Leasing market generates N1.26trillion
Despite the economic stagnation that impacted negatively to businesses across sectors in the country, leasing firms braved the odds and generated N1.26 trillion in 2016, findings showed that the industry recorded 14 per cent growth in outstanding lease volume from N1.1 trillion in 2015.
Consequently, experts believe the Nigerian leasing industry has remained vibrant and continued to provide succour to many organisations across all sectors of the economy, despite the current economic realities.
Stakeholders believe 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 N398 billion, or 24 per cent of the total portfolio, while transportation followed with N319 billion, representing 19 per cent of the total volume.
Manufacturing followed with N180 billion, then came agriculture, government, telecoms, and a host of others, which also recorded substantial growth.
Further categorisation revealed that finance leases accounted for 70 per cent of all the transactions while operating lease accounted for 30 per cent.
This is as a result of increasing trend of operating leases in the recent times, due mainly to risk mitigating mechanisms and responses adopted by industry players, by providing vehicles (trucks, cars and staff buses) and other assets to support the operations of their corporate customers.
Also, the banks were the lead players, particularly in 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 mainly on the micro, small and medium scale enterprises (MSMEs). However, the industry recorded a drop in growth of 14 per cent when compared with 27 per cent recorded in 2015, due to the inability of the industry to cope with demand resulting from high cost of equipment, necessitated by foreign exchange and funding challenges.
Nonetheless, the appetite for leasing is on the increase, with new lease transactions being booked on daily basis. This is 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 corporate for service-oriented leases like fleet management, responding accordingly.
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 finance especially to MSMEs.”
He pointed out that the manufacturing sector as well as MSMEs, also present enormous opportunities for leasing, as the demand for assets for productive ventures is expected to continue to increase.
Efurhievwe also noted that agriculture leasing is growing, as a whole range of equipment would be required across the 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 added.
He also said another emerging business opportunity lay 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.