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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