The Equipment Leasing Association of Nigeria (ELAN) today reported a 14.5 percent growth in the nation’s outstanding lease volume in 2017, peaking at N1.44 trillion up from the N1.26 trillion volume in 2016.
The association in a statement attributed the growth to the relative stability in the macroeconomic environment, increasing demand, new entrants into the leasing industry and increased value of assets due to the depreciation of the Naira.
An analysis of the volume by sector indicated that the oil and gas led the ranking chart with N449 billion, representing 28 percent of the total portfolio, while transportation followed with N355billion, representing 20 percent.
This is even as Manufacturing sector’s volume rose to N217billion from the N180 billion recorded in the preceding year while Agriculture, Government, Telecommunications and other sectors (education, healthcare, construction and consumer sectors) recorded considerable growth.
The ELAN reported further that Finance lease remained the predominant type of leases during the year under review, accounting for 65 percent of the transactions while operating lease also sustained its strong showing at 35 per cent.
The association noted that in recent times there had been increase in the market share of operating lease due to its growing popularity among lessors as a risk mitigating mechanism against default and response to current market dictates especially from corporate customers who require service-oriented lease.
Also, the body disclosed that in terms of transaction value, the banks still took the lead, particularly financing big ticket leases, and providing funds to lessors for lease transactions just as non-bank lessors accounted for about 80 percent of customer base drawn largely from the Small and Medium Scale Enterprises (SMEs).
The association noted that the industry continued to attract investors from the financial and other sectors desiring to tap into the opportunities in leasing and as means of hedging against other non-performing product offerings.
According to the lessors’ umbrella body, a further categorisation of the leasing business on assets basis, showed that vehicles led the chart with about 52 percent of the leased assets, including trucks for haulage and buses for inter-state commercial transportation, which have been major attraction in recent times.
The ELAN reported further that market projections indicated that the leasing industry would 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.
Citing the implementation of the Economic Recovery and Growth Plan (ERGP) 2018– 2020 as a potential macroeconomic initiative that will impact in leasing sector, the association projected that the Plan would create 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, manufacturing etc.
While noting the future of leasing is bright in the country, the association identified stakeholder’s goodwill, governments’ creation of a more conducive environment for leasing business and encouragement of leasing companies to access low interest funds, including from the pension savings and intervention funds, as critical to improving the industry’s contributions to capital formation in the nation’s economy.
The association pointed out that these supportive measures would enhance the capacity of lessors to deepen lease penetration in the market and would, in the long run, promote investments, create wealth and more jobs.