Senate passes factoring bill to boost MSMEs’ growth

By Henry Umoru, Abuja

The Senate has approved the Factoring, Assignments and Receivables Financing Bill, a key legislative move designed to improve financing options for Micro, Small and Medium Enterprises (MSMEs) and strengthen liquidity across the business sector.

The Bill establishes a legal and regulatory framework for debt factoring in Nigeria, enabling suppliers and MSMEs to sell their unpaid invoices—receivables—to third‑party financiers, known as “factors,” at a discount in exchange for immediate cash. This mechanism is intended to relieve cash‑flow pressures on small businesses without the need for traditional collateral.

Senate Leader Opeyemi Bamidele, who led the discussion on the Bill’s core principles, explained that the legislation aims to create a structured environment for factoring transactions in both domestic and international trade.

Bamidele noted that the Bill had already completed all required stages in the House of Representatives and met Senate procedural requirements, including Order 78(3) of the Senate Standing Orders, 2026. He added that it had been reviewed and cleared by the Ad‑Hoc Committee on Compliance chaired by Senator Abdul Ningi.

According to Bamidele, the Bill defines the relationships among sellers, debtors and financiers, and clearly outlines their respective rights and obligations to ensure transparency and legal certainty in factoring transactions.

During earlier consideration of the Bill, its sponsor, Chairman of the Senate Committee on Banking, Insurance and Other Financial Institutions Tokunbo Abiru, said the framework would help businesses convert receivables into working capital, thereby improving access to credit for MSMEs.

Abiru explained that factoring allows companies to sell invoices owed by creditworthy customers to financiers, who then assume responsibility for collection.

He added that the system would be especially beneficial for small businesses that supply large corporations on credit terms, enabling them to access immediate funding instead of waiting for delayed payments.

The Bill is expected to enhance liquidity, reduce payment bottlenecks and support the growth of MSMEs, which constitute a significant portion of Nigeria’s economy.

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