‘Leasing Industry Still Faces Many Challenges’

Beyond the tax challenges, the lessors are currently faced with other problems that daily threaten the growth and development of leasing industry in Nigeria.  According to the Elan  as published in  LEASING TODAY  these are mainly in the  areas of funding , high  cost of  imported equipment, fraudulent practices of lessees regarding  default and  helplessness of the judiciary. Others are lack of understanding of leasing  by regulating  agencies,  low awareness of the investing public of the role of  leasing and  poor  economic condition of the  country and  above  all absence of a leasing law

Funding; In the  area of  funding, the leasing sub- sector  has  contuined  to suffer due  to  the absence  of long-term  low cost  funding  sources. The  banks  see non  bank lessors  as keen  competitors  and  that explains  why  some  of  them are unwilling  to extend  cheap  credit to lessor to the  detriment the  whose  economy. By its nature, leasing involves medium to long-term funding  and since the local financial market does not have  the capacity for it,  the lessors are left  to resort  to foreign financial institutions for  assistance which is not forthcoming  become  of  socio- political  considerations.

High Cost of Imported Equipment: This is a  big problem  especially with dwindling value of the naira against other world major  currencies  as US dollar, Pounds and  Euro . Most of the machinery for leasing are imported and given the higher exchange rate, lease transaction becomes inevitably   high. This is so with such additional costs as  5 percent value Added Tax (VAT), and 10 percent to withholding tax etc.

Fraudulent practices By Lessees;  The  lessees  are often involved in certain  fraudulent   practices that are inimical to  lease  development  such as tampering with components  of the  asset  on lease, multiple lease  financing  and default in rental payment  .

This scenario is worsened by the  difficulty of  repossession as some  courts presided  over  by  corrupt  judicial  officers  do not help  matters. In some cases, lessees get fraudulent court injunctions essentially to frustrate  repossession  efforts , thus making  lessors to  lose huge sums of money in the event of rental  defaults.

Absence of leasing legislation:  Despite attempts by the successive governments to enact a comprehensive  leasing law for  Nigeria, it is yet unrealistic. At present,  the Proposed  leasing law before  the  National  Assembly (NA) is not  receiving  expected  much attention, perhaps , due  to lack of understanding of its  implication to the Nigerians  economy. This explains  why  till date , the  practice  of leasing  in  Nigeria  is governed  by  common law  and  certain tit bits  of provisions. As a result, foreign lessors are shying away from Nigerian as they consider  the country a  risky investment climate.

Government policies and regulation;

Government’s monetary and fiscal policies and regulations have not been too favorable to the development of leasing business in Nigeria.

These manifest  in the  area  of  withholding  tax usually deducted from rentals at source and it depletes the real value  of rentals to  the lessor.

Other are VAT  which  amounts to double taxation  in addition to the  reversal of  tax policy against lessors.

Poor Awareness About  leasing: The  investing  public is not  still aware  of  the inherent  advantages of leasing as   a viable  financing alternative  or option.

This calls  for more enlightenment  Campaign  by  the  stakeholders led  by ELAN  for the industry  to experience  exponential  growth  to the  benefit of the  country. Though  the development  is a  reflection of the  down  turn  in the  economy  but the same   environment can be  bettered  through  leasing   products.

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