Secured Transaction, Collateral Registry and Leasing
In 2017, the Secured Transaction in Movable Assets Act was enacted to encourage the use of movable assets as collateral for a loan. This is part of Government’s efforts to enhance access to finance especially to SMEs and financial inclusion
The Act applies to all securities in movable assets created by an agreement that secures payment or the performance of an obligation and all public registries on movable assets are expected to be operated in a manner that creates automated interface with the National Collateral Registry.
By its very nature, the Act does not apply to leasing, although an attempt was earlier made to include leasing under the Act. Leasing appears to work in opposite in the sense that, ownership of the asset belongs to the lessor and thus it will be contradictory for the lessor to pledge its own property for a loan with the lessee. The Act envisages a situation where a borrower wants to get a loan and have a movable asset which he can now use as a security. He will then grant the creditor permission to register it at the collateral registry to serve as collateral for the loan.
Leasing companies are however may have a need to use the collateral registry in sale and leaseback transactions or perhaps when they are assigning lease receivables for a loan. In the case of sale and lease back, the leasing company may have to do a search at the Collateral Registry to see if the asset which is owned by the proposed lessee is encumbered or not.
For now, since the Equipment Leasing Registration Authority is yet to come into operation, it is advisable for lessors to check with the National Collateral Registry in case of any sale and lease back transaction.
You can assess the registry by visiting www.ncr.gov.ng
ELAN Advisory Service 2019