Introduction
The concept of pawn brokering entails the giving out of short-term credit facility by certain people known as pawn brokers, to persons who are desirous of obtaining such loans in exchange for some item(s) of value1 which is pledged as collateral for the pawn loan. These individuals get their valuables back from the pawnbroker, if they successfully pay back the money which they were loaned along with the accruing interest on the loan. Upon failure to repay the loan and accruing interest, the pawnbroker reserves the right to sell the item(s) to a subsequent customer in order to recover the loan sum.
Pawnbrokering in Nigeria
The concept of pawn brokering is not a very common concept within the Nigerian financial landscape, as such, there are not many pawn shops spread across the length and breadth of the country. However, for those in operation in Nigeria, they seek to provide easy-to-access services to individuals who are desirous of engaging them.
It must be noted that pawnbrokers are not the same as money lenders as by virtue of the provision of Section 2 of the Money Lenders Law of Lagos State, a money lender is:
Every person whose business is that of money lending or who carries on or advertises or announces himself or holds himself out in any way as carrying on that business whether or not that person also possesses or earns property or money derived from sources other than the lending of money and whether or not that person carries on the business as a principal or as an agent; but shall not include… a Licensed pawnbroker.
Due to the fact that the concept of pawnbroking is relatively unknown and underutilized in Nigeria, there are not many specific legislations which deal with the issue of pawn brokering in Nigeria. Furthermore, due to the fact that Pawnbrokering is not on the exclusive legislative list, there is no Federal Legislation which is dedicated solely to regulating pawnbroking, thus, various states have taken the liberty to enact their own pawnbrokering laws which regulate pawnbrokering within their jurisdiction.
However, the pawn brokers law of Lagos State appears to be the most comprehensive law relating to pawn brokering in Nigeria and the said law regulates such transactions within the territory of Lagos. The law consists of 49 sections and deals with matters ranging from obtaining pawn brokering licenses to penalties for offences contrary to the law.
In Lagos state, the sphere of the services which pawnbrokers provide includes the following:
- Loan services
- Swap services
- Sales
- Loan services
Pawn brokers render loan services to customers by evaluating the collateral items brought in by individuals in order to determine the worth of those items. After the evaluation of the item, an agreement is reached between the parties to the transaction and the repayment period and interest rate is fixed. Upon failure of the customer to repay the loan, the pawn broker may elect to sell the goods in order to recover the loan sum.
2. Swap services
Furthermore, in addition to loan activities, pawn brokers swap items gotten from their loan activities, in exchange for other items for a profit. The worth of the item(s) is based on the prerogative of the swap agent.
3. Sales
Pawn brokers also in the course of their business, sell goods which they have obtained through their loan and swap activities. Through their sale activities, clients can walk into the pawn shop and simply purchase available items at a rate which covers the cost of the item, as well as profit for the pawn broker.
Obtaining a Pawn Brokering Licence
For persons seeking to operate as pawn brokers within Lagos state, they must:
- By written notice through a registered letter posted at least 21 days before the application, notify a senior police officer in the district of the intention to carry on the pawn brokering business.2
- The notice must contain the name, address and the location of the shop in which he intends to carry on business.3
- Apply to a magistrate within the jurisdiction where they intend to carry on the pawn brokering business.4
- Satisfy the magistrate that –
- He is of good conduct
- neither the shop where the business is intended to be carried out nor other premises in its environs is frequently visited by people of questionable character
- the provisions of the law are fully complied with.5
- The magistrate issues a certificate to a successful applicant in accordance with the form in the fourth schedule of the Law.
- The applicant applies for a licence from the issuing authority.
For an intending pawnbroker, the requisite licence is issued upon payment of a prescribed yearly fee which is reviewed periodically. Furthermore, such a person will be required to take out separate licenses for each pawnbroker shop that they operate. This licence is liable to be forfeited if the pawnbroker is convicted of any fraud in the pawn broker’s business or where the pawn broker obtains stolen good knowing them to be stolen. 6
Conclusion
Despite being a great means to readily access loan facility and also its potential to be a major source of revenue generation for those who engage in this business and ultimately also for the state through tax remittance, the concept of pawnbroking is highly under-utilized in Nigeria and has been left fallow in the country, save for the few individuals who have seen the prospects of pawnbroking and have engaged in the business. It is therefore imperative for government and regulators to look into ingenious ways to make pawnbroking thrive in Nigeria in order for individuals to reap from the benefits which accrue therefrom. There is also the need for continuous amendments to the law so that negative emerging trends can be curtailed and the laws enforced.
1.These items of value range from jewellery, gold, televisions, phones, computers, electrical appliances, etc.
2. Section 35 of the Pawnbrokers Law of Lagos State
3. Supra
4. Section 33 of the Pawnbrokers Law of Lagos State
5. Section 36 of the Pawnbrokers Law of Lagos State
6. Section 31 of the Pawnbrokers Law of Lagos State
Written by Jerry-Joe Tobechukwu Monye for The Trusted Advisors
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