A Critical Analysis of Credit Information Sharing Under the Credit Reporting Act 2017

Abstract

Credit is the lifeblood of business and difficulty in accessing credit has been the bane of many businesses in Nigeria. One of the primary reasons for the unwillingness of financial institutions to extend credit to businesses is lack of reliable credit information of the businesses. Ironically, this has also been the reason for some bad lending decisions resulting to non-performing loans. An efficient credit reporting system is therefore essential to the functioning of a strong financial system. A primary objective of a credit reporting system is the facilitation of accurate and reliable credit information sharing. Credit information sharing enables lenders to properly assess borrowers’ performance/nonperformance record in credit transactions before making decisions. This enhances responsible lending and borrowing, improves access to credit, and reduces operational costs and the risk of default and fraud. On 30 May 2017 Acting President Yemi Osinbajo SAN signed into law the Credit Reporting Act 2017 (CRA). Some of the objectives of the CRA, set out in section 1, include promoting access to accurate, fair and reliable credit information whilst protecting the privacy of the information; promoting fair and competitive credit reporting system, and facilitating credit information sharing. Prior to the CRA, the Central Bank of Nigeria (CBN) had on 14 November 2013 issued Guidelines for the Licensing, Operations and Regulations of Credit Bureaux and Credit Bureaus Related Transactions (2013 Guidelines) pursuant to section 57 of the CBN Act 2007. The 2013 Guidelines replaced the earlier guidelines issued in October 2008. Prior to the guidelines, the Credit Reporting Management System (CRMS), a public registry for financial institutions to register/check-up credits above N1 million, was established pursuant to sections 28 and 52 of the CBN Act 1991.