Nigeria’s outstanding lease volume increased to N1.44trillion in 2017 from N1.26trillion the previous year, representing a growth of 14.5 percent, according to a recent report released by the Equipment Leasing Association of Nigeria, ELAN.
The report listed relative stability in the macroeconomic environment, increasing lease demand, new entrants into the leasing industry and increased value of assets due to the depreciation of the Naira, as reasons for the continued upward trend witnessed in the industry during the period.
Analysis of the volume by sector revealed that the oil and gas, lead with N449billion, representing 28 percent of the total portfolio, while transportation followed with N355billion, representing 20 percent. Manufacturing moved to N217billion from N180billion in 2016, while Agriculture, Government, Telecommunications and other sectors (education, healthcare, construction and consumer sectors) recorded considerable growth.
As usual, finance lease remained the predominant type of leases accounting for 65 percent of the transactions while operating lease continued to make strong showing at 35 percent.
In recent times there has 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.
In terms of transaction value, the banks still maintains the lead, particularly financing big ticket leases, and providing funds to lessors for lease transactions.
The non-bank lessors however accounted for about 80 percent 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 means of hedging against other non-performing product offerings.
Also, in terms of assets categorisation, vehicles take the lead 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.
However, market projections indicates that the leasing industry will 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.