Nigeria's economy is witnessing a surge in innovation, particularly its entertainment and technology sectors.

However, creatives and startups can sometimes face significant challenges in accessing traditional financing leveraging their craft, due to the intangible nature of their primary assets. In this context, Intellectual Property (IP) securitisation presents a promising solution, and can enable businesses to leverage their IP assets to secure funding.

As intangible assets increasingly drive economic value, IP securitisation has emerged as a compelling avenue for financing and could unlock significant economic potential. This article explores the concept of IP securitisation, its applicability in Nigeria, and the potential it holds for transforming the country's financial landscape.

Understanding IP Securitisation

Essentially, IP securitisation is a financial strategy that involves converting IP assets, such as patents, trademarks, or copyrights, into tradable financial instruments that can be bought, sold, or used as collateral for loans and other sophisticated forms of financing. Traditionally, securities in Nigeria have been associated with tangible assets, such as real estate or equipment. As intangible assets increasingly drive economic value, IP securitisation has emerged

as a compelling avenue for financing and could unlock significant economic potential and with the explosion of Nigeria's entertainment and technology industries, IP in music and films, and even proprietary software may very well become a pivotal form of security.

Recent Statutory and Policy Shift toward IP Securitisation in Nigeria

IP as a means of securing financing has, over time, gained some recognition with room for improvement. For instance, the Companies and Allied Matters Act (GAMA) 2020 affirms the right of companies to create security interests (charges) over their intellectual property; however, in more recent times, additional legal frameworks have emerged to complement existing laws, providing clearer recognition

of IP assets as viable instruments for securing loans. More recently, the Investments and Securities Act, 2025 expanded the definition of securities to include digital and virtual assets.' While IP is neither a digital nor a virtual asset (intangible), the digital representation of IP, such as music/ film in an encoded format (MP3s), certainly qualifies as a digital asset, which can be leveraged in raising financing.

The current state of our laws suggests that creatives and startups can indeed leverage their respective IP rights in unlocking the financial markets; provide the financing can be structured in an acceptable manner. The gap in the sector may then be such deliberate policy direction and political will to drive implementation, compliance and acceptance of these IP assets as securities in the traditional and non-traditional financial institutions.

Securing Financing With IP Assets

IP Securitisation can be procured through traditional financing methods, which include IP Auction, IP back lending and IP Sale-Leaseback.

IP Auction: IP auctions involve selling IP assets to the highest bidder through a competitive bidding process. This allows IP owners to monetise their assets by attracting buyers willing to pay a premium for the rights to exploit the IP.

IP Sale-Leaseback: This method involves an investor acquiring an IP asset and leasing it back to the company. The company continues to use the IP in its operations, but pays a lease or licensing fee to the flow from IP assets may be unstable as opposed to tangible assets, and with the exception of software, there is no definitive way to determine the true value of most IP assets upfront.

IP-back lending: IP-back lending essentially involves a lender taking an interest in the borrower's IP assets as security in exchange for a loan. It can be structured for the owner of an IP asset to assign future income streams (such as royalties) to another party in exchange for a lump sum payment. This method allows the IP owner to monetise future revenue without parting with the asset itself. It can also be structured to allow the lender to have access to all present and future income from the IP asset, which will extend beyond stream royalties to ownership of the masters and any licensing or similar rights arising from the same. This has already been done. In 1997, David Bowie, a performing artist in the United States, used royalties from his present and future album sales as collateral to issue bonds, raising a whopping US$55 million. There were certainly several structuring considerations, including his use of funds . This financial innovation gave rise to what are now known as Bowie Bonds.

Essential Parties in IP Securitisation

The IP securitisation typically involves the following entities:

Originator: The original holder of the IP rights. This can be an individual or a corporate entity holding rights to a literary work or software.

Special Purpose Vehicle (SPV): Where required, particularly in the case of a human originator, the originator may set up an independent legal entity which will approach the market to raise the required financing using the IP as security. To effectively do this, the originator, as sponsor of the transaction, may either provide the necessary guarantees by creating a security over the asset in favour of the investors, or outrightly transfer the asset to the SPV as borrower/ issuer.

Investors or Creditors: Individuals or entities that provide financing by investing in the financial instruments issued by the Originator/SPV.

Trustee: Acts as an intermediary between the investors and the SPV, ensuring the proper management and distribution of funds. These entities will also usually hold the rights to the IP assets for the duration of the financing, and will have the obligation to enforce the same in the event of a default by the Originator/SPV.

Other key participants include the rating agencies, credit enhancers, and insurance companies.

Challenges

While IP securitisation presents opportunities, several challenges remain, including:

1. Valuation Difficulties: The intangible nature of IP assets makes accurate valuation challenging, particularly for newly registered or untested assets. This is further underscored considering that the cash flow from IP assets may be unstable as opposed to tangible assets, and with the exception of software, there is no definitive way to determine the true value of most IP assets upfront.
2. The Risk of Intellectual Property Infringement: The constant threat of infringement raises another concern, as this can drastically jeopardise its value, leaving lenders at risk.
3. The Difficulty of Selling Intellectual Property: Unlike physical assets that can be easily bought and sold, secondary markets for IP are still developing and lack liquidity. This may make it challenging for lenders to quickly sell their interest in a case of default, potentially locking them into long-term commitments with uncertain outcomes. The lack of liquidity may also discourage some investors from entering the market
4. Trend Shift and New Technologies: There is the risk of a new technology making a patent obsolete.New trends and tastes in music can also affect existing literary works. These risks can affect the value of the underlying IP asset, and thus negatively impact the investment offering.
5. Lack of Awareness and Expertise: This is an emerging financing option, particularly in Nigeria. Accordingly, many creatives are understandably not aware of the possibility. Traditional lenders and advisers may also not be familiar with the necessary instruments for making the offering, and this may hinder the growth of IP securitisation.

The way forward: Cultivating an Environment for IP Securitisation

Despite the challenges identified above, the potential of IP securitisation is undeniable. To create a viable environment for IP securitisation in Nigeria, several solutions should be implemented:

1. IP Registration: Proper registration of IP is essential for establishing legal ownership and using IP assets as collateral in financing. For creatives, inventors, and businesses, registering IP rights is a critical step to securing legal protection and reducing the risk of ownership disputes. Although copyright registration is not mandatory, the Copyright Act 2022 recognises registered works and grants a presumption of ownership to the registered party.' In financing transactions, lenders typically require verified proof of ownership, which can only be reliably provided through formal IP registration.
2. IP Insurance: IP insurance safeguards intellectual property assets like patents, trademarks, and copyrights against risks such as infringement, loss of value, or even invalidation. This crucial protection enhances an IP's inherent value and significantly boosts its appeal to potential lenders, essentially "de­ risking" these often-intangible assets. Insurers will need to develop creative, tailored policies for diverse IP types, employ sophisticated valuation methods, and likely collaborate with IP experts to offer effective products. By providing this vital security, IP insurance builds lender confidence, unlocking capital that businesses can then leverage for growth and innovation.
3. Legal Framework Reforms, Awareness and Education: Awareness and education are essential for broadening the understanding and adoption of IP financing among creators, innovators, and businesses. Governments can play a key role by establishing supportive legal frameworks, recognising IP as valid collateral, standardising valuation methods, and offering incentives for IP-backed lending. In general, government policy drive in addition to legislation, is required to achieve clear IP securitisation inclusion in our traditional and non-traditional financing options in Nigeria. Public campaigns can simplify complex IP financing concepts for various audiences, from creators and small and medium enterprises (SMEs) to lenders, highlighting their economic benefits and practical applications. Complementary educational initiatives, such as integrating IP financing into academic curricula, offering practical workshops for professionals, and developing certification programs, will help build a knowledgeable ecosystem around IP securitisation.

Conclusion

While the potential of IP securitisation in Nigeria is undeniable, its realisation depends on deliberate policy reforms, institutional readiness, and stakeholder awareness. Involving and ensuring active inclusion of the financial institutions and their regulators. Turning promise into practice requires a concerted effort to create the necessary infrastructure to unlock the true value of intellectual property as a viable asset class. Until then, its transformative power will remain largely untapped.