How #EndSARS Protests Threaten N2tr Collateral For Looted MSMEs Assets, By CBN

The Central Bank of Nigeria (CBN) has warned that protesting youths might have attacked the very fabrics of the nation’s economic development base as movable assets used as collateral for micro, small and medium enterprises (MSMES) amounting to about N2 trillion credit in the last three years.

Governor of CBN, Godwin Emefiele, made the disclosure at a virtual capacity building programme organised by the World Bank in collaboration with the apex bank for judges and justices of Appeal Courts on Secured Transactions in Movable Assets and Credit Reporting Reforms.

The Nigerian Collateral Register  (NCR), which commenced operations in 2017 registered household assets and property to be used as collateral for credit in banks in place of immovable assets like houses or plots of lands as part of CBN’s initiative to widen credit delivery to MSMEs in the country.

Such movable assets include cars, motorcycles, refrigerators, television sets, sewing machines and furniture items, among others.

Private businesses and homes have within the last one week faced vandalism and some of the Movable Assets either set ablaze or removed by the hoodlums who have since hijacked the #ENDSARS protests, with the cost of destruction still being compiled by states across the country.

Speaking on the value of movable assets to the Nigerian economy, Emefiele said:  “As at September, 30, 2020, 694 financial institutions comprising 22 Deposit Money Banks (DMBs), four Merchant Banks, five Development Finance Institutions (DFIs), 580 Microfinance Banks, 37 Non-Bank Financial Institutions, 43 Finance Companies, one Primary Mortgage Bank and two Non-Interest Financial Institutions, registered on the NCR portal.

“Based on 113,153 financing statements registered on the NCR in respect of movable assets offered as collateral, banks gave ₦1.80tr, $1.36b and €10.92m to 273,435 as credit to 262,904 individuals, 1,421 large, 4,260 medium, 1,433 micro and 3,417 small businesses.

“Some components of the foreign currency-denominated loans represent the much-needed capital inflows into the economy and this attests to the power of the NCR and indeed, the STMA-centric reforms, to engender economic development. Ultimately, it underlines our resolve to sustain the reforms and improve public appreciation, and especially judicial perception, of its potentials.”

He further explained the rationale behind sensitising the judicial officers, as enablers in the implementation of the STMA and CRA 2017, with a view to strengthening adjudication over them.

“A lending relationship is based on trust and it is our belief that lenders will respond positively to the yearnings of MSMEs for greater access to finance, given the assurance that their legitimate interests will be protected under the enabling laws of the land.

“To this end, it is pertinent that we solicit and get the full support of the judiciary and law enforcement agencies towards providing a robust and resilient financial infrastructure that will deepen credit delivery to the MSMEs.

“The journey is just beginning and it promises to get more exciting. But together we will scale the hurdles to significantly de-risk lending to the MSMEs. We will pull out all the stops to enhance the safety, soundness and resilience of the financial system,” he added.

On his part, Chief Justice of Nigeria (CJN), Tanko Muhammad, who addressed participants of the training programme, pledged the judiciary’s readiness to partner the CBN to ensure that the STMA succeeds in the country.

He said: “My address is focused on the theme of this virtual meeting, which is The Role of the Judiciary in Ensuring the Effectiveness of Secured Transaction in Movable Assets and Credit Reporting Act. I am pleased to share my perspective on some of the key issues regarding the role of the judiciary in the financial sector.

“Credit reporting reforms in Nigeria require special attention from the judiciary because of its critical position in the economy given that movable assets are involved. Small businesses require access to credit to thrive and the rights of the relevant parties to a transaction must be protected.”

He noted that the importance of the judiciary to the financial sector could not be over-emphasised and that potential investors often hinged their decisions to invest in Nigeria on enforceability of their rights in any commercial venture.

“Therefore, Courts must be versed with credit transactions principles, especially with the passage of the STMA Act and Credit Reporting Act 2017.

“This means that there is need for the judiciary to be strengthened to help the financial sector protect credit transactions. The financial sector and indeed the entire economy stand to benefit from quick dispensation of justice in commercial or business transactions.

“As access to credit is necessary for the economic development of Nigeria, it behooves the judiciary to protect parties to a transaction and ensure fair and ethical standards. The purpose of both Laws is to facilitate and promote access to credit and enhance risk management in credit transactions. The protection of the rights of parties in a credit transaction would promote responsibility in the market and encourage responsible borrowing.

“The STMA established the NCR to receive, register and store information and security interests in movable assets; provide access to persons who may seek information on security interests and perform other functions prescribed by regulations under the Act.

“Without further stating the obvious, the judiciary has a crucial role to play in securing transactions in movable assets and credit reporting. It is therefore, our collective duty to ensure that the potential and prospects of credit delivery are optimally realised.

“The on-going economic development strategy requires the joint efforts of the CBN, the Judiciary and all stakeholders to make giant strides,” he stated.