With equipment leasing accounting for an estimated $1.5 trillion additional revenue from investments in equipment globally, the Federal Government is targeting to earn big as it is set to unveil Equipment Leasing Registration Authority (ELRA) in the country.
The Chairman of ELRA, Saidu Njidda, who announced the unveiling of the agency said the ceremony would be performed by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, on Tuesday.
Njidda said the implementation of the Equipment Leasing Act would serve as a viable alternative to loans to herald a new era of enhanced revenue generation given that just 20% of total investment in equipment contributes about 1.5% of the global Gross Domestic Product (GDP).
He said the inauguration of the agency would enable it to play its role as a key driver and facilitator of two of the Tinubu Administration’s eight-point agenda, namely ‘Access to Capital and Job Creation.”
The ELRA Board was inaugurated in May 2022 by the immediate past Minister of Finance, Budget and National Planning, Zainab Ahmed, following the establishment of the authority by the provisions of Section 8 of the Equipment Leasing Act, 2015.
The new 11-member board, which has Njidda as Chairman, also has the Registrar/Secretary, Bassey Imoh, a lawyer, with one representative each from the Central Bank of Nigeria (CBN), Small and Medium-scale Enterprises Association of Nigeria (SMEDAN), Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), Federal Ministry of Finance, 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.
The Chairman of the ELRA Board observed that the implementation of the Equipment Leasing Act was a viable alternative to loans to herald a new era of enhanced revenue generation in the country.
Equipment Leasing as an alternative and significant source of finance to loans, Njidda noted, has immensely contributed to capital formation in the global economy with its wide usage in many countries for the acquisition of capital assets.
He said major players in the leasing industry in Africa including South Africa, Morocco, and Nigeria are ranked among the top 50 Leasing Countries in the world, with Ghana, Rwanda, Egypt, Kenya, Tunisia, and Angola, playing significant roles
.The ELRA Boss further observed that in Nigeria Leasing has contributed over ₦14.3 trillion to the country’s GDP over the last 10 years, adding that it has continued to be more relevant, especially under the prevailing situation where access to finance was 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 said.
He said despite the importance of leasing as a financing option to Nigeria’s industry sector players and the economy, the penetration rate in Nigeria was still very low – currently at less than one percent, when compared to the potential of the Nigeria economy against other developed economies, like Europe and America where the penetration is as high as 28 percent.
The Chairman further explains that the major players in the Leasing industry are the lessor, who provides the asset 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 other players include the supplier, who sells and assures the performance and suitability of the asset, the financier, who gives out money as raw material of leasing, the lease broker, who sometimes facilitates the lease as an intermediary with the manufacturer and financier; 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 to stabilizing and supporting a healthier leasing industry Ecosystem which the Authority seeks to regulate with support from the government,”.
He listed the major challenges of lease penetration as the poor inflow of Direct Foreign Investment (DFI) in the lease industry, and lessor’s apathy to some categories of leasing among others which he attributed to the absence of government support through the regulatory environment and financial intervention to grow the sector and enhance its contribution to Nigeria (GDP).
Njidda expressed optimism that with the passage of the ELRA Act and the full takeoff of the Authority, fraudulent and unscrupulous practices of transacting parties, including the manufacturer, would be identified and handled accordingly.
This, he said, would 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.
