Part I General Provisions

It was stated in the Draft Law that the proposed legislation will be referred to as ‘Security Interests in Movable Property Act’ to provide for the creation, priority, registration and enforcement of security interests in personal property.83 _{The proposed reforms stated in the} Draft Law is applicable to all security interests in personal property, both tangible and intangible, in Nigeria regardless of its form or denomination, thus accepting their economic purpose as functional equivalents.84 The existence of the law would not repeal all the previous laws which governed security interests, except those that are contrary to the provisions of the Draft Law.85 The scope of the Draft Law encompasses all security interests in personal property created by agreement that secure payment or other obligatory performances.86 For the avoidance of doubt, a security interest will be deemed as synonymous to a security right, interest or charge in personal property inclusive of fixtures which secures payment or performance of an obligation.87 This was the first ever attempt to unify and codify all security interest laws in personal property in Nigeria under one statutory enactment. It was even alleged that the Draft Law, if enacted, would be ‘the most comprehensive and advanced in the world’!88 Sadly, this Law which was deemed impeccable was not enacted into legislation in Nigeria. If successfully enacted and implemented, it would have positively impacted on business access to finance in Nigeria. Financial institutions would have been able to lend while minimising the risk normally associated with unsecured lending because they would be protected by statutory provisions,

83 _{Draft Law, preamble.} 84 _ibid.

85 _{Draft Law, para 92.5.} 86 _{Draft Law, para 1.1.}

87 _{Draft Law, 8. The term ‘security interest’ as used in Article 9 of the Uniform Commercial Code (UCC) is}

not often referred to in continental Europe as equivalent to ‘security right’ which is the term commonly used instead in that it is recognised that an ‘interest’ is not equal to a right. However, the Draft Law and CBNR does not differentiate between both terms.

88 _{Heywood Fleisig, Nuria de la Peña and Corey Loney, Registry Assessment for Filing Security Interests in} Movable Property, Prepared for Nigeria: Secured Finance for Movable Assets - Collateral Reform and Leasing Development (CEAL Second Progress Report, Washington DC, March 2010) summary I, ‘Registry Report’.

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where the existing substantive property and commercial laws have so far proved to be deficient.

One of the main reasons for proposing a Draft Law was to replace the Nigerian statutory provisions on equitable charges (section 178 – 182 CAMA), thereby establishing a comprehensive and functional approach in taking security in personal property owned by corporations as suggested in the Cuming Report.89 For instance, it was reiterated in the CEAL Registry Report that the CAC was not adequately utilised for registration of equitable charges to the extent that when compared with other countries, about 1,800 charge registrations are done at the CAC as against one million in Romania.90 Although in reality, due to administrative expenses, there are charges that exist which are not filed at the CAC, and are only filed when the grantor is on verge of insolvency leading to loss of priority against third party claimants who may have already perfected their security interest.91

As proposed in the Cuming Report, it was reiterated again that electronic-based notice registration would be introduced in the proposed legislation which will bring about faster and cheaper filing of security interests, safer system of publicity, and, certainty in determining priority based on the time of registration.92 Of course, there are other methods of providing the public with notice of security interests, including newspaper announcements, online media and other public postings, but their effectiveness was deemed to be rather limited and the cost of publication with these systems was likely to be more expensive than notice registration.93 Besides, a secured creditor relying on public announcement and advertisements may lose priority against subsequent creditors as a result of difficulties associated with predicting the exact hour and minute the third party will receive the notice especially where the communication system is poor especially in rural locations in Nigeria.

The Draft Law does not apply to ships, land except for rules governing fixtures, lien arising by operation of law except for filing of notice of their existence, aircraft and other mobile equipment’s as defined in international conventions to which Nigeria is a signatory.94 An example of such Convention is the Convention on International Interests in Mobile Equipment,95 which is divided into separate protocols for three different types of mobile

89 _{Draft Law, 1 (see commentaries); Cuming Report, Recommendation 5.}

90 _{CEAL Registry Report, summary ii. The lack of use was attributed mostly to evasion of taxes and filing fees,}

negligence and ignorance on the part of corporations, complex transaction-filing procedures, and administrative problems at the registry which indirectly leads to frustration, or, a combination of these factors.

91 _{CEAL Registry Report, 1.}

92 _{CEAL Registry Report, summary iii.} 93 _{CEAL Registry Report, 12.}

94 _{Draft Law, p 7.}

95 _{Cape Town, 2001 < http://www.unidroit.org/english/conventions/mobile-equipment/mobile-equipment.pdf >}

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equipment (space objects,96 railway rolling stock97 and aircraft98). Nigeria has ratified the Convention and the Aircraft Protocol, thus making it a recognised law in Nigeria. In contrast, although certain excluded types of asset for instance, land, in the Draft Law extends to a type of proceeds for instance, rent, so the Draft Law will apply to the security interest in the receivable except to the extent that the law governing the type of asset states otherwise.99