The Incompatibilities of the Secured Transactions Law Reform in Nigeria with Access to Credit: What Did the Lawmakers Get Wrong?

Abstract

In 2017, the Nigerian National Assembly passed the Secured Transactions in Movable Assets Act (STMA), which is predicated on the theoretical underpinnings of Article 9 of the U.S Uniform Commercial Code (UCC Article 9), precisely its unitary-functional approach to secured financing. The STMA claims that its overall aim is to expand access to affordable credit especially for individuals and small businesses. Yet, despite this laudable ambition, certain provisions of STMA significantly betray its aim and objectives, mainly due to the reformers ostensible lack of a proper understanding of STMA’s ancestry, i.e., the UCC Article 9 and its case law jurisprudence that has developed over a period of seven decades. One of STMA’s defects which largely ignore the realities faced by most of the small businesses and individuals in need of credit financing, is its requirement of them to provide an insurance cover as a precondition for concluding a valid security agreement. Similarly, its private enforcement mechanism which requires an advance notice as well as the unwise involvement of the Nigeria Police in repossession of collateral is problematic: this could be a fertile ground for more cases of police brutality and corrupt practices. Through a doctrinal analysis, comparing the STMA provisions with those of UCC Article 9, the paper shows how certain provisions of the former are inimical to its overall aim and objectives. The paper also suggests transplantable solutions that are likely to assist Nigerian lawmakers in reforming this important legislation.