Distinguished Members,
I am pleased to welcome you to the 26th Annual General Meeting of our Association and present to you the Financial Statements and Reports for the year ended 31st December 2020.
Global Economy
The year 2020, was a wonder year like no other, the year of the “new normal” when new economy with unfamiliar characteristics was unveiled and economic discourse dominated by the impact of COVID-19 pandemic. Indeed, the pandemic has with alarming speed, delivered a global economic shock of enormous magnitude – representing the largest economic disruption the world has witnessed in decades, causing a collapse in global activity. People all over the world witnessed profound changes in their lives: economic recession, unemployment, technology and the automation of jobs, the rise of digital currencies, lower returns on their savings, rising inequality and debts.
In response to the disaster, several countries provided large-scale macroeconomic support to alleviate the economic blow. Central banks in many countries eased monetary policy and took other far-reaching steps to provide liquidity and maintain investors’ confidence. These notwithstanding, the global economy contracted by 4.3 percent, the deepest global recession in eight decades.
Domestic Economy
The Nigerian economy which was on the slippery slope of recovery was not spared by the Covid 19 pandemic, leaving shocks in the system. For a largely import-dependent economy, the unprecedented fall in price of oil in the international market due to low demand, further exerted pressure on the economy.
With the structuring weak economy affected by the externally induced shocks – specifically, fall in oil prices, the Nigerian economy slipped into recession in the third quarter of 2020, following a GDP contraction of 3.62% and the negative growth of -6.1 percent recorded in the second quarter (Q2), contracting by levels not seen since the 1980s. However, the economy recorded a positive growth 0.11% (year-on-year) in real terms in the fourth quarter of 2020, representing the first positive quarterly growth in the last three quarters.
Inflation was on the upward trajectory, closing at 15.75 percent in December with average inflation rate at 12.89% during the year. Major inflation drivers in 2020, include, structural challenges, closure of land borders, VAT increase and decline in agricultural output, as well as exchange rate depreciation, higher energy costs and high transportation cost.
Also, the exchange rate was highly pressured and volatile in 2020. The Central Bank of Nigeria (CBN) devalued/adjusted the Naira on three occasions to ameliorate the pressure. The adjustments were also steps taken to bridge the gap between official and parallel markets rates. However, on several occasions, these adjustments coupled with lower foreign exchange inflows extended the gap in both markets. The Naira on the Investors & Exporters (I&E) window closed at N410.25/US$ and at the CBN official window, the Naira closed at N379/US$.
The Nigerian Capital Market however, rallied to close the year strongly and ranked the best performing in the world in 2020 as investors remained steadfast in their pursuit of higher yields The market capitalisation closed the year at N21, 057trillion up from N12.97trillion it opened the year with, putting about N8.1trillion in the pocket of investors – the highest profit even received by investors since 2015.
The Leasing Industry
Following a decade of growth of the global leasing industry – growing by 129% during the period, the momentum was halted in 2020, with the Covid 19 pandemic which necessitated global lock down. The effects of the prevailing adverse impacts of tax, regulatory changes and slow economy. which were more visible in the mature markets, were exacerbated by the pandemic that affected business volume and operations. However, when compared to the overall performance in most economies, equipment and software investment growth fared better than overall gross domestic product (GDP) growth in 2020, as businesses invested to adapt to the COVID-19 pandemic.
The growth trajectory of the Nigerian leasing industry was expected to continue in 2020 and was set in that path before it was hit by the thunder storm of the ravaging corona virus in the first quarter of the year. The industry’s resilience was stretched considerably as a result of massive disruption of economic activities. The impact of this disruption, macro-economic conditions and other prevailing industry’ specific factors, defined the leasing industry in 2020.
Essentially, the leasing land scape was characterized by:default in rental payment and other commitments; drop in new business origination, owing to the fear of portfolio risks and low demand; new business and operational approach in response to “the new normal; emergence of opportunities as demand shift to more productive and essential assets as well as increased cost of assets and operations resulting from the “adjustment” of the Naira.
The perennial and emerging challenges notwithstanding, the Nigerian Leasing industry remained resilient and continued to demonstrate its contribution to economic development in 2020 – recording a marginal growth of 4.3 percent. Available statistics show that outstanding leases as at 2020 stood at N2.01trillion as against N1.91trillion in 2019. The oil and gas sector took the lead at 29% with N602 billion lease volume, followed by Transportation & Logistics sector taking N490billion (25%), Manufacturing N279billion (12.5%), Others (including Healthcare and Education accounted for N185billion (17%), while Agriculture, Telecommunications, and Government recorded considerable growth.
Finance lease maintained its position at 60% of total leases with operating lease increasing its market share in recent times due to market dictates arising from the preference of corporate bodies to focus more on their core activities, while outsourcing other operational functions such as transportation and other logistics services. Operating lease is equally increasingly becoming a risk mitigant and niche market for several lessors in the industry.
In terms of assets categorisation, vehicle constitutes about 55% of the leased assets including trucks for haulage; buses for inter-state commercial transportation and staff shuttle, which have been major attraction in recent times.
It is expected that the equipment leasing industry will continue to grow due majorly to the need to re-inflate the economy, which requires enormous capital. Also, the increasing cost of assets further makes leasing more relevant as an alternative option especially to the MSMEs.
OUR ACTIVITIES
The disruption due to Covid 19 had its toll on our activities for the year. However, we were able to stay afloat and sustain our activities within the constraints.
Lease Awareness
We sustained our efforts to increase the visibility and essence of leasing especially through the media and engagement with other stakeholders supported by organised programmes We successfully organised in November, the 18th National Lease Conference, which has become a major platform for spreading the essence of leasing and engagement on various issues affecting the development of leasing. These activities have further added impetus to our lease awareness campaign.
Training
We continued to be innovative in our training programmes, amidst the tough environment. From April to December, all our training programmes and other activities including the18th National Lease Conference, were held virtually. However, income from this source dipped significantly from N11.12 million in 2019 to N5.37 million in 2020 due to low patronage.
Advocacy
Efforts were sustained towards achieving better regulatory environment for the industry. Part of these, was the engagement with the Federal Ministry of Finance, Budget and Economic Planning and other stakeholders for the implementation of the Equipment Leasing Act 2015, especially the formal inauguration of the Equipment Leasing Registration Authority. The formal inauguration of the body remains a sore point for us, despite considerable efforts made in this regard in the past five years. However, the process was re-activated following the resumption of duties at the Ministry after the lock down and hopefully it shall be completed in 2021, especially with the growing interest and support from stakeholders.
The Equipment Leasing Registration Authority constituted by stakeholders from the public and private sectors including representatives from ELAN, is a very important body that will give effects to the purport and intents of the Act that will ensure certainty, stability and growth of our industry.
Membership
Twenty (20) new members joined the Association under the three categories during the year as against twenty-five (25) in 2019. We continued to enhance our value propositions to members through organised “face time “events, business networking opportunities and Advisory Services to guide them in their business and improve the bottom line. Part of these activities was the virtual forum was organised on the impact of the pandemic on the leasing industry and help members to position themselves to navigate through the period. Equally a mentorship programme for new members was put in place, essentially to guide them as they operate in the industry.
The challenge of retaining and attracting new members remains obvious. Consequently, measures are being taken to ensure that the Association is more responsive and proactive in delivering value added services to members.
Research and Publication
We sustained our research and publication functions, including research conducted into the trends and developments in the leasing industry, which was published in the Lease Market Review and the World Leasing Year Book. Also, our quarterly magazine “Leasing Focus” was published with contents aligned with the objective of providing succinct information. The magazine continues to be important source of leasing information and documentation.
ELAN Secretariat Building Project
At the 24th Annual General Meeting, members approved the proposal presented by the Board to raise the amount of N120million, through levies from members and good will donations, for the purpose of acquiring a befitting secretariat building for the Association. As at end of year, the sum of N19million was realised as levies from Members. While we appreciate the challenging period, we encourage our members that are yet to pay their levy, to do so in order to cash in on any opportunity to acquire the property. This project is our own and it is important to see it through, in order to enhance our operations and profile given the expected role of the Association.
External Relations
We continued to build on our relations with other stakeholders in the pursuit of our objectives. The Association remained a reference point in leasing in Africa working with the World Bank and other development partners. Also, we deepened our engagement with the Ministry of Finance, Budget and National Planning and commenced engagement with the Solid Mineral Development Fund (SMDF) and other relevant stakeholders in our quest to promote the leasing industry.
Accounts
Our revenue dropped significantly in 2020, obviously due to aftermath of the covid 19 pandemic. However, due to prudential management we were able to maintain positive result for the year. The Audited Accounts indicate a total income of N25.84Million as against N38.81Million for 2019, while expenditure amounted to N23.35Million as against N36.62Million for the corresponding period, leaving a surplus of N2.5Million as against N2.2Million in 2019.
The Board
At the end of the year, the seat of LECON Financial Services Limited, on the Board became vacant, following the retirement of the former Managing Director, Ibrahim Bisallah who was representing the company on the Board. Subsequently, the Board approved the appointment of Mrs Lolo Ruth Kadafa, the new Managing Director/CEO of LECON Financial Services Limited, as a director to fill the vacancy. In line with our Articles of Association and the Companies and Allied Matters Act, the appointment of Mrs Kadafa as a director of the Association shall be brought for ratification by members at this Annual General Meeting. The Board continued to consolidate on the gains of previous Boards, providing direction and support for the Association in the pursuit of its objectives.
The Future
The impact of the pandemic is expected to continue to affect business volume and operations. However, it is imperative for the leasing industry to remain resilient to navigate through the storm. This calls for realignment of strategies and adoption of innovative approach.
Indeed, as an Association, we shall continue to strengthen our value proposition to members and other shareholders in the pursuit of our objectives, providing integral support, creating and facilitating the platform for the attainment of the corporate goals of stakeholders. Essentially, our priorities shall be on the pursuit of favourable environment and business opportunities; sustained promotion of the essence of leasing, enhancing the visibility and profile of the industry and the Association.
Finally, distinguished members, I express on behalf of the Board, our deep appreciation for the opportunity to serve you and steadfast support given to the Association over the years. Also, we thank the management and staff of the Secretariat for their service and with our collective support, the leasing industry will continue to achieve greater heights.
Thank you.
DR. OLUTOYIN OKEOWO
Chairman, Board of Directors
