Nigeria’s Factoring Bill has Structural Problems Nobody is Talking About

Nigeria’s Factoring Bill has Structural Problems Nobody is Talking About

Nigeria is about to get its first dedicated law for factoring — a financing tool where businesses sell their unpaid invoices to a third party in exchange for immediate cash, rather than waiting 30, 60, or 90 days for a customer to pay. The Factoring Regulation Bill 2024 (the “Bill”) is currently before the National Assembly. For the thousands of Nigerian businesses whose biggest problem is not profitability but cash timing, this matters.

But the Bill has structural problems that could undermine the entire regime before a single transaction is registered. Two of them are serious enough to be addressed before the law is enacted: an unresolved conflict between two regulators, and a conflict between two competing registries.

Should the SEC be regulating this — or the CBN?
Is factoring a speculation or contracts trading play or a lending product, strictly speaking?

The Bill’s most consequential design choice is also its least discussed: it places factoring under the Securities and Exchange Commission rather than the Central Bank of Nigeria.

In Nigeria, the CBN regulates credit — overdrafts, term loans, invoice discounting, and most lending products. The SEC regulates capital markets, investment products, and market infrastructure. By naming the SEC as primary regulator, the Bill reclassifies receivables financing. It is no longer framed as a lending product. It is being treated as a market infrastructure play — closer in structure to a

securities exchange than a bank credit facility.

The Bill’s architecture reinforces this. It establishes an electronic marketplace where businesses can offer invoices to multiple financiers simultaneously, and it requires a central invoice registry managed by the SEC. These are market-infrastructure features, not lending features.

This is not just a regulatory labelling exercise. It signals that Nigerian policymakers may be moving toward treating pools of receivables as tradeable, investable assets rather than bilateral credit exposures. For banks, private credit funds, and FinTech platforms in supply chain finance, that shift changes how products are structured and who oversees them.

The SEC’s role as primary regulator creates an immediate conflict. Most entities likely to engage in factoring — banks, finance houses, and FinTech platforms offering invoice discounting — already hold CBN licenses and operate under CBN prudential guidelines.

The Bill permits banks to participate. It does not provide any mechanism for resolving conflicts when SEC and CBN requirements diverge. There is no statutory tiebreaker. When the two regulators give inconsistent directions, dual-regulated entities have nowhere to go. That is not a regulatory gap that implementing regulations can fix. It requires preemptive amendment agreed before the Bill becomes a law.

Determining whether factoring can be treated as a speculative/contracts’ trading or lending product should lead policymakers closer to a clear answer.

Two registries. No priority rule. That is the real problem.

The registry problem is, if anything, more technically dangerous.

The Bill requires all factored receivables to be registered in a new SEC-managed invoice registry. But a Collateral Registry for security interests over movable assets — including receivables and book debts — already exists under the Secured Transactions in Movable Assets Act 2017. Under that Act, priority between competing interests is determined on a first-to-file basis: whoever registers first, wins.

Here is the gap. A receivable could be assigned to a factor under the new Bill and registered in the SEC’s invoice registry, while the same receivable has already been charged as collateral under the STMA and registered in the Collateral Registry. Both registrations are valid. Neither statute tells you which one prevails.

For any lender with a receivables-backed portfolio, that is not a theoretical risk. That is an unpriced legal exposure sitting in live transactions right now — and the Bill does not resolve it.

What this means if you are in this market

1. Banks and finance houses: If the Bill is enacted as currently drafted, SEC registration may apply to factoring activity, on top of existing CBN obligations — though it remains unclear whether that requirement attaches to the factoring entities themselves or only to the invoices they intend to list. There is currently no guidance on which regulator’s instructions take precedence in a conflict. Banks and finance houses active in this space should be engaging with the legislative process now, while the Bill is still open to amendment, rather than raising these questions after it becomes law.
2. FinTech platforms in supply chain finance or invoice discounting: The Bill applies to any arrangement involving the purchase of receivables at a discount — regardless of what you call it. If your product involves buying invoices, you are in scope. Some of these platforms are licensed as Moneylenders rather than CBN-regulated entities, which adds another layer to the restructuring conversation. The licensing and operational implications are real, and most platforms have not started working through them.
3. Private credit funds investing in factors or factoring platforms: The STMA priority conflict is your primary due diligence concern on any receivables-backed transaction until this is resolved. Until there is a statutory or regulatory answer on which registry governs, that risk needs to be explicitly addressed in transaction documentation — and priced accordingly.

The Bill exists. The rules that govern it don’t yet.

The Factoring Regulation Bill has the right policy instincts. But the Bill (if passed and signed) itself will not shape how this market operates — that work falls to the SEC’s implementing regulations, which have not yet been drafted. Registration criteria, penalty structures, transition timelines: all of it is still to come.

That means the most important decisions about this regime will be made after enactment, in a process with less scrutiny than the legislative one. Market participants who wait for the regulations before engaging are the ones who will find themselves restructuring products and portfolios in a hurry.

Nigeria’s factoring market has been waiting a long time for a legal framework. The question now is whether the framework it gets will be clear enough to actually be used — or whether two unresolved structural problems will make practitioners route around it entirely.

AUTHOR

David Bereibibo Bristol – Alagbariya
Legal Analyst – Hamu Legal