The Guardian, Thursday, May 11, 2017
Despite the economic stagnation that impacted negatively on businesses across sectors in the country, leasing firms braved the odds and generated N1.26trillion in 2016.
Findings showed that the industry recorded 14% growth in leasing activities. The outstanding lease stood at N1.26 trillion, from N1.1 trillion in 2015 representing 14 percent compared to 27 percent in 2015.
Consequently, experts believed the Nigerian leasing industry has remained vibrant and remained succour and continued to provide succour to many organisations across all sectors in the economy, despite the current economic realities.
Stakeholders believe that leasing is still attractive to new investors with massive diversification by existing players in the industry.
Sector analysis of transactions during the period revealed that the oil and gas, with its present challenges still out played other sectors with the lead of N398billion, accounting for 24 percent of the total portfolio, while transportation followed with N319billion, representing 19 percent of the total volume.
Manufacturing stood at N180billion, Agriculture, Government, Telecommunications and other sectors (education, healthcare, construction and consumer sectors) recorded substantial growth.
Further categorisation revealed that finance lease accounted for 70% of the transactions while operating lease accounted for 30%. In recent times there has been increase in the market share of operating lease due to its growing popularity among lessors as a risk mitigating mechanism against default and response to current market dictates especially from corporate customers who require service-oriented lease.
The industry continued to witness the banks as lead players, particularly financing big ticket leases, and providing funds to lessors for lease transactions. The non-bank lessors however accounted for about 80% of customer base mainly from the Small and Medium Scale Enterprises (MSMEs). Some capital market operators and other companies were attracted to the leasing industry to tap into the opportunities and as means of hedging against other non- performing product offerings. Also, vendors and service providers (telecom and oil) increased their participation in leasing industry.
In terms of asset categorisation, about 40% of leased assets are vehicles including trucks for haulage and buses for inter-state commercial transportation, which have been major attraction in recent times. Financing of specialised assets is emerging in the market especially in the health sector.
The Executive Secretary, Equipment Leasing Association of Nigeria, Andrew Efurhievwe, said “our market projections show that the leasing industry will blossom, owing to the various initiatives of Government aimed at re-inflating the economy and the increasing relevance of leasing to capital formation in view of the challenge of access to finance especially to MSMEs”.
Essentially, the focus on agriculture will create huge market for the leasing business, as a whole range of equipment would be required across the agric value chain, from planting, harvesting, processing and storage to distribution. Also, the special focus on infrastructure will open up business opportunities for the leasing industry as specialised and general equipment would be needed to support the massive construction that would take place in the rail, roads, power, housing etc. The manufacturing sector including the micro, small and medium enterprises (MSMEs) will equally present enormous opportunities for leasing, as the demand for assets for productive ventures is expected to continue to increase.
Another emerging business opportunity lies in the healthcare and education sectors. Already, ELAN is exploring ways to harness this opportunity by partnering with healthcare vendors, to provide assets for players in the sector. In the education sector, various assets are being leased including modern instructional equipment including computers, communications, laboratory, technical and research equipment in addition to the general assets like vehicles, generating sets. Indeed, leasing has immense scope in the sector given the large numbers of educational institutions across the country and the infrastructure financing gap.
While it is obvious that the future for leasing is bright in Nigeria, it is imperative that operators reposition themselves to capture the immense opportunities, through appropriate capacity building and market research to fully understand the peculiarities of these industries. Specifically, players in the industry should imbibe sound corporate governance to increase their corporate profile in order to endear them to necessary support and patronage, especially in the areas of attracting appropriate funding and business partnership. It is also important for operators to adopt proactive business approach, understand the risk profile of transactions and other dynamics before venturing into them.
He therefore called on the Government to continue in its support for the leasing industry, through a more favourable operating environment. The capacity of the industry needs to be strengthened and sustained to enable it perform its developmental role effectively. Government can for instance support the industry to overcome its funding challenge, by allowing leasing companies to access pension and the various intervention funds for development in specific sectors of the economy. This will no doubt enhance the capacity of lessors to deepen lease penetration in the market, and will in the long run promote investments, create wealth and more jobs.
The Guardian, Thursday, May 11, 2017