How leasing firms raked in N1.26trn one year

In spite of the economic recession that had negative effects on the level of businesses generated by most sectors of the nation’s economy last year, leasing firms were in joyous mood as they were able to generate N1.26 trillion lease business volumes in 2016, Business Times check has revealed.

Findings show that the industry in 2016, recorded 14 per cent growth in outstanding lease volume, which grew from N1.1 trillion in 2015 to the aforementioned amount in 2016.

This, experts said, means that Nigerian leasing industry continues to be vibrant and remained succour to many organisations across all sectors of the economy, in spite of the current economic realities.

Observers believe leasing is still attractive to new investors with massive diversification by existing players in the industry.

Analysis of the volume by sector revealed that the oil and gas, with its present challenges still out played other sectors with the lead of N398billion, a 24 per cent of the total portfolio, while transportation followed with N319billion, a 19 per cent of the total portfolio. Manufacturing pulled N180billion, with agriculture, government, telecoms, among other sectors and others, recording considerable growths.

Categorising the lease transactions according to types, finance leases retained the dominant position accounting for 70 per cent of all lease transactions while operating lease accounted for 30 per cent.

This, it was learnt, was as a result of increasing trend of operating leases in the recent times, due mainly to risk mitigating mechanism and response by industry players to current market dictates, by provision of vehicles (trucks, cars and staff buses) and other assets to support the operations of their corporate customers.

The industry continued to witness the banks as the lead players, particularly financing big ticket leases, and also providing funds to lessors for lease transactions. The non-bank lessors contributed 70 per cent of lease transactions concentrating majorly on the Micro, Small and Medium Scale Enterprises (MSMEs).

However, the industry recorded a drop in growth, 14 per cent when compared with 27 per cent in 2015, which was mainly because of the inability of the industry to cope with the demand due to high cost of equipment, necessitated by foreign exchange situation and the funding challenge.

Nevertheless, investigation shows that the appetite for leasing is still increasing, with new lease transactions being booked on a daily basis, even as the level of patronage has increased given the current economic situation, which has made outright purchase increasingly difficult and demand from multinational and other large corporates for service–oriented leases like fleet management.

Reacting to this development, the executive secretary, Equipment Leasing Association of Nigeria (ELAN), 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 to access to finance especially to MSMEs.”

The focus on agriculture, according to him, will create huge market for leasing business, as a whole range of equipment would be required across the agric value chain, from seedlings/inputs to fertilizers, harvesting, processing and storage as well as 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, among others,” he stressed.

The manufacturing sector as well as MSMEs, he pointed out, will equally present enormous opportunities for leasing, as the demand for assets for productive ventures is expected to continue to increase.

He also revealed that another emerging business opportunity lies in the healthcare and education sectors, adding that ELAN is exploring ways to harness this opportunity by partnering with healthcare vendors, to provide assets for players in the sector.