Equipment leasing sector contributes N14.3tr to country’s GDP
Equipment leasing has contributed over N14.3 trillion to the country ‘s Gross Domestic Product ( GDP) over the last ten years.
Nigeria joined the league of nations utilizing their leasing potential as a means of funding where access to finance is difficult, especially for Micro Small and Medium Scale Enterprise (MSMES).
Chairman, Board of Equipment Leasing Registration Authority (ELRA) Engineer Saidu Njidda stated this at the board inauguration of ELRA by the Minister of Finance, Budget and National Planning Mrs Zainab Ahmed.
Njidda observed that the implementation of the equipment leasing Act, as a viable alternative to loan heralds a new era of enhanced revenue generation.
This is because the industry is capable of generating an estimated total volume of $1.5trillion globally accounting for 20 percent of total investment in equipment and contributing about 1.5 percent of Gross Domestic Product (GDP).
The Chairman also noted that equipment leasing as an alternative and significant source of finance to loans has been immensely contributing to capital formation in the global Economy with its wide usage in many countries for the acquisition of capital assets.
He noted that the leading players in the leasing industry in Africa are South Africa, Morocco and Nigeria who are ranked amongst the top 50 Leasing Countries in the world with Ghana, Rwanda, Egypt, Kenya, Tunisia and Angola, playing significant roles.
He said in the last 10 years, Leasing has contributed over ₦14.3 trillion to the country’s GDP and continues to be more relevant especially under the prevailing situation where access to finance is difficult, especially for Micro Small and Medium Scale Enterprise (MSMES).
“The whole essence of Leasing is to enhance the planning, improvement and development of any economy, by building and supporting productive ventures, through capital formation, generating employment and creating wealth”.
He stressed that despite the importance of leasing as a financing option to Nigeria’s industry sector players and the economy, the penetration rate in Nigeria is still very low which currently stands at less than 1percent when compared to the potential of the Nigeria economy, and in other developed economies like Europe and America where the penetration is as high as 28 percent.
Saidu Njidda further explained that the major players in the Leasing industry are the lessors, who provide the assets to be leased and sometimes with other auxiliary services, the lessee who is the user of the equipment and has possession of the equipment or asset but not the title.
The supplier sells and assures the performance and suitability of the asset, the financier, gives out money as raw material of leasing, the lease broker sometimes facilitates the lease as intermediary with the manufacturer and financier.
There are the lease professionals who structure and manage the lease, and the Government who plays a vital role in the industry in terms of policy formulations, the legal framework, Tax, accounting and other regulatory policies.
“It is pertinent to point out that the conduct and roles of the players mentioned above are the keys in stabilizing and supporting a healthier leasing industry Ecosystem which the Authority seeks to regulate with support from Government” Saidu Njidda said
He listed the major challenges of lease penetration as the poor inflow of Direct Foreign Investment (DFI) in the lease industry, lessor’s apathy to some category of leasing among others which he attributed to the absence of Government support through regulatory environment and financial intervention in order to grow the sector and enhance its contribution to Nigeria (GDP).
Engr. Njidda expressed optimism that with the passage of the ELRA Act, fraudulent and unscrupulous practice of transacting parties including the manufacturer will be identified and handled accordingly adding that this will no doubt fill the gap and bring out a comparative advantage in driving the equipment leasing sector to a developed status, from the existing scenario of developing status through the introduction of appropriate policies, guidelines and standing orders that will shape up and sanitize the industry.
Earlier in her remark, Minister of Finance, Budget and National Planning Mrs Zainab Ahmed said the establishment of the authority was in accordance with Section 8 of the Equipment Leasing Act, 2015 which also presents a great opportunity for Government to make more revenue for the nation.
The Minister observed that the establishment of the authority will assist government to expand the provision of infrastructure and equipment to the critical sectors of the economy for rapid industrialization and economic development.
She charged members of the Board of ELRA not only to regulate the industry but to also sensitize members of the public on the benefits of equipment leasing adding that the National Bureau of Statistics (NBS), should as part of their activities, report on the equipment leasing activities throughout the country.
The newly inaugurated board comprises 11 members including Engr. Saidu Njidda, Executive Chairman, Barr. Bassey Imoh, Registrar/Secretary, one representative each from the CBN, SMEDAN, NACCIMA, Federal Ministry of Finance, Budget and National Planning, Federal Ministry of Justice, Federal Ministry of Trade and Investment, and three representatives from the Equipment Leasing Association of Nigeria, the umbrella body of lessors which sponsored the bill.