The Nigerian government is set to unveil the Equipment Leasing Registration Authority (ELRA) on November 7, 2023, in a grand ceremony in Abuja, the capital city. This momentous occasion, which will be presided over by Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, marks a significant step towards achieving two key objectives of the Tinubu Administration’s 8-point Agenda – “Access to Capital and Job Creation”.
The ELRA Board was established in line with Section 8 of the Equipment Leasing Act, 2015, and was inaugurated in May 2022 by Zainab Ahmed, the former Minister of Finance, Budget, and National Planning. The board consists of 11 highly esteemed members, including Engr. Saidu Njidda as the Executive Chairman and Barr. Bassey Imoh as the Registrar/Secretary. There is also representation from various esteemed organizations such as the Central Bank of Nigeria, SMEDAN, NACCIMA, Federal Ministries of Finance, Justice, and Trade and Investment, as well as three representatives from the Equipment Leasing Association of Nigeria, the sponsorship body of the bill.
The implementation of the Equipment Leasing Act opens up new opportunities for enhanced revenue generation, as the leasing industry has the potential to yield an estimated total volume of $1.5 trillion globally, accounting for 20% of total investment in equipment and contributing approximately 1.5% to the Gross Domestic Product (GDP). Engr. Njidda, the Executive Chairman of ELRA, highlights that Equipment Leasing, as an alternative financing option to loans, has played a significant role in capital formation across various economies globally.
In Africa, countries such as South Africa, Morocco, and Nigeria are ranked among the top 50 Leasing Countries in the world, with Ghana, Rwanda, Egypt, Kenya, Tunisia, and Angola also making notable contributions. In Nigeria alone, leasing has contributed over ₦14.3 trillion to the country’s GDP in the past 10 years. This alternative source of finance has become even more crucial, particularly in the current economic climate where access to finance is challenging, especially for Micro, Small, and Medium Scale Enterprises (MSMEs).
Engr. Njidda emphasizes that the primary goal of leasing is to promote economic planning, improvement, and development by supporting productive ventures through capital formation, job creation, and wealth generation. However, despite its importance, the penetration rate of leasing in Nigeria is still very low, standing at less than 1%. In developed economies like Europe and America, the penetration rate is as high as 28%. This disparity calls for concerted efforts to increase awareness and adoption of leasing as a viable financing option.
The Chairman further explains that key players in the leasing industry include lessors who provide the assets for lease, brokers who facilitate leases as intermediaries, lease professionals who structure and manage the leases, and the government, which plays a vital role in formulating policies, establishing the legal framework, and implementing tax, accounting, and other regulatory policies.
It is important to note that the conduct and roles of these key players are crucial in stabilizing and supporting a healthy leasing industry ecosystem, which ELRA seeks to regulate with government support. The Chairman identifies poor inflow of Direct Foreign Investment (DFI) in the lease industry and lessors’ apathy towards certain categories of leasing as major challenges to increasing lease penetration. These challenges can be addressed through a supportive regulatory environment and financial interventions from the government to promote growth in the sector and enhance its contribution to Nigeria’s GDP.
Engr. Njidda expresses optimism that the passage of the ELRA Act and the full establishment of the Authority will provide a framework to identify and address fraudulent and unscrupulous practices among transacting parties, including manufacturers. This, in turn, will fill existing gaps and position the Equipment Leasing sector as a developed industry through the introduction of appropriate policies, guidelines, and standing orders that shape and sanitize the industry.
The unveiling of the Equipment Leasing Registration Authority heralds a new era in Nigeria’s finance landscape, opening up opportunities for businesses to access capital and stimulating job creation. As the Nigerian government takes steps towards establishing a robust leasing industry, it paves the way for economic growth and development. By embracing the potential of leasing, Nigeria can harness the power of alternative finance and accelerate its journey towards prosperity.
