CBN Unveils Collateral Registry Regulations to Enhance Access to Credit

Obinna Chima

In order to improve access to finance for micro, small and medium enterprises (MSMEs) in the country, the Central Bank of Nigeria (CBN) has approved the collateral registry regulations.
The document signed by the CBN Governor, Mr. Godwin Emefiele, a copy of which was posted on the central bank’s website, is also expected to support prudent lending policy in the industry.

The collateral registry to be established is to be maintained and operated by the CBN.

According to the bank, the regulations aim to stimulate responsible lending to MSMEs by providing a mechanism for efficient registration of security interests in movable property and realisation of such interests in the event of a default.

The registry is also expected to provide information on the existence of relationships between lenders and borrowers as they relate particularly to movable and immovable collateral as well as other ancillary functions. The registry is also to play a key role in creating an enabling environment to ensure easy access to credit.

According to the document, the CBN Governor shall appoint a registrar to supervise and administer the operation of the registry.
“The Governor of the CBN may issue guidelines to govern the functions and operations of the collateral registry from time to time.
“The collateral registry shall accept for registration financing statements in the prescribed form which shall be electronically transmitted.
“The collateral registry shall be accessible at all times except if precluded by maintenance, technical and security constraints,” it added.

For the purpose of the regulations, the CBN pointed out that the determination of whether goods are consumer goods, equipment, farm products or inventory is to be made at the time when the security agreement is concluded, adding that the secured creditor may rely on representations of the debtor, as to the intended use.

“These regulations apply to all security interests in movable property created by an agreement that secures payment or other performance of an obligation, regardless of the form of the transaction, the type of movable property or the nature of the secured obligation.

“Any individual or entity may be a secured creditor under these regulations subject to priority created in favor of a third party under any existing laws,” it added.

Furthermore, it noted that all financing leases entered into after the regulations have become effective would be subjected to registration in the registry and its provisions.

On the incidence of creating security interest, it stated that a security agreement would be effective and “create a security interest as between the parties according to its terms.”

In terms of the information required to register financing statement, it explained that: “In the case of an individual, the biometric based unique identifier i.e. national identity card or international passport, gender, name, address including telephone and date of birth of the debtor, the name and address of the secured creditor or a representative of the secured creditor; a description of the collateral; and the maximum amount for which the secured obligation may be enforced.”

But if the debtor is an individual who is neither a citizen nor a resident of Nigeria, it noted that “the secured creditor shall enter the debtor’s passport number and the name that appears in the passport issued by a foreign government.”

Culled from: http://www.thisdaylive.com