By Obinna Chima
The Equipment Leasing Association of Nigeria (ELAN) has released a review of the Nigerian leasing industry for 2015.
According to the association’s Executive Secretary, Andrew Efurhievwe, a review of the past five years, showed a steady growth of the industry even in the face of the economic meltdown.
According to him, available statistics show an impressive 27.39 per cent growth in leasing activities. The volume of outstanding leases grew from N869 billion in 2014 to N1.1 trillion in 2015, and this was based on the developmental attributes of leasing which make it attractive during a boom or recession, as is currently the case.
Efurhievwe stated that many industries relied on leasing as a creative financing alternative for capital assets, adding that this has created increased investments from existing lessors and attracted new entrants into the leasing industry to tap into the opportunities in the market.
He further explained that analysis by sector of the leased volume recorded in 2015, showed that even with the global fall in the price of crude oil, the oil and gas sector still had the highest volume of leased assets.
He said the volume of leased assets in the sector rose from N284 billion in 2014 to N361 billion in 2015, representing 27 per cent growth and 33 per cent of total portfolio. Next to the oil and gas sector was the transport sector, which recorded 21 per cent growth rate from N228 billion in leased asset in 2014 to N290 billion in 2015.
Other sectors like telecoms, agriculture and manufacturing as well, also had considerable growths.
“Categorising the lease transactions according to types, finance leases retained the dominant position accounting for 75 per cent of all lease transactions, while operating lease accounted for 25 per cent. It is however expected that operating lease will continue to increase its market share as more demands are being made from large corporates due to its service oriented nature.
“The banks continued to play dominant role in providing funds to lessors for lease transactions and direct participation as lessors especially at the high end of the market, financing big ticket leases. The non-bank lessors contributed 80 per cent of lease transactions concentrating majorly on the Small and Medium Scale Enterprises (MSMEs).
“Equipment vendors are equally making waves in the market, particularly in the consumer market in the lease of their products such as household assets and cars under vendor lease programmes supported by banks in some cases,” Efurhievwe said.
When asked about the benefits of the leasing law, Efurhievwe said it would make it easier for Nigerians to acquire assets to enhance quality of life and create more business and job opportunities.
“It will also create easier ways for small businesses to acquire productive assets for growth and job creation; while it will help the government to have a well-regulated sector, with increased investment, revenue and reduce poverty through job creation,” he added.
Efurhievwe further stated that in terms of asset categorisation, about 50 per cent of leased assets are vehicles, including trucks for haulage and buses for inter-state commercial transportation. He said Nigerian lessors basically focused on general items due to the increased risk of specialised assets, aggravated by the limited knowledge of the nature of the assets and the high cost of such assets.