WELCOME ADDRESS BY MR OLUTOYIN OKEOWO, CHAIRMAN, BOARD OF DIRECTORS, EQUIPMENT LEASING ASSOCIATION OF NIGERIA (ELAN) AT THE EXECUTIVE BUSINESS FORUM “UNDERSTANDING AND PREPARING FOR IFRS 16” HELD ON TUESDAY, 31ST JULY, 2018 AT LCCI CONFERENCE AND EXHIBITION CENTRE, ALAUSA, IKEJA – LAGOS.
Distinguished Guest Speakers and Panelists,
Respected Members of Board of Directors Here Present
Esteemed Members of ELAN,
Gentlemen of the Press,
Ladies and Gentlemen
I am honoured and delighted to welcome you to this Executive Business Forum organised by the Equipment Leasing Association of Nigeria (ELAN). I most welcome our Distinguished Guest Speakers and Discussants as well as other dignitaries to this august occasion. We deeply appreciate your presence and contributions to this event.
This forum with the theme “Understanding and Preparing for IFRS 16” is packaged in line with the Association’s aspirations to continually create “face time” for members for effective engagement on issues pertinent to the development of the Nigerian leasing industry. It is expedient to bring our members together at this forum, in view of the imminent implementation of the International Financial Reporting Standard on leases (IFRS16) which is expected to take effect on 1st January, 2019. This event is intended among other things, to further enhance members’ understanding of the new standard and assess the level of preparedness of the leasing industry.
The IFRS 16), was issued in January, 2016 by International Accounting Standard Board (IASB) to replace the International Accounting Standard on leases (IAS17) for reporting period beginning from 1st January, 2019. The objective of IFRS 16 is to ensure that Lessees and Lessors provide relevant information in a manner that faithfully represents their lease transactions in their financial statements. The information will provide basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flow of an entry.
The IFRS 16, made significant changes on the accounting for leases by lessees which mainly affect the accounting for operating leases focusing on the elimination of off balance sheet financing. By implication, the lessee will no longer classify leases as either operating or finance. The lessee is expected to recognise all leased assets and liabilities on the balance sheet. In essence, lessees will account for all leases similar to accounting for finance lease under the existing IAS 17, except where they elect not to do so within the exceptions provided by the standards
For the lessors’ accounting, the changes are less significant than those faced by lessees. While, as lessors our accounting remains largely unchanged from IAS 17, it is expected that our businesses will be affected by changes in needs and behaviours of customers which will impact our business model, lease products and key lease decisions. It is therefore imperative to begin to strategise to enhance our capacity and creativity for improved valuable service delivery in the market place to meet these changes.
I am particularly delighted that ELAN is proactively organising this forum to enable our members have the desirable information concerning their leases to assist their customers. It is my utmost wish, that we take advantage of this platform to get ourselves acquainted to the requirements of the new standard and develop a model that will boost our leasing activities rather than the new standard having a diminishing effect on our businesses. Essentially, we expect that this forum will begin the process of assessing this new development, its impact on our businesses and creating a workable template that would guide us to succeed in the new accounting era. I am particularly pleased that our Guest Speakers and Panelists are seasoned experts, who will give a thorough analysis of the standard, revealing its basic requirements with insights into the actions plans for implementation.
Indeed, it is important to continue to emphasise the strategic role our industry plays in national economic development. The impact of leasing continues to the be felt in all sectors of the economy as latest statistics in 2017 ,indicate, outstanding lease volume of N1.44trillion, as against N1.26trillion in 2016, representing a growth of 14.5%. Going by the relative stability in the macroeconomic environment, the industry is expected to further continue to facilitate the developmental plans of Government across all sectors. It is projected that the leasing industry will blossom, given the wide financing gaps in all sectors of the economy, the increasing relevance of leasing to capital formation with the challenge of access to finance especially to MSMEs and the expected Government’s commitment to the various initiatives aimed at consolidating growth and development in the economy.
However, the growth trajectory can only be sustained with improved operating environment for the leasing industry. A key element in this regard, is effective implementation of the Equipment Leasing Act 2015, of which the formal inauguration of the Equipment Leasing Registration Authority is of immediate priority. We continue to engage the Ministry of Finance for this to be done, while setting up the registry. The cost of setting up the registry, which is to be driven by Information Technology, is such that the Association cannot bear on its own
I therefore appeal for the kind support of members and other stakeholders so that together we can contribute our quota towards the development of the Nigerian leasing industry and economy.
Equally critical, is funding to meet the huge demand for leasing. The cost and short term nature of available funding sources are not suitable for lease financing. There is therefore the need to seek appropriate funding mechanism and we have been exploring various sources, seeking partnership with both local and international financiers in this regard. We are presently discussing with Sterling Bank Plc and are optimistic of positive outcomes
Once again, I welcome you to this forum and wish you a rewarding session.
Thank you.
OLUTOYIN OKEOWO
CHAIRMAN, BOARD OF DIRECTORS, ELAN