NEXIM, GIZ, Others Seek Regulatory Supervision For Factoring

Foreign and local stakeholders in the financial sector have agreed on the need for Nigeria to have a regulatory framework for the establishment of Factoring operations in the country to address the vulnerability of small-scale enterprises due to lack of access to affordable finance.

The Nigeria Export-Import Bank (NEXIM), German Corporation for International Cooperation (GIZ), AfrimBank and the African Development Bank, the Central Bank of Nigeria among other stakeholders said a guideline on Factoring would enable intra-African trade and grow the nation’s GDP. They made the observation at the FAPA Grant – workshop training programme on Factoring services in Nigeria, yesterday.

SMEs have been disproportionately affected by rising financing costs and related supply chain disruptions caused by COVID-19 pandemic and Russia/Ukraine crisis.

Managing director of NEXIM Bank, Abba Bello called for the passage of the draft Factoring Bill currently at the National assembly towards a transparent and credible factoring service in Nigeria.

He said NEXIM is promoting factoring services in Nigeria in line with its strategic mandate to facilitate the mainstreaming of the informal sector into the financial sector of the economy with the attendant benefits of access to finance/working capital support, thereby enhancing financial inclusion of MSMEs.

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The training is on how to establish or develop a guide on factoring operation. The four-day training which commenced yesterday is taking a deep look into the practices and requirements for building a factoring operation in any establishment.

Factor Chain International (FCI) secretary general Mr Peter Mulroy said: “We have to provide you the map about how to establish a factoring operation in your company. We have never done this before in Africa,” Mulroy said, telling the participants that they have to show that there is the need for such factoring services in Nigeria, with a desire for it.

“Establish all the proper principles for its operation for a proper framework in the organisations.

You will do so without fraud and mistakes. You learn what this guide will teach you. This will affect the policy issues of the central bank.

“Investors have to have the confidence that factoring is in place to do business in Nigeria. We need to have the regulation and know how to establish the framework,” he stated during his paper presentation.

Head, client relations, Anglophone West Africa, Mr Peter Olowononi said to ensure that factoring is effectively deployed to unlock the potential of African SMEs, more needs to be done, particularly in terms of scale, market expansion and market participants.

“It is therefore essential that factoring should be open to companies interested in this financial service to expand its reach to SMEs who are poorly banked by the banking sector,” Olowononi who represented the regional chief operating officer, Anglophone West Africa said.

South Africa, Egypt and India are among other African countries that started with Factoring regulation before enactment of the enabling laws. South Africa, which is the largest market for factoring in Africa accounting for 89 percent of factoring volumes in Africa in 2022 is also the largest credit insurance market in Africa.

Some of the speakers at the event said Nigeria needs regulatory guidelines for Factoring activities to improve the factoring infrastructure for invoicing, financial companies and non-bank financial companies. They agreed that the factoring ecosystem and market can only thrive where there is liquidity, adding that the regulation is needed to attract investors.

The training workshop is a technical assistance programme designed to support capacity building for banks and Factoring companies in Nigeria and the African Region. It is anchored by the FCI consultants and is designed to train participants on how to launch factoring and supply chain finance (SCF) activities.