Equipment Leasing Association of Nigeria (ELAN) is confident that the “Equipment Leasing Act 2015” will bring enormous benefits to Nigeria by enhancing access to productive equipment, increase investment, generate employment, and grow the economy.
Government in recognition of the developmental role of leasing, provided a specific law on leasing, “Equipment Leasing Act 2015,” as part of the support framework that will stimulate development in the industry to enable it contribute more effectively to the national economic development.
Nigeria’s leasing industry continued to witness growth despite the challenging environment. The volume of leases transactions grew from the N869 billion recorded in 2014, to N1.1trillion in 2015, representing a 27.39 percent growth.
“We are currently engaging the Ministry of Finance, which is the supervisory ministry, and other stakeholders on the full implementation of the Law which includes inauguration of the Equipment Leasing Registration Authority. This statutory body is made up of stakeholder representatives from the public and private sectors including ELAN and saddled with the basic responsibilities of regulating leasing, including the registration of leasing companies and lease transactions,” Chuka Onwuchekwa, chairman, ELAN told BusinessDay on the sideline of ELAN annual general meeting held Thursday in Lagos.
Onwuchekwa said the Act when fully implemented would change the face of the Nigerian leasing industry, strengthen its capacity to finance more leases and facilitate the attainment of economic initiatives.
“The new law is expected to strengthen the existing legal structure that would promote and sustain development in the leasing industry. It provides minimum legal framework for leasing that would enhance confidence, encourage leasing investment (local and foreign); and most importantly, provide sanity, certainty and protection to leasing stakeholders including lessors, lessees, equipment suppliers, and other investors,” he said.
Before the Equipment Leasing Act, the legal infrastructure for leasing was weak. There was no specific legislation on the subject. Industry players rely on basically, the common law and other provisions scattered in other laws. “This structure was inadequate to cater for the level of sophistication the industry has attained over the years and achieve its full potential,” ELAN chairman added.
While the opportunities for the leasing industry are real, it is imperative for the industry to position itself to play actively at these times. The capacity of the industry needs to be strengthened to enable it play its developmental role effectively. The major challenges facing the industry centre on regulatory and operating environments.
The industry is still plagued with the issues such as inadequate funding mechanism, defaults and unfavourable tax regime, which remain concerns to the industry.
The funding challenge is critical as most practitioners rely on short-term sources, mainly local banks, for funding. These sources according to ELAN chairman are not appropriate for leases, which ideally should be a medium to long-term financing.
Consequently, lease tenors are generally confined to not more than four years and lessor’s capacity to play actively in the market especially big ticket leases is greatly impaired.
Again, the industry is still struggling with the unfavourable tax regime. The issue currently at stake includes Value Added Tax (VAT) and Withholding Tax; which amounts to double taxation and depletes the real value of leases respectively.
“ELAN has been engaging the revenue authority to ensure that these issues are resolved with some considerable success especially in the area of VAT, which is no longer applicable in the case of finance lease. I want to use this opportunity to urge the Federal Inland Revenue Service (FIRS) to review the current guidelines to make them more favourable to stimulate leasing activities,” Onwuchekwa said.
