Nigeria’s Senate has taken a significant step towards easing the chronic cash flow challenges faced by small and medium-sized enterprises, concurring on Wednesday with the House of Representatives on the Factoring Assignment and Receivables Financing Bill, 2026 a landmark piece of legislation designed to open up fresh financing channels for businesses across the country.

The bill, which had already cleared all legislative stages in the House of Representatives, seeks to establish a comprehensive legal and regulatory framework for debt factoring in Nigeria. In simple terms, factoring allows businesses particularly Micro, Small and Medium Enterprises, known as MSMEs to convert unpaid invoices and outstanding credit sales into immediate cash, rather than waiting weeks or months for clients to settle their debts.

This arrangement, facilitated by a third-party financier known as a factor, effectively unlocks working capital that would otherwise remain tied up in unpaid receivables.

Leading debate on the bill during plenary, Senate Leader Senator Opeyemi Bamidele described the legislation as a structural reform that would create an enabling environment for alternative financing mechanisms and strengthen liquidity for businesses nationwide. He explained that the bill clearly sets out the terms governing factoring contracts between sellers and financiers, while defining the rights and obligations of all parties involved to ensure transparency and accountability in the process.

The bill received further endorsement from Senator Adetokunbo Abiru, Chairman of the Senate Committee on Banking, Insurance and Other Financial Institutions, who described it as a major intervention in Nigeria’s financial ecosystem. He noted that for too long, MSMEs had been left vulnerable by delayed payments, with many businesses delivering goods and services and then waiting up to 90 days or more before receiving payment a situation that leaves them unable to pay workers, restock supplies, or grow their operations.

Proponents of the legislation have pointed to the success of similar frameworks in countries such as Mexico, India, Chile, Brazil, and South Africa, where factoring policies have unlocked billions of dollars in working capital for small businesses and strengthened domestic value chains. If Nigeria can replicate even a fraction of those outcomes, advocates say the country could attract over one billion dollars annually through factoring alone, generating jobs and boosting investor confidence.

The passage of the bill is being seen as a timely intervention, particularly given the broader economic pressures facing Nigerian businesses, including the impact of currency devaluation on the cost of imports and operations. MSMEs form the backbone of the Nigerian economy, accounting for the vast majority of businesses and a significant share of employment, yet access to affordable and flexible financing has long been identified as one of the most persistent barriers to their growth and survival.

With the Senate’s concurrence now secured, the bill heads to President Bola Tinubu for presidential assent, after which it is expected to be operationalised through the relevant regulatory authorities. For millions of Nigerian small business owners, it represents a long-awaited structural shift from dependency on scarce bank credit to a more dynamic and invoice-driven model of financing.