Leasing Firms Plead For Long Term Funding For Efficiency

Leasing firms across the country are pleading for cheap long term funding to enhance the capacity of lessors to deepen leasing penetration in the country.

Speaking on behalf of the leasing operators at the Quarterly Business Forum of the Equipment Leasing Association of Nigeria (ELAN) in Lagos, the chairman, ELAN, Mr. Chuka Onwuchekwa, said, one of the challenges faced by leasing industry in the country is inadequate funding mechanism as most practitioners rely mainly on short term sources, especially banks, for funding.

These sources, he said, are not appropriate for leases which ideally should be medium to long term financing. Lease tenors, according to him, are generally confined to not more than four years and that lessors’ capacity to play actively in the market especially big ticket leases is greatly impaired.

Leasing Firms Plead For Long Term Funding For Efficiency 1

Stating that ELAN continues to seek ways to address this funding challenge, he advocated for better funding mechanism, identifying and engaging both local and foreign fund providers. It is in this regard, that we seek partnership with the insurance industry as a major stakeholder, he pointed out.

In other climes, he said insurance and pension funds are major sources of finance for the leasing industry, but that in Nigeria, most insurance companies’ appetite appears limited to providing insurance cover for leased assets with only a few venturing into investment in terms of loans to leasing companies, equity participation or creating leasing subsidiaries.

To this end, he said the role of insurance industry should go beyond the provision of cover to active investment that would enhance the attainment of the core corporate objective of profitability of insurance companies.

He believes the future of leasing remains bright in Nigeria as leasing tends to thrives whether the economy is booming or recessing. He said the diversification and developmental plans of government require huge investment in capital which presents immense opportunities for the leasing industry.

There is the need for the leasing industry to continue to enhance its capacity to meet the demand of filling the wide financing gaps in various sectors and contribute more effectively to capital formation in the Nigerian economy, he pointed out.
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