Nigeria’s lease market grows on back of cash crunch
Deals top N5.8tr as credit crisis deepens
Leasing, rather than bulk payment, has become alternative to outright acquisition of assets, as Nigerians grapple with recession-induced cash crunch.
These include the acquisition of wealth creating equipment- plants and machinery, particularly for medium and large-scale farmers and manufacturers; household items; cars, real estate, among others.
Already, assets worth more than N5.8 trillion has been financed through leasing in the last 10 years and the sub-sector is now emerging a catalyst for growth, with potential for economic diversification.
Chairman of Equipment Leasing Association of Nigeria (ELAN), Chuka Onwuchekwa, said leasing is now increasingly visible in Nigeria, contributing to capital formation and creating wealth.
The outstanding lease volume in 2015, according to the leasing association, is put at N1.1 trillion, up from N869 billion in 2014, representing a growth rate of 27.3 per cent.
For the Executive Director at BGL Capital Limited, Femi Ademola, the rising trend in lease volume in the country can only be explained by its growing acceptance, but mostly the biting economic situation that has drained liquidity in the hands of people.
He said that it makes economic sense to acquire an item with the payment spread across over a period, while the bulk will be invested in other activities that could yield immediate gains to offset interest payments on the lease.
He however, said that there is no money in the economy like it used to be and this has lasted for over two years, a time that covered the observed increase in leasing transactions.
In a chat with the Executive Secretary of ELAN, Andrew Efurhievwe, he noted that leasing is now more at the centre of easy and convenient access to capital equipment.
Admitting that there is even more anticipated growth in the business, he said that the sub-sector needs government support, perhaps, patronage too, as a way to boost growth.
“The sector needs exposure, support and framework. The patronage and utilisation of leasing products is important and the economy would be better for it,” he said.
However, Onwuchekwa stressed that leasing can be brought to bear in support of the planned massive investment in infrastructure (power, road and rail), agriculture, manufacturing and solid minerals that would stimulate production and employment.
He therefore, urged the government to utilise equipment leasing to achieve these policy initiatives to stimulate the economy. Similarly, the group has commended government’s development foray into agriculture, mining and manufacturing, as well as massive projection for investment in infrastructure.
Besides, the operators noted that the recent global economic developments, especially the decline in oil price have called for dynamism in every endeavour.
He said that the global economic developments currently have continued to impinge greatly on Nigeria’s key macroeconomic variables, with consequential slow growth recorded in major sectors of the economy.