Business
Leasing business booms over high cost of funds, goods
...as Nigerians go for assets financing
The Nigerian leasing industry has continued to expand at a strong pace, bolstered by innovative service models, high cost of goods, and demand for assets financing, and surge in investments in the oil and gas, IT/technologies and energy sectors, Business Hallmark’s findings have revealed.
The sector, which rates among the highest in Africa, now plays a vital role in supporting large and medium-sized enterprises and the country’s wider economy.
According to the Corporate Finance Institute (CFI), an equipment lease agreement as a contractual agreement where the lessor, who is the owner of the equipment, allows the lessee to use the equipment for a specified period in exchange for periodic payments.
Based on available data obtained by BH, outstanding leases stood at N4.19 trillion in 2023, compared to the sum of N3.25 trillion lessee splashed on assets in 2022. The 2023 figure represents a 28.7 percent increase from the amount realized in 2022.
Data also showed that new leases peaked at N935.6 billion in 2023 against N672 billion in 2022, a 39.2 percent growth.
While the performance report of the sector for 2024 is yet to be released, stakeholders projected a business volume of over N8 trillion in old and new leases, representing about 100% jump from the 2024 figure.
Sector Players
According to a report by a renowned research, credit ratings, and credit risk management firm, Augusto&Co, titled: ‘2023 Finance and Leasing Industry Report’, Nigeria has over 100 licensed lease companies and more than 240 smaller independent lease providers operating outside regulatory oversight at the end of December 2023.
One of the major players in the nation’s leasing space listed on the Nigerian Exchange Limited (NGX), C & I Leasing Plc, recently released its 2024 financial statements, showing an impressive year-on-year performance.
For instance, the company made N37 billion in 2024, up 75% from 2023, with most of the revenue (85%) coming from leasing income.
Also, C&I Leasing’s total assets grew by 44%. This, however, was in part due to foreign currency translation gains.
The depreciation of the naira grew the value of C&I’s offshore subsidiaries, boosting the foreign currency translation reserve by 84% to N29 billion. On the positive side, this strengthened the firm’s equity and reduced leverage.
In the same vein, the leading leasing firm repaid N12.5 billion of its issued Commercial Papers (CPs). As a result, its outstanding CPs declined sharply from N19.7 billion in 2023 to N7.169 billion at the end of the 2024 business year.
This, experts said, suggests a strong signal of the company’s strong commitment to meeting short-term obligations.
Also on a positive note, the firm’s stock which fell 33% YtD by the end of 2024 after gaining 75% in 2023, has rebounded by 6.21% YtD (as of March 21st, 2025) as investor confidence returns.
Economic Trends
BH findings revealed that some trends have been driving the growth of Nigeria’s leasing industry despite the prevailing headwinds in the economy.
They include the rising cost of outright purchases, which makes leasing attractive to many businesses and individuals; a surge in the number of startups in urban hubs like Lagos, Port Harcourt, Abuja, Enugu, and Aba, who are daily embracing leasing firms’ flexible and lower upfront capital requirements offers, as well as subsidized government leasing programme for SMEs in different informal sectors.
According to a crop farmer in Sepeteri in the Oke-Ogun area of Oyo State, who spoke to our reporter on the matter, Tope Odunsin, he decided to run to a leasing firm to get the needed farm machinery like tractors for clearing bush and heap/mound making, planters and harvesters when he could not raise the funds to outrightly purchase new ones.
“After completing my maize and sorghum training in Songha, Kwara State, and cassava farming course at the International Institute for Tropical Agriculture (IITA) in Moniya, Ibadan, I moved to my hometown of Sepeteri, Oyo State to start the farm business.
“I had earlier secured a loan of N200 million from a commercial bank to finance the project, which a flour mill in the country had committed to offtake its products.
“Unfortunately, the cost of buying the heavy equipment needed to clear the bush alone is more than N150 million, not to talk of the seeds, planters, and harvesters.
“I was later introduced to a leasing firm that offered to lease out two bush clearing tractors at the cost of N50,000 per day and N1.5 million per month, amounting to N3 million for the two heavy-duty caterpillars a month.
“By the end of the second month, the whole bush was cleared at the cost of N6 million (excluding fuel cost).
“So, I had enough to pay for other farm needs and tools like planters, pumping machines, harvesters, fuel, weeding, wages, and seedlings, which all amounted to a little over N40 million at the end of the first planting season.
“The arrangement allowed me to keep operations running smoothly without needing to source for more funds.
“We are long done with harvesting rainy-seasoning crops. Meanwhile, harvesting of dry-season crops planted in late 2024, as well as the cassava stems planted in March 2024 is ongoing.
“My accountant just informed me some minutes ago that we have realized over N83 million in revenue from sales of harvested crops.
“Yet, we still have about 30% of the field left to harvest. At this rate, I can project that we are going to hit the N100 million revenue mark during this winding down farming season in preparation for the new planting season,” Odunsin enthused.
Another respondent, the founder and CEO of an IT servicing firm based in Lagos, Engr. Segun Ilori, said he preferred the leasing agreement as it is cheaper and more convenient.
“My company was selected to do a job for MTN in Uyo, the Akwa Ibom State capital in February 2024, which lasted for six months. Before then, we used to lodge our workers in hotels at a huge costs.
“However, I met a senior colleague in the business, who advised that I should rather rent an apartment and furnish it to my taste for my workers.
“We got a twin duplex in Uyo through an estate agent, who introduced us to a leading leasing firm in the country with a branch in the state that provided all the furniture, electronics, air-conditioners, and kitchen appliances at a cost.
“At the end of the project, we returned the building, furniture, and appliances without incurring losses from resale depreciation.
“We also ended up spending about 40% of the budget we had planned to spend in housing our workers in hotel rooms. It was an eye-opener for me”, the IT consultant stated.
Business Attraction
According to a financial expert, Dr. Peju Beckley, it didn’t come as a surprise to her that more businesses and individuals now prefer leasing items from companies rather than buying them outrightly.
“This is primarily because there’s a lower upfront cost, which means you don’t have to save up to pay a large lump sum to get whatever asset it is you want.
“People and businesses can have what they need instantly and choose to pay weekly or monthly.
“It’s now possible to lease almost anything you could buy. This includes cars, property, telecommunication and IT equipment, printers, machinery, furniture as well as construction equipment. The list can go on and on.
“In Nigeria’s evolving business landscape, managing cash flow effectively is essential for sustainability and growth. From small-scale enterprises to large corporations, maintaining steady cash flow can be the difference between success and failure.
“Leasing has emerged as a practical solution, helping businesses in Nigeria access critical assets without overwhelming their finances”, Beckley stated.
Another financial expert, Mr. Sam Emiazor, said the assets and equipment leasing business is booming because access to finance remains a challenge for many Nigerian businesses, particularly small and medium-sized enterprises (SMEs).
“Leasing provides an alternative to traditional asset acquisition by eliminating the need for large upfront payments.
“Also, for big companies in the IT, petroleum, fintech, and construction industry, political instability and depreciation of assets is a major concern.
“While a single government decision can throw spanners into the best laid out plans of companies, assets like vehicles and machinery also lose value rapidly due to wear and tear, and harsh environmental conditions.
“So, for most of these companies, leasing transfers these risks to the lessor, allowing them to either focus their cash on operational efficiency or quickly pack their bags and exit the country at the slightest sign of trouble, rather than worrying about assets depreciation and losses”, Emiazor explained.
