ABUJA, Nigeria — The House of Representatives Committee on Banking Regulations on Thursday held a public hearing on two complementary bills designed to shore up confidence in the banking system and widen access to working capital for small businesses.
The session, chaired by Hon. Bello El-Rufai, drew senior regulators and industry leaders. Lawmakers sought technical advice on a Factoring and Receivables Financing Bill. They also discussed an amendment to the Banks and Other Financial Institutions Act, BOFIA. This was aimed at strengthening consumer protection against unauthorised withdrawals.
The hearing was notable for its dual focus. One measure suggests institutionalising factoring and receivables financing. These would become mainstream instruments for improving liquidity. This is crucial for micro, small, and medium enterprises. They often supply goods on credit but wait months for payment.
The second seeks sharper remedies for customers who suffer fraudulent or unauthorised debits from their accounts. Proponents argued that the two reforms are complementary. One plugs the demand side of credit. The other builds trust by protecting depositors from digital and insider abuses.
The urgency behind the reforms is plain from regulatory figures. The Central Bank of Nigeria reported handling nearly 20,000 customer complaints between October 2023 and September 2024. It facilitated refunds totaling about N7.05 billion and US$714,569 to aggrieved customers. Those numbers underline why lawmakers and the CBN are prioritising consumer redress mechanisms and faster refund timelines.
Lawmakers and guests repeatedly emphasised the twin problem of rapid technological adoption and weak consumer recourse. The CBN and other regulators have flagged a rising incidence of digital fraud and unauthorised transfers.
A recent assessment cited by legal scholars and regulatory commentators reports a sharp year-on-year rise. This increase is seen in reported incidents of financial fraud. Many losses are traced to digital channels and unregulated virtual platforms. That trend, the critics say, increases the cost of doing business and erodes depositor confidence in electronic payment rails.
Factoring advocates at the hearing argued that a properly regulated receivables finance market can be transformative. Globally the factoring market runs into trillions of dollars. It is forecast to expand further. Industry analyses suggest that SMEs account for the bulk of demand. They capture significant working capital relief from invoice discounting.
In Nigeria, many firms run on prolonged credit cycles. An effective factoring regime turns stale invoices into immediate liquidity. It would reduce reliance on expensive overdrafts. This approach would make exporters more competitive.
But success depends on the legal and infrastructural fit. Speakers at the hearing repeatedly pointed to existing instruments. These include the Secured Transactions in Movable Assets Act of 2017. They also mentioned the national collateral registry as partial building blocks.
They urged harmonisation of the new factoring statute with those instruments. It should also align with CBN guidance to avoid legal uncertainty. Such uncertainty would deter institutional factors and foreign investors. Clear registration, priority of claims, standardised documentation and disclosure rules were recommended as immediate priorities.
Consumer protection proposals included faster investigation and mandatory refund timelines. They also suggested clearer liability rules for banks and fintech firms. Additionally, they focused on stronger penalties for insider collusion.
Civil society and regulatory representatives mentioned recent draft guidelines. These initiatives aim to shorten turnaround times for customer refunds. They also seek to increase transparency when transactions fail.
Lawmakers signalled appetite for prescriptive remedies in BOFIA that would make consumer redress enforceable rather than advisory.
The central message from the session was institutional: legislation must both allow credit innovation and lock in consumer protections. If well drafted, the factoring bill will widen access to finance for SMEs. It could also stimulate growth at the base of the economy.
Meanwhile, amendments to BOFIA that impose clear duties on banks and payments providers would shore up depositor confidence. These amendments would also reduce reputational risks for the sector.
Yet risks remain. Factoring, if poorly regulated, can expose small suppliers to predatory pricing and obscure fee structures. Equally, heavy-handed consumer rules that create open-ended bank liability for disputed transfers shift costs to customers through higher fees.
The challenge for the National Assembly is to create a statutory architecture that is balanced. It should foster market depth and protect the weakest parties.
What to watch next: the committee will collate submissions from the CBN, SEC, industry bodies, and consumer groups. They will publish a report. Draft clauses will clarify the rights of invoice sellers. They will define the obligations of factors.
These clauses will outline registration procedures and dispute resolution mechanisms. Such clarity will be determinant for market uptake.
On the consumer protection front, the timetable for mandatory refund windows will be crucial. The quantum of sanctions for breaches will also signal priorities. These factors will show whether reformers prioritise deterrence or accommodation.
For Nigerian businesses and depositors the outcome matters. A factoring regime that works alongside robust consumer protection will reduce the cost of working capital. It will accelerate payments up the supply chain. It will restore faith in digitised banking.
Conversely, poorly harmonised laws risk creating regulatory gaps that opportunists will exploit.
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