One of the biggest challenges facing Nigerian businesses is not always profitability but cash flow. Many small and medium-sized enterprises complete contracts, deliver goods, or provide services only to wait weeks or months before receiving payment. During that waiting period, salaries must be paid, inventory replenished, and operations sustained. The Factoring Assignment and Receivables Financing Bill, 2026, recently passed by the National Assembly, is an attempt to address that gap.
The legislation creates a legal framework for debt factoring, a financing arrangement that allows businesses to convert unpaid invoices and receivables into immediate cash by selling those claims to a financier. In practical terms, a company that is owed money does not have to wait for payment before accessing working capital.
The significance of the bill lies in its focus on liquidity rather than debt. Many MSMEs already struggle with high borrowing costs and limited access to bank credit. Factoring offers an alternative route by allowing businesses to unlock funds tied up in outstanding invoices instead of taking on additional loans. For firms operating in sectors where delayed payments are common, this can make the difference between expansion and stagnation.
The bill also reflects a broader shift in how business financing is evolving globally. Traditional bank lending is no longer the only source of capital available to enterprises. Across many economies, receivables financing, supply-chain finance, and other alternative funding mechanisms have become increasingly important in supporting business activity, particularly among smaller firms.
What makes Nigeria’s situation notable is how little it currently participates in this market. According to lawmakers supporting the bill, the African factoring market is worth more than $50 billion, yet Nigeria accounts for less than one per cent despite having one of the continent’s largest economies and a vast MSME sector. Countries such as Egypt and Morocco have developed stronger factoring industries, allowing businesses to access liquidity without relying solely on conventional credit facilities.
The passage of the bill therefore addresses more than a financing gap. It also tackles a regulatory vacuum that has limited the growth of the receivables financing industry. Investors and financiers are generally reluctant to operate in markets where contractual rights, enforcement mechanisms, and obligations are not clearly defined. By providing legal certainty, the legislation could encourage greater participation from financial institutions and specialised financing firms.
However, the effectiveness of the law will depend largely on implementation. Establishing a framework is one thing; ensuring that businesses understand and can access the system is another. Many small enterprises remain unfamiliar with factoring and may still rely on traditional borrowing despite its higher costs.
The real test will be whether the legislation expands access to working capital beyond a small group of large firms and reaches the thousands of businesses that struggle daily with delayed payments. If that happens, the bill could become one of the more practical business reforms in recent years, helping enterprises turn completed sales into usable cash and reducing their dependence on expensive bank loans.
