By Obinna Chima
The Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele has revealed that movable assets valued at N392 billion have been registered on the National Collateral Register (NCR) as at August 24, 2017.
According to him, 136 financial institutions, 22 commercial banks, 106 microfinance banks, one non-bank financial institution, three merchant banks, three development finance institutions and one non-interest bank have registered 16,236 financing statements for 20,684 movable assets on the NCR as at the aforementioned date.
He disclosed this in the central bankâ€™s Movable Assets newsletter, a copy of which was obtained at the weekend.
He pointed out that financial institutions traditionally prefer fixed assets, such as land and building as collaterals for loans, while majority of the micro, small and medium enterprises (MSMEs) can only provide movable assets such as inventory and equipment.
Emefiele recalled that in his maiden press briefing upon assumption of office in June 2014, he stated that one of his vision was to create a people centred central bank.
According to him, one of the key strategies to achieve this was to significantly improve the credit culture in the Nigerian Banking System, by designing and introducing a robust system that effectively reduces information asymmetry, assists lenders to make good credit decisions and ultimately improve access to credit by MSMEs.
He pointed out that top of that agenda was the establishment of a Secured Transaction and National Collateral Registry (ST&NCR).
â€œThat promise has now been fulfilled with the commencement of live operations of the National Collateral Registry on May 25, 2016 and the accent to the Secured Transactions in Movable Assets Act, 2017 by the Acting President Professor Yemi Osinbajo on 30th May, 2017,â€ he added.
The NCR initiative was in collaboration with the International Finance Corporation (IFC).
The NCR is expected to unlock access to credit, which has always been a major concern to Nigerian MSMEs,
The registry allows financial institutions, bank and non-bank, to register their priority interest in movable assets as collateral for loans. It is an on-line, real time notice based registry that allows borrowers to prove their creditworthiness and potential lenders to assess their ranking priority in potential claims against particular collaterals.
Â There is empirical evidence, that the establishment of collateral registries has increased lending to MSMEs in other jurisdictions.
In China, for example, the adoption of the collateral registry resulted in 84 per cent of SMEs securing their loans using movable assets.
The use of the registry in Mexico also grew loans secured with movables by four times while 45 per cent of total loans went to the agricultural sector.
Similarly, in Afghanistan, with the operations of the new centralised collateral registry, 90% of loans by financial institutions were granted to SMEs, Emefiele explained.
He added: â€œIn this regard, i am hopeful that the commencement of operations of the NCR will have tremendous impact on MSME lending in Nigeria, as we strive to increase lending by banks to the sub-sector to about 10 per cent from 0.067 per cent in the next few years.
â€œI am happy to note that the strategy this yielding positive results. The lack of access to credit for MSMEs in Nigeria has resulted in a huge financing gap.
â€œRecords showed that in 2016, loans to MSMEs by deposit money banks as a percentage of their total loans and advances to the economy declined to 0.067 per cent from 0.099 per cent achieved the preceding year.â€ He said there was no gainsaying, that the lack of access to finance had been one of the major impediments to the development of the sub-sector in Nigeria today, saying that it was expected that the Registry will motivate banks to accept moveable assets as collateral
Furthermore, the CBN Governor anticipated that it would boost production and create employment, adding that increased access to credit would increase productive capacity and generate employment.
Â â€œThe Registry will cut down the cost of verifying borrowers by 35 per cent and therefore reduce the cost of credit and non-performing loans,â€ he added.