There are calls for the government to look in the direction of leasing as a way of cutting the cost of governance in the face of the country’s revenue challenge, writes FELIX OLOYEDE
The N57.6bn used to procure 360 Sport Utility Vehicles for members of the National Assembly recently attracted a lot of criticism from the public. Many considered it reckless, especially at a time when the country was battling an economic crunch. Some wondered why the lawmakers went for imported SUVs when there were local vehicles that could serve the same purpose, and save the country the scarce foreign exchange.
Besides considering local substitutes, leasing experts believe that the government should look at the direction of leasing as a viable option for scaling down the huge capital expenses associated with political officeholders during every election cycle.
They also argued that government adoption of leasing would enable it to free more money for capital projects.
Of the N27.5tn 2024 budget that President Bola Tinubu presented to the National Assembly, the Federal Government intends to spend 31.6 per cent of it (N8.7tn) as capital expenditure, 36.1 per cent (N9.92tn) as recurrent expenditure while debt servicing would gulp 30 per cent (N8.25tn).
According to a former Principal Manager with Leasing Company of Nigeria, Soji Oloyede, the capital outlay of the government is usually too much every four years.
He stated that if the government embraces leasing, some of the money spent on office equipment and vehicles would be moved from capital expense to recurrent expenditure.
“Apart from that, it is going to also boost the economy. It will create businesses for the leasing companies that will provide cars, drivers and maintenance every four years if it is wet leasing.
“It will also reduce corruption. It is those in procurement in government agencies that do not want the government to embrace the leasing option,” Oloyede asserted.
He disclosed organisations like the Nigerian Maritime Administration and Safety Agency, the Federal Inland Revenue Service, etc., had used leasing for some of their asset needs in the past.
He added that there was a time when the Federal Government tried to give out some of the refineries through contract leasing, but it fell through.
The Group Managing Director/CEO of C&I Leasing Plc, Lenin Ugoji, told The PUNCH that it has important role in the Federal Government’s attempt to revamp the economy through infrastructural development.
“We see that the focus of the Nigerian government has shifted to infrastructure development. At least we have seen that over the last decade, there has been some investment in certain key infrastructures that are very critical to creating the kind of modern society that we need.
“And in increasing those things, of course, there is going to be equipment needs because you cannot build infrastructure without equipment. So, C&I Leasing is keenly interested in the infrastructure space,” he declared.
He noted that since infrastructure is critical to Nigeria’s development, the leasing sector aims to support the country’s infrastructure needs.
It was in light of this that the Equipment Leasing Association of Nigeria centred this year’s conference which was held in Lagos on November 16, 2023, on how leasing could be used to propel economic growth. The theme of the conference was “Propelling Economic Recovery and Growth: The Leasing Initiative.
Setting the tone for the deliberation on how the government could leverage leasing for economic growth, the Chairman of the Board of Directors of ELAN, Mrs Elizabeth Ehigiamusoe, who is also the Managing Director of Micro Investment Support Services, stated that the country had been facing a barrage of challenges from insecurity to a depressed economy.
“Essentially, the impacts of the removal of petroleum subsidy and the devaluation of the naira are major headwinds choking Nigerians and bringing immense economic hardship to the citizenry. The Federal Government under the new administration has been under pressure to ease the economic hardships and is responding through palliatives and several measures to cushion the effects,” she noted.
According to Ehigiamusoe, the government has taken steps to revamp the Nigerian economy, which includes food security; poverty eradication, economic growth, job creation; access to capital, especially consumer credit; inclusivity in all its dimensions, particularly as regards youths and women; the rule of law and fighting corruption; adding that these are positive initiatives not different from pronouncements made over the years by successive governments.
She stressed the need for the government to develop new and improved implementation models and solutions that would ensure the attainment of the agenda and improve the quality of lives of Nigerians.
“No doubt, equipment leasing is very significant to achieving the government’s economic agenda with direct bearing on all the eight priority areas. As a financing alternative, leasing is unique as it facilitates easy and convenient access to desired equipment needed for productive purposes, contributing to capital formation in the economy.
“Leasing reaches out and meets the diverse equipment needs of various categories of customers, be it large corporate organisations or small venture owners, providing them with affordable and quality services tailored to their needs. The overall essence of leasing is to enhance the planning, improvement and development of any economy by building and supporting productive ventures,” the ELAN chair enunciated.
She noted that globally, equipment leasing had been established over the years as the creative financing alternative, generating a new business volume of over $1.5tn annually in new leases and accounting for 20 per cent of total investment in equipment, contributing about 1.5 per cent to GDP.
“The beauty of leasing lies in the fact that it delivers a multiplicity of benefits to those who choose to lease. It helps all types and sizes of businesses to conveniently acquire the much-needed equipment to conduct their business operations and make a profit.
“Governments are also utilising leasing in their developmental initiatives. The leasing industry supports investments in key sectors of the economy in many developing countries, including Egypt, South Africa, Morocco, Algeria, Ghana and Zambia,” she remarked.
Leasing has been around in the country for some time, though it has not been fully explored. Ehigiamusoe asserted that since its inception in Nigeria, leasing has been supporting economic development. “Today, the impact of leasing is pronounced in all sectors of the economy, enhancing capital formation, generating employment and creating wealth.
“Outstanding leases in Nigeria in 2022 amounted to N3.18tn as against N2.58trn in 2021 representing 23.2 per cent growth. In the last decade, leasing contribution to capital formation in the economy is more than N16.3tn. Leasing is becoming more relevant in our prevailing economic situation, especially to Micro Small and Medium Scale Enterprises (MSMEs) given the high cost of assets,” she disclosed.
The ELAN chairperson called on the Federal Government and the states to utilise leasing in their various developmental initiatives to bring succour to the people.
“The leasing industry is willing to collaborate with government at all levels and build a strong partnership with other stakeholders to achieve the set out economic initiatives,” she assured the government.
Participants at ELAN’s annual conference stated the need for the government at all levels to leverage equipment leasing in their various developmental initiatives aimed at bringing succour to the people, assuring them of the industry’s willingness to collaborate with the government and build a strong partnership with other stakeholders to achieve the set out economic initiatives.
“In view of the relevance of leasing to economic development, it is imperative for the government to focus on the leasing industry by taking targeted measures that would stimulate more contribution from the industry,” part of the conference communiqué read.
The need for the government to utilise leasing in the public sector to achieve efficiency and cost savings and incentivise lease investments in critical areas such as agriculture, health and mining, through access to cheap funding, tax rebates and providing risk mitigants, was also brought to the fore.
Speaking on the theme “Nigeria’s Economic Agenda: Impact Analysis, Roles and Opportunities for Leasing” at ELAN conference, the Managing Director of Coscharis Mobility Limited, Christian Chigbundu, said, “To help manufacturing companies have enough capital for production, leasing should be the way forward to go for manufacturing equipment and machines that are needed to meet up the expected production.
“Leasing over the years has played a major role in assisting the growth of SMEs in Nigeria and other African countries like Morocco and South Africa. In view of this, here comes another opportunity for leasing companies to harness the opportunity that will be open in SMEs sector.”
According to Chigbundu, a critical review of the current government economic agenda is geared towards revamping, redesigning and energising economic growth, which is powered by diversified income revenue generation, anchored in boosting production, mechanised agriculture, improved infrastructure and creating an enabling environment for business to drive.
“If properly executed without distractions and lack of political personal interest, in other words, separating politics from economy and understanding the psychology of economy, the expected growth will be actualised with leasing benefiting from it,” he remarked.
To be able to support the government in its economic agenda, the leasing industry needs to find solutions to its funding challenge.
ELAN stakeholders believe to tackle the funding challenge, the government should create an intervention fund for the subsector. “Leasing should be included in the various intervention funds for the development of targeted sectors of the economy. Also, the leasing industry should be given access to pension funds, which is one of the major sources of funds for leasing globally because of its long-term nature,” they demanded.
It is certain that if the government embraced leasing and the industry played its part effectively, it would be a win-win for the leasing industry and the economy in general.
