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. vii 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
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