Barrister Andrew Emonuwa, Executive Secretary/Chief Executive Officer of the Equipment Leasing Association of Nigeria (ELAN) in this interview with FELIX OLOYEDE, x-rays the performance of the leasing sector in 2020 and projects how it would perform this year. Excerpt:
The leasing sector was able to pull a 4.3% growth last year despite the disruption caused by COVID-19. What propelled this growth when many other sectors were in the negative during this period?
If you look at the leasing industry, it has been growing more than the economy. It slowed down last year because of the pandemic. Leasing is all about productive equipment. During the pandemic, some sectors were very active like the logistics sector, the health sector, etc. There were a couple of deals that were done after the lockdown, which was basically on logistics. Some of our members did transactions in that sector. This contributed to the growth. There was also the need for people to restart their lives, especially in the second half of the year. All these impacted the growth. In 2020, we did 4.3%, compared to over 14% in 2019.
The majority of the growth last year was from the oil and gas sector. Why is it so?
It has always been the major sector in the leasing industry. The value of equipment used in that sector is very huge. They use specialized equipment, and they depend heavily on logistics support. For instance, there was more demand for staff buses because of the social distance occasioned by the COVID-19 pandemic. So, the value going to the oil and gas sector is very huge. But again, the leasing sector did not grow as expected. It grew at a slower pace.
Despite being a N2 trillion sector…
It is about N10 trillion sector over the last 10 years.
It is only C&I Leasing that is listed on the Nigerian Exchange. Why is it so?
It depends on the corporate strategies of the various players. But it is not only C&I Leasing that is listed. It is only a specialized leasing company. They are players in the sector that are listed. For instance, the banks are equally doing leasing and they are on the stock exchange. Like I said earlier, it depends on the corporate strategies of the players. They may not want to be on the exchange. Maybe they have some private investors who are pumping in money. It depends on how they want to play. It does not mean because they are not on the exchange, they are not doing well. Many big companies in Nigeria are not listed on the stock exchange. For instance, it is just recently some of the telcos were listed on the stock exchange.
Leasing penetration is very low in Nigeria. What is ELAN as well as other stakeholders doing to improve this?
ELAN was established for that purpose. To promote leasing, we do that in various ways- through advocacy, awareness creation, stakeholders’ engagement, conferences, and press interviews. All these are ways to tell people the alternative benefits of leasing as a major financing option. All these are things we have been engaging other stakeholders to do. Other stakeholders like the development partners like the DFID. Now we are trying to work with GIZ. These foreign development partners are willing to support the growth and penetration of leasing in Nigeria. Even the government is also supporting the promotion of leasing. If you look at the Leasing Act of 2015, this is an effort aimed at increasing leasing penetration in the country. We are doing a lot in that regard. A lot can still be done because we are not there yet.
What the World Bank is doing through IFC; it has a lot of development programmes across Africa, but not in Nigeria because it feels Nigeria is good. What ELAN is doing in Nigeria is what they are doing in other countries.
There was a time many banks were into micro-leasing, but it seems this drive has slowed down. What is responsible for this?
It has not gone down. In terms of value, it is the big end that is driving the industry, as a transaction can cost N1 trillion. But in terms of spread, it is the SMEs that is being done. About 80% of members focus on SMEs. Not because of choice, but because of funding. They cannot do some of these big-ticket transactions.
We are trying to work with JIZ to spread the gospel of leasing. We are partnering with GIZ to focus on five states of the federation on they can support SMEs through leasing. Leasing is the last resort for SMEs. We are doing a lot in that area.
The government is one of the major drivers of the Nigerian economy in terms of employment. To what extent has the government embraced leasing?
The government has not utilized leasing because of policy issues. That is not to say that it is not appreciative of what we are doing. What it does is support the leasing environment. So that the productive sectors can have access because the capital formation is very key in any economy. That is what leasing is all about. It is to enhance capital formation in the economy. If the leasing industry can do that through the support of the government, that is fantastic. The Equipment Leasing Act was promulgated to support leasing, especially the automotive industry. The government believes not many Nigerians will not be able to afford the Nigerian-made vehicles outrightly. We are still working with the government on this. We are also discussing with the Lagos State Government and fishermen in the state how they can use leasing to meet some of their equipment needs. We are also encouraging the government to embrace leasing and identify partners they are working with to support them with leasing products.
The automotive policy has not worked. How has this impacted the leasing industry?
If the automotive policy was well implemented, to encourage many Nigerians to patronize these made-in-Nigeria vehicles, to encourage more production, then you need to have a financing scheme. That is where leasing comes in. Recently, the automotive council was trying to launch a vehicle financing scheme. We are still watching out for that. It will impact the leasing industry positively. We hope that it will materialize as expected.
What is the potential of the leasing industry in Nigeria if properly harnessed?
If you look at the Nigerian economy, there are a lot of gaps. There are a lot of financing gaps in all sectors of the economy. It means a lot of leasing opportunities. The government currently talking about agriculture, mining and health, there is no sector that you will not find leasing opportunities. All that we need to do is for players to articulate these policies and find a way of meeting these demands because it is very huge. The leasing industry will continue to grow because of the capital deficiency in the system.
What is your projected growth for this year?
This year has started well. Although there was nothing much in the first quarter because people were trying to adjust to the current situation. But in the second, third and last quarters, we expect more momentum in the economy. As the economy gears up, we will see a lot of financing is done. At the same time, you need to look at other challenges in the macro-environment. The insecurity is still there. This is a challenge that can hamper any meaningful economic growth, which may dovetail to the leasing industry. But by and large, we are expecting better growth this year.