednesday debated a Bill seeking to create a legal framework that would allow small and medium-sized enterprises (SMEs) to access quicker financing by converting unpaid invoices into immediate cash.
Sponsoring the legislation titled “Factoring Regulation Bill, 2024,” Senator Asuquo Ekpenyong said the proposal is aimed at tackling one of the most persistent challenges facing micro, small, and medium enterprises (MSMEs), delayed payments.
He noted that across the country, MSMEs frequently deliver goods or services but often wait up to 90 days to be paid, a delay that hampers their ability to pay workers, restock materials, or scale up operations.
“This cycle of weak cash flow not only traps small businesses but also slows down our economy’s overall growth,” Ekpenyong said.
Describing the Bill as a structural reform to unlock working capital for more than 40 million small businesses that power the Nigerian economy, the senator explained that factoring the practice of selling verified invoices to a licensed financial institution at a small discount in exchange for immediate cash offers a proven solution to chronic liquidity challenges.
“Unlike a bank loan that depends on collateral, factoring is based on the buyer’s creditworthiness and the validity of the invoice,” he said.
“This allows businesses to access financing on the strength of their sales, not their fixed assets.”
Ekpenyong explained that the Bill provides a robust regulatory framework under the supervision of the Securities and Exchange Commission (SEC), ensuring that only licensed operators can participate in factoring. It also requires full disclosure of fees and charges to protect MSMEs from exploitation.
The proposed law would make invoice transfers legally enforceable, align with ongoing digital reforms such as e-invoicing and receivables registries, and strengthen verification systems to reduce fraud.
According to the senator, the legislation would also encourage large corporations and government agencies to implement supplier-financing schemes that enable smaller firms to receive early payments at minimal cost.
Citing global examples, Ekpenyong noted that countries such as Mexico, India, Chile, Brazil, and South Africa had successfully used similar frameworks to unlock billions of dollars in working capital for SMEs and strengthen local value chains.
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He expressed confidence that, with proper implementation, Nigeria could attract over $1 billion annually through factoring to boost production, job creation, and investor confidence.
“This is not another short-term credit scheme,” Ekpenyong stressed.
“It is a structural reform that converts invoices MSMEs already hold into usable capital.”
The Bill, first introduced on June 11, 2024, also mandates periodic reporting on transaction volumes, default rates, and MSME participation. It further promotes financial literacy by requiring the use of simplified contracts and standard term sheets.
After extensive debate, the Bill passed second reading and was referred to the Senate Committee on Banking, Insurance, and Other Financial Institutions for further legislative action.
