The Incompatibilities of the Secured Transactions Law Reform in Nigeria with Access to Credit: What Did the Lawmakers Get Wrong? — Oak Academic Publishing
Research ArticleOpen AccessGoogle Scholar indexed
The Incompatibilities of the Secured Transactions Law Reform in Nigeria with Access to Credit: What Did the Lawmakers Get Wrong?
Commercial Law Division at Osborne Law Practice, Lagos, Abuja & Port Harcourt, Nigeria
1 Commercial Law Division at Osborne Law Practice, Lagos, Abuja & Port Harcourt, Nigeria
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.
KeywordsSecured TransactionsLaw ReformCollateral PolicingAccess to CreditInsurance CoverCollateral RegistryBorrowerSecured Creditor
Abasiekong, E. M. (1981). Pledging Oil Palms: A Case Study on Obtaining Rural Credit in Nigeria. African Studies Review, 24, 73-82. https://doi.org/10.2307/523911
Baird, D. (1983). Notice Filing and the Problem of Ostensible Ownership. Journal of Legal Studies, 12, 53. https://doi.org/10.1086/467714
Baxbaum, H. (2003). Unification of the Law Governing Secured Transactions: Progress and Prospects for Reform. Uniform Law Review, 8, 321-339. https://doi.org/10.1093/ulr/8.1-2.321
Benjamin, J. (2010). Securities Collateral. In J. De Lacy (Ed.), The Reform of the UK Personal Property Security Law: Comparative Perspectives. Routledge-Cavendish.
Bennett, H. (2003). Registration of Company Charges. In J. Armour, & H. Bennett (Eds.), Vulnerable Transactions in Corporate Insolvency (pp. 217-280). Hart Publishing.
Bridge, M. (2016). The Nature of Assignment and Non-Assignment Clauses. Law Quarterly Review, 13, 47-67.
Bridge, M. G., Macdonald, R. A., Simmonds, R. L., & Walsh, C. (1999). Formalism, Functionalism, and Understanding the Law of Secured Transactions. McGill Law Journal, 44, 572. https://doi.org/10.2139/ssrn.2732687
Broude, R. F. (2001). Secured Transactions in Personal Property in the United States. In M. Bridge, & R. Stevens (Eds.), Cross-Border Security and Insolvency (pp. 49-58). Oxford University Press.
Burdick, F. M. (1918). Codifying the Law of Conditional Sales. Columbia Law Review, 18, 103-122. https://doi.org/10.2307/1111228
Calnan, R. (2006). Taking Security. Jordan Publishing Ltd.
Calnan, R. (2015). A Secured Transactions Code. Butterworths Journal of International Banking and Financial Law, 30, 473-486.
Carroll, D. W. (1967). The Floating Lien and the Preference Challenge: Some Guidance from the English Floating Charge. Boston College Law Review, 8, 243-259.
Coenen, D., Givray, A. J., Quinn, D. M., & Hilton, P. (1977). Priority Rules of Article Nine. Cornell Law Review, 62, 834-987.
Cohen, N. B. (1999). Internationalising the Law of Secured Credit: Perspectives from the US Experience. University of Pennsylvania Journal of International & Economic Law, 20, 423-442.
Corruption Perceptions Index 2020 by the Transparency International. https://www.transparency.org/en/cpi/2020/index/nga
Davis, K. J. (1997). Priority of Crown Claims in Insolvency. Canadian Business Law Journal, 29, 145-167.
Drobnig, U. (1977). Study on Security Interests. UNCITRAL Yearbook, 8, 171-221.
Esangbedo, G. (2020). Secured Transactions in Moveable Assets Act, Company Charges and Funding Micro, Small and Medium Enterprises under Nigerian Law. Journal of African Law, 64, 81-105. https://doi.org/10.1017/S0021855319000354
Esangbedo, G. O. (2018). The Transactions in Movable Assets Act, Company Charges and Funding Micro, Small and Medium Enterprises under Nigerian Law. M. Phil in Law, Keble College, Oxford.
Estrella-Faria, J. A. (2009). Future Directions of Legal Harmonisation and Law Reform: Stormy Seas or Prosperous Voyage. Uniform Law Review, 14, 5-34. https://doi.org/10.1093/ulr/14.1-2.5
Finch, V. (2017). Corporate Insolvency Law—Perspectives and Principles. Cambridge University Press. https://doi.org/10.1017/9781139626811
Fleisig, H., Safavian, M., & de la Peña, N. (2006). Reforming Collateral Laws to Expand Access to Finance. World Bank. https://doi.org/10.1596/978-0-8213-6490-1
Garro, A. M. (2003). Harmonization of Personal Property Security Law: National, Regional and Global Initiatives. Uniform Law Review, 8, 357-368. https://doi.org/10.1093/ulr/8.1-2.357
Gilmore, G. (1965). Security Interests in Personal Property—Vol. I. Little, Brown and Company.
Gilmore, G. (1981). The Good Faith Purchase Idea and the Uniform Commercial Code: Confessions of a Repentant Draftsman. Georgia Law Review, 15, 605-629.
Glenn, G. (1939). The Chattel Mortgage as a Statutory Security. Virginia Law Review, 25, 316-339. https://doi.org/10.2307/1067700
Goode, R. (1988). Legal Problems of Credit and Security. Sweet & Maxwell.
Goode, R. (1989). Security: A Pragmatic Conceptualist’s Response. Monash University Law Review, 15, 361-369.
Goode, R. (1997). Principles of Corporate Insolvency Law. Sweet & Maxwell.
Goode, R. M. (2011). Principles of Corporate Insolvency. Sweet & Maxwell.
Gough, W. J. (1996). Company Charges. Butterworths.
Gretton, G. (2012). Reform of Security over Movable Property: The Discussion Paper in Outline. Edinburgh Law Review, 16, 261-267.
Gretton, G. (2012). Reform of Security over Moveable Property: A View from England. Edinburgh Law Review, 16, 261-267.
Gretton, G. L. (2003). Reception without Integration? Floating Charges and Mixed Legal Systems. Tulane Law Review, 78, 307-332.
Gullifer, L. (2008). The Reforms of the Enterprise Act 2002 and the Floating Charge as a Security Device. Canadian Business Law Journal, 46, 399-403.
Gullifer, L., & Hurst, S. (2013). Bills of Sale Acts: Ripe for Reform. Butterworths Journal of Int’l Banking & Financial Law, 28, 685-706.
Gullifer, L., & Payne, J. (2011). Corporate Finance Law: Principles and Policy. Hart Publishing.
Gullifer, L., & Tirado, I. (2017). Financing Micro-Businesses and the UNCITRAL Model Law on Secured Transactions. Uniform Law Review, 22, 642-662. https://doi.org/10.1093/ulr/unx046
Harris, S. L., & Mooney, C. W. (1994). A Property-Based Theory of Security Interests: Taking Debtors’ Choices Seriously. Virginia Law Review, 80, 2021-2072. https://doi.org/10.2307/1073551
Hudson, J. (1995). The Case against Secured Lending. International Review of Law and Economics, 15, 47-63. https://doi.org/10.1016/0144-8188(94)00003-D
Human Rights Watch (November 18, 2007). Nigeria: Investigate Widespread Killings by Police. https://www.hrw.org/news/2007/11/18/nigeria-investigate-widespread-killings-police
Iheme, W. C. (2013). The Role of Self-Help Repossession under Article 9 of the UCC: Lessons for Nigeria. LL.M Long Thesis of the Central European University. https://www.etd.ceu.edu
Iheme, W. C., & Mba, S. U. (2017). Towards Reforming Nigeria’s Secured Transactions Law: The Central Bank of Nigeria’s Attempt through the Back Door. Journal of African Law, 62, 131-153. https://doi.org/10.1017/S0021855317000043
International Monetary Fund (2005). Nigeria: Poverty Reduction Strategy Paper— National Economic Empowerment and Development Strategy (NEEDS). IMF Country Report, No. 05/433, 53. https://doi.org/10.5089/9781451828993.002
Kanda, H., & Levmore, S. (1994). Explaining Creditor Priorities. Virginia Law Review, 80, 2103-2154. https://doi.org/10.2307/1073554
Kohn, R., & Morse, D. (2016). UNCITRAL: The UNCITRAL Model Law on Secured Transactions. The Secured Lender, 72, 48-52.
Korybut, M. (2014). The Uncertain Scope of Revised Article 9’s Statutory Prohibition of Exculpatory Breach of Peace Clauses. Hastings Business Law Journal, 10, 271-346.
Kronman, A. (1975). The Treatment of Security Interests in After-Acquired Property under the Proposed Bankruptcy Act. University of Pennsylvania Law Review, 124, 110-164. https://doi.org/10.2307/3311461
Lipson, J. C. (2005). Secrets and Liens: The End of Notice in Commercial Finance Law. Emory Bankruptcy Development Law Journal, 21, 426.
LoPucki, L. (1994). The Unsecured Creditor’s Bargain. Virginia Law Review, 80, 1887-1965. https://doi.org/10.2307/1073548
Macleod, H. (1876). Principles of Economical Philosophy. Longmans, Green, Reader & Dyer.
McCormack, G. (2003). Rewriting the English Law of Personal Property Securities and Article 9 of the US Uniform Commercial Code. Company Lawyer, 24, 68-89.
McCormack, G. (2004). Secured Credit under English and American Law. Cambridge University Press. https://doi.org/10.1017/CBO9780511494789
McCormack, G. (2011). American Private Law Writ Large? The UNCITAL Secured Transactions Guide. The International and Comparative Law Quarterly, 60, 597-625. https://doi.org/10.1017/S0020589311000236
McRobert, R. (2012). Defining Breach of the Peace in Self-Help Repossession. Washington Law Review, 87, 569-594.
Meadows, R. (1994). A Potential Pitfall for the Unsuspecting Purchaser of Repossessed Collateral: The Overlooked Interaction between Sections 9-504(4) and 2-312(2) of the Uniform Commercial Code. The American University Law Review, 44, 167-217.
Meyer, K. (2001). A Primer on Purchase Money Security Interests under Revised Article 9. University of Kansas Law Review, 50, 143-194.
Ngo, V. M. (2002). Getting the Question Right on Floating Liens and Securitized Assets. Yale Journal on Regulation, 19, 85-169.
Nguyen, X. T., & Nguyen, B. T. (2014). Transplanting Secured Transactions Law: Trapped in the Civil Code for Emerging Economy Countries. Robert H. McKinney School of Law Legal Studies Research Paper, No. 39.
Nickles, S. H. (1995). Consider Process before Substance, Commercial Law Consequences of the Bankruptcy System: Urging the Merger of the Article 9 Drafting Committee and the Bankruptcy Commission. American Bankruptcy Law Journal, 69, 589-596.
Nwabueze, R. N. (2009). Alienations under the Land Use Act and Express Declarations of Trust in Nigeria. Journal of African Law, 53, 59-89. https://doi.org/10.1017/S0021855309000035
Nwachukwu, O. (23 August 2020). CBN, EFInA, SANEF in New Push for 80% Financial Inclusion by 2020. Business Day. https://businessday.ng/financial-inclusion/article/cbn-efina-sanef-in-new-push-for-80-financial-inclusion-by-2020/
Oditah, F. (1991). Lightweight Floating Charges. Journal of Business Law, 1, 49-56.
Oliyide, O. (2012). Law, Credit Risk Management and Bank Lending to SMEs in Nigeria. Commonwealth Law Bulletin, 38, 673-695. https://doi.org/10.1080/03050718.2012.707350
Otabor-Olubor, I. (2015). Stuck in a Time Warp: Security Interests in Chattel Mortgages and the Bills of Sale Legislation in Nigeria. International Company and Commercial Law Review, 26, 345-354.
Otabor-Olubor, I. (2017). Reforming the Law of Secured Transactions: Bridging the Gap between the Company Charge and CBN Regulations Security Interests. Journal of Corporate Law Studies, 17, 39-72. https://doi.org/10.1080/14735970.2016.1214227
Palmer, N. (1991). Bailment. Law Book Company.
Parks, J. L. (1922). The Rights of a Pledgor on Transfers of a Pledge. Minnesota Law Review, 6, 173-193.
Pennington, R. R. (1960). The Genesis of the Floating Charge. Modern Law Review, 26, 630-646. https://doi.org/10.1111/j.1468-2230.1960.tb00630.x
Picker, R. (1992). Security Interests, Misbehavior, and Common Pools. University of Chicago Law Review, 59, 645-679. https://doi.org/10.2307/1599916
Rollison, W. D. (1993). Priorities in the Law of Mortgages (continued). Notre Dame Law Review, 8, 215-242.
Rubin, E. L. (1993). Thinking Like a Lawyer, Acting Like a Lobbyist: Some Notes on the Process of Revising UCC Articles 3 and 4. Loyola Los Angeles Law Review, 26, 743.
Schroeder, J. (1994). Is Article 8 Finally Ready This Time? The Radical Reform of Secured Lending on Wall Street. Columbia Business Law Review, 1, 291-502.
Schwartz, A. (1989). A Theory of Loan Priorities. Journal of Legal Studies, 18, 209-261. https://doi.org/10.1086/468147
Schwartz, A. (1994). Taking the Analysis of Security Seriously. Virginia Law Review, 80, 2073-2087. https://doi.org/10.2307/1073552
Schwartz, A., & Scott, E. R. (1995). The Political Economy of Private Legislatures. University of Pennsylvania Law Review, 143, 595-654. https://doi.org/10.2307/3312527
Scott, E. R. (1994). The Politics of Article 9. Virginia Law Review, 80, 1783-1851. https://doi.org/10.2307/1073545
Shupack, P. (1992). Defining Purchase Money Collateral. Idaho Law Review, 29, 767-792.
Smead, E. E. (1936). The Rule against Retroactive Legislation: A Basic Principle of Jurisprudence. Minnesota Law Review, 20, 775-797.
Smith, I. O. (2001). Nigerian Law of Secured Credit. Ecowatch Publications Ltd.
Stacy, S. (2014). Follow the Leader? The Utility of UNCITRAL’s Legislative Guide on Secured Transactions for Developing Countries (and Its Call for Harmonization). Texas International Law Journal, 49, 35-52.
Sykes, E., & Walker, S. (1993). The Law of Securities. Law Book Company.
Tajti, T. (2013). Systemic and Topical Mapping of the Relationship of the DCFR and Arbitration. Kazimiro Simonaviciaus University.
Tajti, T. (2014). Could Continental Europe Adopt a Uniform Commercial Code Article 9-Type Secured Transactions System? The Effects of the Differing Legal Platforms. Adelaide Law Review, 35, 149-178.
Tajti, T. (2016). Franchise and Contract Asymmetry: A Common Trans-Atlantic Agenda? The Loyola of Los Angeles International and Comparative Law Review, 37, 245-273.
Triantis, G. (1992). Secured Debt under Conditions of Imperfect Information. Journal of Legal Studies, 21, 225-258. https://doi.org/10.1086/467906
Uwazuruike, A. (2020). #EndSARS: The Movement against Police Brutality in Nigeria. Harvard Human Rights Journal, 33. https://harvardhrj.com/2020/11/endsars-the-movement-against-police-brutality-in-nigeria/
Vig, V. (2013). Access to Collateral and Corporate Debt Structure: Evidence from a Natural Experiment. Journal of Finance, 68, 881-928. https://doi.org/10.1111/jofi.12020
Walsh, C. (2015). Justifications for UCC Article 9’s Treatment of Deposit Accounts: A Comparative Note. Penn State Journal of Law & International Affairs, 4, 350-362.
Weise, S. (2007). U.C.C. Article 9: Personal Property Secured Transactions. The Business Lawyer, 62, 1633-1646.
Whitney, F. A. (1933). Value and the Doctrine of Bona Fide Purchase. St. John’s Law Review, 7, 181-204.
Wood, R. J. (2010). The Definition of Secured Creditor in Insolvency Law. Banking & Financial Law Review, 25, 341-359.