INTRODUCTION

Credit facilities contribute greatly to the advancement of businesses in Nigeria, as it affords small and medium enterprises opportunities to make an impact in the competitive market. Businesses can thrive more in an environment where entrepreneurs can secure finances easily using identifiable assets as collateral. Access to affordable and timely credit is pivotal for the growth and sustainability of businesses in Nigeria.[1] Adequate financing enables individuals and enterprises to invest in infrastructure, expand production capacity, adopt new technologies, enhance competitiveness by participating in value chains, enhance operational efficiency and leverage economies of scale.

Secured credit transactions are essential to enterprises as they provide a mechanism for leveraging assets to obtain credit. It forms a fundamental aspect of modern commercial law, enabling entrepreneurs to obtain financing by granting lenders a security interest (proprietary or possessory) in identifiable assets as collateral for the purpose of growth and development of their businesses. Secured credits are loans in which one party, typically the lender, requires collateral as guarantee for repayment.[2] The party requiring collateral then obtains a security interest to ensure that the Borrower fulfils his covenant to repay or recover the lender’s money in the event of default.

The key feature of a security interest is that it attaches to identifiable assets, whether fixed or floating. Relying solely on the borrower’s promise to repay may not yield practical results. This is especially true given the protracted nature of litigation. However, when identifiable assets serve as collateral for a loan, the lender gains the power to sell those assets upon default. This arrangement significantly enhances the lender’s confidence in extending credit.

Traditionally, these transactions have relied on formal documentation, fixed asset collaterals, and manually centralised registration systems; to ensure enforceability and priority of interests. However, total reliance on traditional forms of security has tremendously limited small and medium scale enterprises. These traditional forms include fixed and floating charges, pledges, mortgages, and others. Enforcement of these securities also poses challenges. SMEs with limited or no fixed assets find it difficult to access credit facilities. This situation has hindered economic growth and development. Nigeria has taken commendable steps to address the challenges SMEs face in accessing credit through traditional security forms. The country has strengthened its legal framework. A key development is the enactment of the Secured Transactions in Movable Assets Act 2017.[3]

The Act was established to shift away from total reliance on fixed assets as collateral for credit facilities, allowing the use of movable assets instead. These would include intellectual property rights, cryptocurrency, and other acceptable movable assets that can be used to secure a loan. The intendment of the Act, as set out in its objective, is to promote financial inclusivity, facilitate access to credit secured with movable assets, enhance responsible advancement of credit to enterprises, especially small businesses, promote perfection of security interest of lenders, and encourage ease of realisation of security interest.[4]

Registration of collateral is pivotal in determining the priority of security interest holders and ensuring the smooth registration of collateral. The Secured Transaction in Movable Asset Act in section 10 established the National Collateral Registry, whose primary responsibility is to cater for the registration of security interests in movable assets, and enable a search on security interests.[5]  To avert perpetual litigation in determining whose security interest in respect to the collateral used in securing a credit facility ranks in priority, section 9 of the Act, with similar provisions in other legal frameworks regulating secured transactions in Nigeria, mandates perfection of the security interest. That is, the agreement creating a security interest must be registered with the collateral registry, and the determination of priority of security interest in the event that there is a competing claim is by the order of registration at the collateral registry.[6]

Despite the provisions of legal frameworks regulating secured transactions in Nigeria, the major challenge lies in the mode of conducting due diligence. Previously, due diligence regarding the ownership of the collateral – especially when intangible assets such as intellectual property are involved- perfection, creditworthiness of the collateral, among others are in most cases done manually. However, the rapid evolution of emerging technologies such as artificial intelligence (AI), Financial Technology (Fintech) platforms and digital data systems has begun to significantly transform the landscape of secured credit transactions, particularly by digitalising collateral registries. This development has made it much easier to carry out due diligence. The use of emerging technologies in secured credit transactions has made the different forms of security (Pledge, lien, mortgages, etc.) particularly attractive to lenders. This is mainly because of their simplicity and the effectiveness of enforcing traditional and modern security interests.

This has also made secured credit transactions potent by mitigating the clash of security interests, and averts the use of disputed assets as collateral. They challenge the foundational assumptions of secured credit transactions law. Concepts such as possession, control, perfection, priority, and even the nature of assets are being redefined. These changes offer increased efficiency, particularly in relation to digital assets, data protection, and the adequacy of existing legal frameworks. Emerging technologies have therefore become highly impactful in secured credit transactions. Their influence is especially evident with the pace of evolving and rapid technological advancement.

Conceptualising Secured Credit Transaction

A secured credit transaction is a business arrangement in which a buyer or borrower provides collateral to a seller or lender to guarantee payment of an obligation.[7] It involves a creditor obtaining a proprietary or possessory interest in a debtor’s asset as security for the performance of an obligation. The effectiveness of such arrangements depends on three core legal pillars:

1. Attachment– the creation of a valid security interest. The Secured Transactions in Movable Assets Act simplifies a security interest to mean a property right in collateral created by agreement, which secures payment or other performance of an obligation, regardless of whether the parties have expressly denominated it as a security interest. However, it does not extend to a personal right against a guarantor or any other person liable for the performance of the secured obligations.[8]
2. Perfection– steps taken to make the interest enforceable against third parties
   
   
3. Priority- the ranking of competing claims.

These principles have been structured around tangible, identifiable and geographically situated assets, such as land, goods or equipment. Even with the expansion to intangible assets (e.g. receivables), the legal framework still assumes identifiable ownership, centralised registration and territorial jurisdiction. However, the emergence of digital technologies is increasingly rendering these assumptions inadequate.

Conceptualising Emerging Technologies

Emerging technologies refer to new and evolving digital tools and systems that are transforming traditional industries and practices. In the context of finance and secured lending, the most relevant include blockchain technology, AI, digital platforms, and electronic registries. Blockchain technology, for instance, enables the creation of decentralised and tamper-resistant records of transactions. It allows assets to exist in digital form and be transferred securely without the need for intermediaries. Artificial intelligence, on the other hand, uses data-driven algorithms to assess creditworthiness, predict-risk and automate decision-making processes big data complements AI by providing vast amounts of information from which meaningful patterns can be drawn.

In Nigeria, while these technologies are still developing, their presence is already evident. Financial technology (fintech) companies are increasingly using digital platforms to provide loans, sometimes without requiring traditional forms of collateral. Similarly, the National Collateral Registry represents a move towards digitisation in secured transaction, allowing lenders to register security interests electronically.[9]

Impacts Of Emerging Technologies in Secured Credit Transactions

Modern forms of security over movable assets have evolved significantly, providing alternative financing options for individuals and businesses. The advancement of emerging technologies such as artificial intelligence and its tools has caused a trajectory shift from the traditional or manual processes of perfection of security interest and has made the enforcement of security interest easier and potent. The following are some of the impacts of emerging technologies on secured credit transactions:

(a) Expansion of Acceptable Forms of Collateral

One of the most significant impacts of emerging technologies is the expansion of what can be used as collateral. Traditionally, secured lending in Nigeria focused on tangible assets such as land, vehicles or machinery. However, technology has introduced new forms of security. Digital assets such as cryptocurrency, intellectual property and tokenised assets are gradually gaining recognition as forms of collateral, particularly through digital registration systems.

To align with the global best practices in the use of emerging technology, the Secured Transaction in Movable Assets Act 2017 was enacted to widen the scope of assets that can be used as collateral in accessing credit facilities in Nigeria. The Act, orchestrated by the United Nations Sustainable Development Goals, has given rise to the emergence of some digital platforms, enabling lenders to assess creditworthiness and provide financing options to enterprises. These platforms often utilise data analytics and AI to evaluate credit risk. Intellectual property assets, by their nature, are intangible, which means that they are not transacted physically. The Act incorporates assets like intellectual property as a movable asset, as section 62 of the Act defines movable assets as tangible or intangible property other than real property.

As a matter of fact, the Nigerian Start Up Act 2022, in section 29(3)(e), recognises registered intellectual property rights as sufficient collaterals for startups to access financial support under the Credit Guarantee Scheme established by the secretariat of the National Council for Digital Innovation and Entrepreneurship. This highlights the increasing acceptance of intellectual property rights as valid security for finance transactions even in Nigeria.[10]

(b) Improved Access to Credit

Emerging technologies have significantly improved access to credit, especially for individuals and small businesses that would otherwise be excluded from traditional banking systems. Through AI-driven credit scoring, lenders can now assess borrowers based on alternative data such as transaction history, mobile phone usage, and spending patterns. This reduces the reliance on formal collateral and allows more people to participate in the credit market. In Nigeria, fintech companies are already leveraging these tools to provide quick and accessible loans. While this does not eliminate the need for secured transactions, it complements the system by broadening financial inclusion by financing needs of individuals and small businesses without imposing onerous legal or administrative burdens.

(c) Efficiency in Registration and Perfection of Security Interests

The introduction of electronic collateral registries has transformed the process of perfecting security interests. In Nigeria, the National Collateral Registry allows lenders to register their interests in movable assets quickly and with relative ease. This digitisation reduces administrative delays, minimises the risk of fraud and improves transparency in determining priority among creditors. This system reflects international best practices, particularly those embodied in the UNCITRAL Model Law on Secured Transactions.[11] Emerging technologies, particularly blockchain, have the potential to take this even further by creating decentralised and immutable registries that cannot be altered or manipulated. In relation to intangible assets like trademark for instance, the evolving nature of technology has helped in digitalising trademark registry wherein registration of ownership is made easier and accessible.[12] By so doing, it becomes easier and cheap for lenders to carry out search at the trademark registry website to determine the true owner of the intellectual property sought to be used to facilitate credit, before advancing such credit facility to the debtor.

(d) Automation of Enforcement Mechanisms

One of the key strengths of modern forms of collateral is their ease of enforcement. Emerging Technology has influenced how security interests are enforced. Through automated systems and smart contracts, it is now possible for certain obligations to be executed without human intervention. For example, in more advanced jurisdictions, collateral can be automatically liquidated once a borrower defaults.[13] The ease and automated nature of enforcement mechanisms make security transactions attractive to lenders seeking quick remedies. Although this is not yet fully operational in Nigeria, the concept raises important possibilities for the future. At the same time, it raises concerns, as Nigerian law traditionally emphasises due process and judicial oversight in enforcement. In Okafor v Nnaife,[14] the Supreme Court stressed the importance of complying with procedural requirements in contractual enforcement. Fully automated enforcement could conflict with these principles, particularly where disputes arise.

(e) Increased Transparency and Reduction of Fraud

One of the persistent issues in secured lending has been the risk of multiple charges on the same asset or fraudulent representations by borrowers. Emerging technologies help address this problem. Digital registries and blockchain systems create transparent records that can be easily verified. This reduces information asymmetry between lenders and borrowers and enhances trust in the system. Through the digitalisation of collateral registries, the potency of secured transactions lies in the transparency of ownership, the reduction of conflict of security interest, and continued relevance to the needs of businesses.

Legal and Regulatory Challenges of Emerging Technologies

Despite the benefits, the integration of emerging technologies into secured credit transactions is not without challenges. First, there is regulatory uncertainty. Nigerian law does not yet provide clear guidance on the status of digital assets as collateral or the enforceability of smart contracts. Second, there are jurisdictional issues. Digital transactions often transcend national borders, making it difficult to determine which laws apply. Third, there are concerns around data protection and privacy, especially with the increasing use of personal data in credit assessments.[15]

Finally, the rapid pace of technological change means the law is often playing catch‑up. This creates gaps that could be exploited if not properly addressed. This is especially as Nigeria has not yet enacted specific laws regulating emerging technologies, apart from the Nigeria Data Protection Act 2023 and its Guidelines of 2025.

Conclusion

Emerging technologies are undeniably transforming secured credit transactions, offering new opportunities for efficiency, transparency and financial inclusion. These developments are beginning to reshape how credit is accessed, secured, and enforced particularly through fintech innovations and electronic registries.

However, the full potential of these technologies cannot be realised without corresponding legal and regulatory reforms. There is a need for Nigerian law to evolve in a way that accommodates innovation while preserving the core principles of fairness, certainty, and accountability that underpin secured transactions. This need is particularly pressing as the country has incentivised the use of intangible property as collateral for loans through the enactment of the Secured Transactions in Movable Assets Act 2017. The Act recognises the use of movable assets – whether tangible or intangible- in accessing financial facilities. More importantly, the intersection of technology and secured credit presents an opportunity for Nigeria to redefine its financial architecture in a way that is both inclusive and globally competitive. Harnessing this opportunity requires not only legislative reform but also institutional efficiency, regulatory coordination and awareness. Without these, the benefits of innovation may remain unevenly distributed or inadequately enforced.

Ultimately, the impact of emerging technologies is not simply about replacing old systems with new ones. It is about rethinking how secured credit transactions operate in a digital age and ensuring that the legal framework is robust enough to support that transformation.