—-Create 5.85m jobs
—-Attracted $40million foreign investment
A total of 22,988 businesses in Nigeria have secured lease financing to the tune of N3.48 trillion. Leasing enabled companies or individual to have temporary access to equipment for use without out-right purchase of the equipment. The amount is the total value of equipment leasing deals that were completed in the last five years. This development Vanguard learnt supported a total of 5.85 million jobs through equipment leasing. The sector it was learnt has so far attracted the sum of $ 40 million foreign investment into three Nigerian leasing firms by Aureos. The sector is as of today about 350 – members strong.
Latest statistics from Equipment Leasing Association of Nigeria, ELAN revealed that outstanding lease volume increased from N780 billion in 2013 to N869 billion in 2014 and is expected to grow higher when the data for 2015 is eventually released, representing a growth rate of 11.3 percent as against 16.8 per cent in 2013.
According to ELAN, the contribution of leasing in the last 15 years is over N4.83 trillion and is becoming more relevant in the Nigeria prevailing situation where access to finance is difficult, especially to Small and Medium Scale Enterprices.
Analysis of the various sectors revealed that, the oil and gas sector dominated the industry with 31.6 per cent of the lease volume closely followed by transportation with 15.8 per cent, Manufacturing sector grew by 11 per cent, Government, Agriculture and Telecoms all grew above 5 per cent while other sectors recorded 26 per cent growth.
A further breakdown of the statistics indicates that Vehicles as the most leased asset with 50 per cent, Plant/Machinery 29 per cent, Office Equipment 10 per cent while Aircraft Vessels had 2 per cent and others (including house hold equipment) 9 per cent.
In terms of types of lease transactions, finance leases dominated with 75 per cent while operating leases represent 25 per cent.
Operating lease will continue to deepen its market penetration with the increasing demand for the product especially from corporate customers, who are now redefining their business strategy to focus on their core business activity and outsource other services. The major contributors to leasing in Nigeria include banks playing at the high end of the market in terms of transaction value and supporting other lessors with funds for their transactions. The non-bank lessors however, have better spread representing 80 per cent of lease transactions, with many of them focusing on Small and Medium Scale Enterprises (MSMEs).
Vendors are equally enhancing their visibility in the market place, especially in the consumer market, where they are engaged in the lease of their own products mainly household assets and cars under vendor lease programmes supported by banks in some cases.
Majority of Nigerian lessors are engaged in general leasing, financing different types of
asset cutting across various industries, though financial capacity and industry’s knowledge may restrict participation in some specialised cases such as telecommunications, power and agricultural equipment. In order to further stimulate development of the leasing industry to contribute more effectively to the national economic development, the Federal Government recently enacted the Equipment Leasing bill into law as part of the support frame work. The new Act is expected
to bring sanity, certainty, create wealth, encourage more investments and promote overall economic growth.
Ordinary Nigerians are enjoying the fruits of leasing as more funds are going to the
‘people’s’ sectors – Manufacturing, telecoms, agriculture, government and transportation.
Finance is definitely a critical issue in the acquisition of capital assets. Going by global trends, financing model must not only be in harmony with current economic realities, but must be creative and flexible. Leasing is a unique financing tool that enhances capital formation. It is unique in the sense that it makes tailor-made provisions to meet the capital needs of every prospective client desiring to use the product.
Essentially, leasing is a contractual arrangement between an owner of an asset (lessor) and the user of the asset called the “lessee” where by the lessor gives possession and right of usage to the lessee for an agreed period of time, in return the lessee pays agreed amounts (rentals) over the period of the lease. At the expiration of the lease tenor, depending on the arrangement, ownership may be transferred to the lessee.
In today’s rapidly changing environment and highly competitive markets, equipment leasing comes as a valuable financing alternative for businesses. The appeal of leasing lies in the fact that it meets the diverse needs of the lessee.
For instance, leasing is a major cash management tool that allows businesses and individuals to acquire productive assets with payments tied to the cash flow generated from the use of the assets. It helps conserve working capital while expanding operations by freeing resources, which may be better, applied to other areas of operations. It also enables organisations to improve their balance sheet position and provides tax management benefits. It equally provides protection to the lessee against the risk of technological obsolescence by facilitating access to modern, state-of-the-art equipment at a lower overall cost.
According to ELAN, over the past few years, there has been increasing demand for leasing products because of flexibility, convenience and benefits. Globally, leasing is now recognised and established as a creative financing alternative that is used to meet the world’s equipment needs. It has been supporting the Nigerian economy and has the capacity to further contribute to accelerate the growth of the nation’s economy.
In Nigeria, modern leasing started in the1960s and has over the years been supporting economic development of the country through the provision of the much needed capital assets for productive ventures.
Today, the impact of leasing is becoming pronounced in all sectors of the economy, supporting infrastructure, generating employment and creating wealth. Leasing’s contribution to capital formation in the economy in the past 15years is over N4.8 trillion and it is becoming more relevant in Nigeria’s present situation where outright purchase of assets is getting more difficult especially to the Micro, Small and Medium Enterprises (MSMEs).
