THE ROLE OF MERCHANT BANK IN EQUIPMENT LEASING IN NIGERIA
THE ROLE OF MERCHANT BANK IN EQUIPMENT LEASING IN NIGERIA
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Date
1992-12
Authors
ALAYANDE, YINKA
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Abstract
Merchant Bank differ from Commercial Bank in that
they have as their primary objective filling the medium
term to long-term loan vacuum in the Country.
They are the specialists in the Nigerian Financial System
as selective cases are referred to them. Their wholesale
nature and corporate focuse can have more direct impact on
industries.
Equipment leasing is a unique function performed by
Merchant Bank in Nigeria. This is beeause commercial bank
are not allowed to engage in equipment leasing. Other
financial and commercial houses that engaged in equipment
leasing operate in a totally different environment and as
such do not compete directly with merchant banks, they also
lack the strong financial base that would allow such competi-r:
tion.
While the term "Lease" may be familiar, it's meaning in
the context of Equipment Leasing is not fully understood.
Today leasing has become familiar as a method of financiag
the acquisition of capital plant and equipment. Leasing is
gaining prominence as the creative financing alternative
for the acquisition of heavy capital goods as a result of
farreaching economic reforms under the structural Adjustment
Programme (SAP), introduced six years ago.
Eventhough the regulatory body (CBN) has stated that a
maxium of 15 per cent of the total asset of merchant banks
should be devoted to Equipment Leasing, most of them are yet
to perform up to 50 per cent of this amount. This is inspite
of the current upsurge in the demand for leasing products.
The performance of Merchant Banks in equipment leasing still
leaves a lot to be desired.
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A lease is a contractual agreement by which the lessor (owner
rentor) grant rights to the leasee (tenant) to use real or personal
property (asset) for a specific period of time less than it's (actual)
working life in return for compensation in the form of specified periodic
cash payments rents. The practice of equipment leasing attracted other
aspects of finance such as legal, taxation, accaounting, Insurance, lease
of purchase etc.
Equipment leasing has continued to be a popular means of
financing business operation in recent times. This is due among other
things, to the numerous advantages it has over its disadvantages and
other means of financing. Despite the advantages the leasing industry in
Nigeria is plagued with a lot of problems such as: lack of a leasing law,
lack of precise regulation regarding uniform taxation; and accounting
policies on leasing plans/assets, lack of competition in the industry, lack
of adequate funding; credit policy problem, the erratic and frequent changes
in the fiscal and monetary policies of the Government leading to
unattractive exchange rates.
other are: Death of trained and experienced relevant financial engineers
and lack of viable projects.
If the above mentioned problems can be effectively tackled, there is no
doubt that the operators of the industry will be adequately equipped to
face the challenges ahead in the industry. The future of leasing in
Nigeria is very bright and promising
Description
A PROJECT SUBMITTED TO THE POST-GRADUATE
SCHOOL, AHMADU BELLO UNIVERSITY, ZARIA
IN PARTIAL FULFILMENT FOR THE REQUIREMENTS
FOR THE DEGREE OF MASTER OF BUSINESS
ADMINISTRATION (M.B.A)
DEPARTMENT OF BUSINESS ADMINISTRATION
AHMADU BELLO UNIVERSITY, ZARIA.
DECEMBER ,
Keywords
ROLE, MERCHANT BANK, EQUIPMENT, LEASING