Nigeria’s Leasing Industry Records 381.68% Growth In 10 Years

Nigeria’s equipment leasing industry recorded 381.68% growth over the last 10 years, according to data by the Equipment Leasing Association of Nigeria (ELAN), from N348.894bn in 2008 to N1.68tr at the end of 2018.
The nation’s lease volume grew by 16.3% last year, from N1.44tr in the previous year, boosted by new entrants into the industry and increased awareness on the ideals of leasing as a unique financing instrument.
According to a statement by ELAN, the rise was equally boosted by relative stability in the country’s macroeconomic environment, as well as an increasing demand necessitated by the rising cost of assets due to the depreciation of the Naira.
An analysis of the volume by sector showed that oil and gas, maintained its lead accounting for N518bn, representing 29% of total portfolio; followed by transportation with N421bn, representing 28%; and manufacturing, 12% with N245bn. Agriculture, government, telecommunications and other sectors like education, healthcare, construction, and consumer, recorded considerable growth.

A breakdown by type shows that finance lease accounted for 60%; ahead of operating leases with 40%, arising from emerging opportunities in the operating leases arising from the demand of many organisations to especially focus on the core businesses and outsourcing support services to third parties.
By transaction value, banks maintained the lead, financing big-ticket leases, and providing funds to lessors for lease transactions, just as non-bank lessors accounted for about 80% of customer base mainly from the Small and Medium Scale Enterprises (SMEs). The industry continued to attract investors from the financial and other sectors desiring to tap into the opportunities in leasing and as a means of hedging against other non-performing product offerings.
In terms of assets categorization, vehicles constituted about 38% of the leased assets, including trucks for haulage and buses for inter-state commercial transportation, which have been major attraction in recent times.
ELAN expects that the industry will continue to blossom, given the wide financing gaps in all sectors of the economy, the increasing relevance of leasing to capital formation with the challenge of access to finance especially to MSMEs and the expected Government’s commitment to the various initiatives aimed at consolidating growth and development in the economy.
The 2018 growth was however marginally better than the 14% recorded in 2016, but far below the 27% recorded in 2015. But the growth rate recorded in 2008 remains the most robust over the period.
ELAN sees the implementation of the Federal Government’s Economic Recovery and Growth Plan (ERGP) 2018 – 2020, creating an enormous market for the leasing business, as a whole range of equipment would be required across the entire value chain of priority sectors including agriculture, mining, and manufacturing, among others.
The future of leasing is bright in Nigeria, the association noted, emphasizing that need for “goodwill from all stakeholders in the leasing industry to work together to build a virile industry that would contribute more to capital formation in the Nigerian economy.
“The Government, for instance, should continue to support the leasing industry through a more favourable operating environment. The capacity of the industry needs to be strengthened and sustained to enable it to perform its developmental role effectively. The Funding challenge is a key area of concern and the Government can intervene by allowing leasing companies to access pension and the various intervention funds for development in specific sectors of the economy. This will no doubt enhance the capacity of lessors to deepen lease penetration in the market and will, in the long run, promote investments, create wealth and more jobs.”

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