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A Critical Appraisal of Secured Transactions Over Personal Property in Nigeria: Legal Problems and a Proposal for Reform

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A Critical Appraisal of Secured Transactions Over Personal Property in Nigeria: Legal Problems and a Proposal for Reform A Critical Appraisal of Secured Transactions over Personal Property in Nigeria: Legal Problems and a Proposal for Reform Iyare Otabor-Olubor A thesis submitted in partial fulfilment of the requirements of Nottingham Trent University for the degree of Doctor of Philosophy March 2017 Copyright Statement This work is the intellectual property of the author. You may copy up to 5% of this work for private study, or personal, non-commercial research. Any re-use of the information contained within this document should be fully referenced, quoting the author, title, university, degree level and pagination. Queries or requests for any other use, or if a more substantial copy is required, should be directed to the owner(s) of the Intellectual Property Rights. i Abstract The thesis contemplates the need for Nigerian policy makers to undertake a reform of secured transactions law to meet international best standards, building upon earlier, unsuccessful, efforts by lawmakers, and drawing upon international benchmarks. It critically analyses the Registration of Security Interests in Movable Property by Banks and Other Financial Institutions in Nigeria (Regulation No.1 2015) ‘CBNR’ published on 2 February 2015. The CBNR, with a primary aim of facilitating affordable credit, and to modernise secured transactions law through the use of personal property as collateral, has departed from its previous position which it inherited from England. This thesis has drawn comparisons between the CBNR and prior reform initiatives particularly the Draft Law 2009 prepared by the Centre for the Economic Analysis of Law (CEAL). These reforms, which were not implemented, recommended wholesale changes to harmonise all existing secured transactions law in Nigeria. The CBNR does not follow this approach, but instead, adopts a piecemeal approach to reform. Correspondingly, this forms the framework within which this study has been undertaken with reference to whether a piecemeal or wholesale reform is now required. This thesis has followed the International Finance Corporation (IFC) approach which focuses on a three-stage secured transactions reform strategy - modernisation of the existing legal framework; establishment of an electronic collateral registry; a concerted effort towards building capacity. With the assistance of international secured transactions legal frameworks such as the UNCITRAL Legislative Guide on Secured Transactions 2007, and its Registry Guide 2014, the CBNR has been benchmarked against these adaptable legal frameworks for the purpose of harmonising secured transactions law, in search of the international best practice which may be desirable for Nigeria. The thesis identifies and discusses at length several problems and inconsistencies associated with the CNBR, and the thesis makes suggestions for a wholesale reform of the Nigerian secured transactions law. This thesis builds on existing knowledge on secured transactions law reform with particular reference, and usefulness, to sub-Saharan African countries and other developing countries that wish to attempt a similar reform of this nature. ii ACKNOWLEDGEMENTS The completion of this thesis could not have been possible without the assistance of many people who supported me throughout this academic journey. First I wish to express my highest gratitude to God Almighty for this rare opportunity of completing a PhD. Also, I would like to thank my entire family – my siblings - Ofe, Osayem and Ogho; and my supportive wife, Blessing Osamuede. I personally wish to dedicate this thesis to my very wonderful and loving parents, Joseph and Roseline. It would have been impossible to undertake and complete this project without their continued support and contribution. I would also like to take this opportunity to thank my excellent supervisors, Professors Paul Omar and David Burdette, especially for their advice and regular monitoring meetings which enabled me develop an understanding of this subject. I am also heartily thankful to Professor Rebecca Parry and Graham Ferris for their encouragement, guidance and support towards the final completion of my thesis. I would also like to take this opportunity to extend my gratitude to certain individuals: Richard Calnan (Norton Rose Fulbright LLP) for the opportunity given to me to be involved in the City of London Law Society Financial Law Committee Secured Transactions Law Reform project; and Dr Marek Dubovec (National Law Centre for Inter-American Free Trade) for his generous advice on secured transactions law reform in Africa. ALL VIEWS EXPRESSED IN THIS THESIS ARE THOSE OF THE AUTHOR’S AND OF NONE OF THE ABOVE. iii Table of Contents I. CHAPTER ONE ......................................................................................................................... 1 1.1 Introduction ....................................................................................................................... 1 1.1.1 Secured Transactions .................................................................................................. 3 1.1.2 Problems with the Existing Law of Secured Transactions in Nigeria ......................... 5 1.2 Purpose of Research.......................................................................................................... 7 1.3 International Legal Frameworks on Secured Transactions Law Reform ................... 9 1.3.1 The EBRD Secured Transactions Framework .......................................................... 11 1.3.2 The UNCITRAL Secured Transactions Framework ................................................. 12 1.3.3 The IFC Secured Transactions Framework ............................................................... 14 1.4 Potential Conflict of Interests between International Organisations and Nigerian Stakeholders ................................................................................................................................ 15 1.5 Limitation of Scope ......................................................................................................... 18 1.5.1 Real Security, Personal Security, and Quasi-security ............................................... 19 1.5.2 Possessory Security Interest and Non-Possessory Security Interest ......................... 20 1.5.3 Consensual Security Interest and Non-Consensual Security Interest ....................... 21 1.5.4 Land and Personal Property ...................................................................................... 21 1.6 Exposition ........................................................................................................................ 24 1.6.1 The Pledge................................................................................................................. 24 1.6.2 Lien over Personal Property ...................................................................................... 25 1.6.3 Security over Assets of a Company by way of Equitable Charge............................. 25 1.6.4 The Chattel Mortgage (Security Bill of Sale) ........................................................... 26 1.6.5 Financial Lease ......................................................................................................... 27 1.6.6 Field Warehousing .................................................................................................... 28 1.6.7 Stocks and Shares as Security ................................................................................... 28 1.6.8 Assignment of Account Receivables ........................................................................ 29 1.7 Methodology .................................................................................................................... 30 1.7.1 Approaches to Comparative Secured Transactions Law in Nigeria.......................... 31 1.7.2 International Harmonisation of Secured Transactions Laws .................................... 32 1.7.3 Summary of Chapters ................................................................................................ 34 II. CHAPTER TWO: THE HISTORICAL BACKGROUD OF TITLE AND POSSESSION OF PROPERTY IN NIGERIA ......................................................................................................... 36 2.1 Background ..................................................................................................................... 36 2.2 Title and Possession of Property under Nigerian Customary Law and in Ancient Rome 37 2.2.1 Conceptual Problems of Ownership Interest in Nigeria ............................................ 38 2.3 Customary Practices relating to Ownership in Nigeria ............................................... 39 iv 2.3.1 Grant of Property Rights by the Community under Indigenous Laws – The Communal Tenure System ........................................................................................................ 40 2.4 Pitfalls of the Customary Tenure System and the Land Use Act 1978 on Secured Transactions Law ........................................................................................................................ 45 2.4.1 Problems with the Land Use Act 1978 ..................................................................... 47 2.5 Concluding Remarks ...................................................................................................... 49 III. CHAPTER THREE: A CRITICAL REVIEW OF SECURED TRANSACTIONS LAWS IN NIGERIA .........................................................................................................................................
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