Leasing industry records 27 per cent growth
Despite challenging financial year dominated by crude oil and revenue crises, the nation’s leasing industry recorded 27.39 per cent growth in 2015.According to Equipment Leasing Association of Nigeria (ELAN), outstanding lease volume rose from N869 billion in 2014 to N1.1 trillion in 2015, representing a growth rate of 27.39% as against the 11.3% recorded in 2014.
This perhaps can be explained based on the developmental attributes of leasing, which makes it attractive whether the economy is witnessing a boom or recession, as is currently the case. Many industries are relying on leasing as a creative financing alternative for capital assets and this has created increased investments from existing lessors and endeared new entrants into the leasing industry to tap into the opportunities in the market.
An analysis by sector of the leased volume results in 2015, shows that even with the global fall in the price of crude oil which is a major contributor to the Nigerian economy, the oil and gas sector still has the highest volume of leased assets.The volume of leased assets in the sector rose from N284 billion in 2014 to N361 billion in 2015 representing 27 per cent growth and 33 per cent of total portfolio. Next in this line is the transport sector recording 21 per cent growth rate from N228 billion in leased assets in 2014 to N290 billion in 2015.
Other sectors like telecoms, agriculture and manufacturing as well, had considerable growths.The harsh global economic realities have indeed precipitated into different facets of the drivers of the economy. However, there has been continued strive in all industries in the Nigerian economy to achieve growth against the prevailing challenges.
The predictions of tougher business environment globally made by the governments and other economic analysts are already at play.Consequently, many companies are forced to downsize in staff numbers, reduction in the patronage given to non-performing business ventures as well as even shutting down operations. This situation has given rise to a radical change in focus to maximise the scarce resources available.
The Nigerian Leasing industry on its part has remained a sustained source for growth to all sectors of the economy, facilitating easy access to capital equipment.A review of the past five years showcases a steady growth of the industry even in the face of the economic meltdown.
Categorising the lease transactions according to types, finance leases retained the dominant position accounting for 75 per cent of all lease transactions while operating lease accounted for 25 per cent. It is however expected that operating lease will continue to increase its market share as more demands are being made from large corporate due to its service oriented nature.
The banks continued to play dominant role in providing funds to lessors for lease transactions and direct participation as lessors especially at the high end of the market, financing big-ticket leases.
The non-bank lessors contributed 80 per cent of lease transactions concentrating majorly on the Small and Medium Scale Enterprises (MSMEs).Equipment vendors are equally making waves in the market, particularly in the consumer market in the lease of their products such as household assets and cars under vendor lease programmes supported by banks in some cases.
In terms of asset categorisation, about 50 per cent of leased asset are vehicles including trucks for haulage and buses for inter-state commercial transportation, which have been major attraction in recent times.
Nigerian lessors are basically focused on general items due to the increased risk of specialised assets, aggravated by the limited knowledge of the nature of the assets and funding the cost of such assets, which quite often is expensive.However specialised asset financing is gaining new attraction as some lessors are looking at opportunities in other areas, which before now they were wary to venture into.
One of such areas is medical equipment, where many leasing companies are exploring partnership with major medical equipment vendors to provide equipment leasing to medical practitioners and facilities across the country.The health care sector is an emerging opportunity for lessors to increase the size of their portfolio and the bottom line.
“Our projections indicate that, the growth trend is most likely going to continue as many investors and business owners are getting more and more aware of the business of equipment leasing and its contributions in growing organisations and the economy.
“Essentially, the diversification of the economy, employment generation focus of government and the planned huge investment in infrastructure will provide immense scope for leasing in terms of supporting the acquisition of the much needed equipment.
“It is also expected that the newly enacted Equipment Leasing Act (2015), will stimulate more investments in the industry by providing the necessary legal framework that would support investment,” ELAN said.
Already, some foreign investors are giving positive signals of their intention to participate in the leasing industry either through existing local firms or setting up new leasing businesses in the country.