The Equipment Leasing Act has 45 sessions and is essentially aimed at promoting the business of leasing in Nigeria by among other things, creating clarity, certainty and sanity in the practice of leasing and ensuring protective mechanism, for both the lessor and lessee. The Explanatory memorandum of the Act states that “This Act seeks to regulate the business of equipment leasing in Nigerian so that the relationship between the lessor and the lessee and other third parties is identified and protected”.  The Act also seeks to establish a regulatory authority to provide for the registration of all equipment lease and the certification of equipment lessors”.


Applies to all leases

  • The court may issue a warrant to enter and repossess the leased asset upon satisfying itself on compliance with the Act

Definition of Leasing

The Act defines a lease agreement as a “means a written agreement between the lessor and the lessee for the lessee’s use in consideration of the payment of an agreed rental over a specified period” for an equipment and “the lessor shall retain full title and legal ownership during the specified period of the lease. ELA recognises and differentiates Finance lease and operating leases.

 Classification of Leases

Lease is divided into 3 main classes (Section 3 ELA),

i. Finance :

ii. Ooperating

and other variants

Syndicated lease

Sale and lease back

Cross border lease

Leveraged lease and other as approved by the Minister of Finance

Requirements for Lease Agreement

Lease agreement must be in writing and containing for:

  1. Finance lease

i. Statement to the effect that the lease is Finance  lease

ii. Description of the asset to be leased

iii. Total rental or instalmental lease rental payable by the lessee

iv. The date which rental is payable

v. The estimated price of the equipment

vi. Statement as to the knowledge of the supplier of the asset that it is for a lease transaction.

vii. A clause affirming the title of the lessors

viii. On termination by expiry of time, unless a renewal is granted or the lessor agrees to sell, the lessee shall return the asset.

ix. Acknowledgement from the lessee that the lease is a full pay out, non cancellable agreement.

x. A statement as to whether or not the lessee selected the equipment or supplier/manufacturer with or without relying on the skill and judgment of the lessor

Operating Lease

i. Statement to the effect that the lease is Operating  lease

ii. Description of the asset to be leased

iii. Total rental or instalmental lease rental payable by the lessee

iv. The date which rental is payable

v. A clause affirming the title of the lessors

vi. On termination by expiry of time, unless a renewal is granted or the lessor agrees to sell, the lessee shall return the asset.


Rights of the Lessor

i. i. Right of ownership

ii. Right to demand payments in event of default

iii. Protection against liability arising from defects in or fitness of the leased asset

iv. Protection against damage

v. Protection against third party claims (death, personal injuries, damage and taxes)

vi. Inspection of asset and lessee’s accounts and documentation

 Obligations of the Lessor

i. Grant quiet and peaceful possession of the leased asset

ii. Provide reasonable assistance to the lessees to enforce his rights against the supplier

iii. Perfect delivery of equipment expeditiously and in accordance with agreed terms.

iv. Deliver the copy of lease agreement to the lessee within 14 days

Rights of the Lessee

i. Enjoyment of quiet possession of the leased asset (s 22(1) ELA)

ii. Protection against unilateral termination of lease

iii. Direct action against the supplier for effective performance (22(2)

iv. Rights to damages for actual loss incurred resulting from termination of lease due to the act of the lessor (s 29)

v. Suspension of obligations upon failure of the lessor to enter a supply agreement

vi. Demand termination upon breach of contractual obligations

Obligations of the Lessee

i. Prompt payment of rental

ii. Use the asset in accordance with the terms and conditions of the agreement

iii. Maintenance in finance lease (s 22)

iv. Proper care of the asset

v. Shall not sub–lease, assign or pledge act in any way inconsistent of the legal ownership of the lessor

vi. To provide information on the leased asset (s 27). (It is an offence if the lessee fails to comply within 14 days without reasonable cause).

vii. Return the asset at the expiration of the lease agreement or exercise option as agreed


1. Distinction between rental default and other breaches

2. The failure of any of the parties to discharge any of the responsibilities as agreed. Some of these  events on the part of the lessee are:

i. Non-payment of rentals as and when due

ii. Unauthorised transfer of the leased property

iii.Failure to use the property in manner and purpose agreed upon

iv. Failure to provide information as to the location and state of the asset

v.Failure to take proper care of the asset

Protective Mechanism under Equipment Leasing Act

i. Termination after giving appropriate notice as specified in the Act (s,37) if default in payments of rental

ii. An exparte application to Federal High Court for repossession for non-payment of rental(s.39)

iii. The lessee shall be responsible for the immediate payment of all rentals due at the time of repossession

iv. Repossession shall not prejudice the right of the lessor to other remedies

v. For breach other than non-payment, the lessor can commence legal proceedings in court

vi. The lessor shall not remove the leased asset from Nigeria without the written consent of the lessor

vii. The lessee shall be liable for repairs to damage caused by his act, agent or servant or any third party to a leased equipment (s,24)

viii. Lessor is generally not liable for any defect in fitness for purpose of leased asset, except the lessee suffers loss as a result of reliance on the lessor (S 31,32,33)

ix. Right of inspection of the leased asset and obligation to provide information on the leased asset (s,26 & 27)

x. Ownership is not impaired by mere fixation of leased asset to land or building(s19)

xi. The implied legal ownership of lessor shall prevail at all times, except against a person in a non-registered lease(s19 &21)

xii. Prohibition against sale and transfer of the leased asset or any act inconsistent with ownership right of the lessor

xiii. Registration of lease constitute constructive notice(s 16)

xiv. Fixation of lessors name to the leased asset(s 19)

Compliance Issues Checklist

i. Lessors shall be a limited liability company with its (MEMAT) having express provision to engage in equipment leasing business

ii. Registration with the Registration Authority.

iii. Registration of leased equipment within 14 days or 3 months for a lease made before commencement of the Act.

iv. Delivery of lease agreement within 14 days.

v. Provision of not less than 15 days notice in default for non-payment of rental in required form and other notices are required.

vi. Adherence to other legal proceedings for termination and repossession


Insurer to be mutually agreed by the parties.

Capital Allowance

Capital allowance to be claimed by lessor in all leases.

End of Lease Options

The lessee is required to return the asset upon termination of the lease in good order and working condition.(s 4(2b)

The lessor can sale the asset or renew the lease.

Establishment of Registration Authority

The Act establishes a Registration Authority under the supervision of the Minister of Finance to:

i. Register lease agreements & lessors.

ii. Determine eligibility of persons & requirements

iii. Register and investigate incidence of default

iv. Establish & maintain register of persons entitled to carry on business of leasing

v. Undertake other activities to give effects to the Act and other functions conferred by the Act

vi. Non – registration makes the lease agreement invalid but not unenforceable against third party.

The Act is available for sale. For more details, contact 08023176691, 08023179048,