The Nigerian leasing industry continued its positive growth trend in 2017.
Outstanding lease volume during the period stood at N1.44trn as against N1.26trn in 2016, representing a growth of 14.5 per cent. This growth was facilitated by 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.
Analysis of the volume by sector reveals that the oil and gas, took the lead with N449bn, representing 28 per cent of the total portfolio, while transportation followed with N355bn, representing 20 per cent.
Manufacturing moved to N217bn from N180bn in 2016, while agriculture, government, telecommunications and other sectors (education, healthcare, construction and consumer sectors) recorded considerable growth. Finance lease remained the predominant type of leases accounting for 65 per cent of the transactions while operating lease continued to make strong showing at 35 per cent.
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 takes the lead, particularly financing big ticket leases, and providing funds to lessors for lease transactions. The non-bank lessors however accounted for about 80 per cent 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. In terms of assets categorisation, vehicles take the lead with about 52 per cent of the leased assets including trucks for haulage and buses for inter-state commercial transportation, which have been major attraction in recent times.
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.
For instance, the implementation of the Economic Recovery and Growth Plan (ERGP) 2018–2020, 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 and others.