ABSTRACT: This research work is an “Leasing as an instrument of finance” problems and prospects. The contribution of leasing as an instrument of finance to banks were examined, its impacts on the economy was also explained. The objective of this project is specifically to find out if leasing as an instrument of finance has been sufficiently contributed to corporate finance.. also the benefits of equipment leasing were explained and some recommendation were given for proper accountability. Fifteen questionnaires were distributed and ten were returned using stratified random sampling. Also related interatures dealing with leasing were examined. The data collected were analysed and interpreted, from the study, it was discovered that leasing as an instrument of finance has sufficiently contributed to corporate finance.
PROPOSAL
This research work is designed to make the reader to fully understand what leasing is all about. It contribution as a financial instrument. It focuses on the important of leasing in financial institutions its advantages and disadvantages.
More so this research work will explain why leasing is a source of fund to many banks and some organization in Nigeria especially in Enugu state and its envirous. Thus this research work will critically view all aspects of leasing as an instrument of finance, its problems and prospects. The researcher will also go further to explain types of leases like financial lease, operational lease, leveraged lease etc.
This research work will also provide the reader with the following information’s.
Consequently, the researcher will use primary questionnaire to deduce inferences from her respondents. She will also look into the relate literature, research methodology to enable her throw more light in analyzing data to reveal the problems and give some suggestions. However, the writer will give recommendations and conclusion from the findings, she will also make references.
Further more, the researcher could only go to certain extent in her findings because of the following limitations
TABLE OF CONTENT
CHAPTER ONE
INTRODUCTION
REVIEW OF RELATED LITERATURE
PRESENTATION OF DATA
FINDINGS
References
Bibliography
INTRODUCTION
To understand leasing as an instrument of finance, it is pertinent to first of all understand “finance” as it relates to business organization.
Finance could be said to be sources, application and management of funds finance as a discipline is merely a body of facts, pricinples and theories dealing with the raising and using of money by individuals business and governments. It is also the activity of managing money especially by a government or commercial organization.
Finance is concerned with money (the life-blood of a company or business). Borrowers have access to a variety of financial instruments which includes shares long term or short term loans, hire purchase facilities and the ability to lease assets or rent property.
To understand fully the lease process, it is crucial to delve into where leasing came from and why it has become what it is today, hence the historical background.
According to J. Johnson clark Tow Dark and S.P Amembal etal, the exact date of the first leasing transaction is unknown but the earliest records bear 2000 B.C in the ancient Sumerian city of UK. The documents produced on damp clay recorded transactions ranging from leases for Agricultural tools, land and water rights, oxen and other animals with priest of the temples as leases and the local farmers as leases.
There could be possibility of leasing existing in some other parts of the world as at that ealier date but there is no document in existence to show for it.
Norwegian King and the Norman Duke utilized forms of lease financing to secure the necessary ships, crews and equipments for military engagement. Leasing of personal property became permissible in united states with writings of “state of wales “ in 1884. however, it is from history and from decided cases in the British House of Lords that there were some form of leasing in the 1840’s and 1850’s. it is known that London’s first railway –London Green which is said to have been leased to the south Eastern Railway in 1844 for 99 years. Legal records show that equipment leasing dates as far back as 1703. in coggs V Benard (1703) 210 Rayon 909, Hoct C.J. in discussing the nature of equipment leasing, stated that it was an expression applied to various contracts all of which have one thing in common, a contract of hire or bailment of goods under hire contract”.
Modern leasing according to Ugboaja, stanted in the united states in 1952 and spread to Europe, Japan in 1960’s and the rest of the world in 1970’s. Samuel and Wilkes and Ugboaja are of the view that there was not much of leasing transaction in the city of London as a new method of business finance. In Nigeria, leasing has been in existence for over 26 years. According to Ugboaja and Elanin the sixths, prior to the incidence of exchange controls in 1987, some equipment was leased by British leasing company to their Nigerian subsidiaries. The volume was predictably low due to the level of industrialization in Nigeria at that time. This type of off-shore leasing arrangement did not leave long consequent on the imposition of strident exchange control measure at the beginning of civil war which were necessary to conserve the countries foreign exchange.
In Nigeria, starting with the early activities of companies like Bert Wort finance company and Nigeria acceptance limited, leasing became prominent in the 1970’s with the establishment of the new merchant bank. However, with the post war reconstruction and the increased earning from oil export as a result of the Arab, Isreal war(1973), the country embarked on an ambitious industrial, zation programme which required a heavy outlay of capital assets. Many of the contractors are mostly foreigners who chose to lease rather than purchase their equipments, as the dominant equipment lessors were merchant banks. The volume of leased equipment in the country grow in direct proportion to the number of the merchant banks in operation therein, seventy five percent (75%) of equipment leasing is done within the construction industry. The fortunes of this sector has had a very great effect on the leasing industry.
The emergence of merchant banks in the late 70s in Nigeria financial system contributed to the growth of leasing industry in Nigeria, Particularly since leasing was recognized in the banking Act 1979 (Amended) as one of the principle activities of this category of banks. As at that time leasing was not popular as a source of finance for a number of reasons.
In the 80’s and particularly with some significant policy and regulatory shifts in the management of the national economy, leasing has definitely emerged as real financing option in the Nigeria financial landscape. Leasing is now the tack of the day in Nigeria business world of today. The researcher arrived at this conclusion because the Nigeria weekly financial papers carry articles on leasing almost every week for the past one year and eight months and giving the impression that it is now the most attractive source of financing, the acquisition and the use of fixed assets examples:
According to Ugochukwu and Ubunna “the new surge in equipment leasing transactions is another progeny of the structural adjustment programme (SAP). Secondary causes of the awareness include the abolition of the import licensing system, the gross deprecation of the Naira, the serious government stand on imports and the relatively ease access to credit facilities for leasing. On 29the June, 1983, a regulatory body on the practice of leasing the equipment leasing association of Nigeria (ELAN) was formed with six members to regulate the activities of members. The total leasing volume of this association was estimated at #61 million. The founding fathers were:
Chase merchant bank Ltd (continental merchant bank). I con ltd (merchant bankers) N.A.I merchant bank ltd.
Nigeria –American merchant bank Nigeria ltd. The ELAN membership has grown from 29 at the beginning of 1989 to 1010 as at 30th September 2000. this factor compiled with the high cost of machinery and equipment has resulted in a steady growth in the demand for equipment leasing in Nigeria.
According to awokwo, present of ELAN (1993) “the real boom in leasing business began in 1987 with a total lease portfolio of #400 million recoded by ELAN members in that year”. His predecessor stated that “leasing volume which aggregated #400 million a year ended in December 1987 assumed an upword swing of seventy five percentage (75%) to an all time high point of about #700 million by year ended December 1988.” This figure did not include those of non-members of ELAN. Shola Akinfe, at a workshop organized by the financial institutions center in April 1992 stated that “leasing has today indeed become a recognized definite tool to face the challenges of productive investment and efficient allocation of scarce resources”.
By the end of 1993, the total lease portfolio of the merchant banks and other had hit the 01 billion target, by the middle of 1994, the increase in the membership of ELAN coupled with the high cost of machinery resulted in a steady growth in the demand for equipment leasing in Nigeria leasing can neither be said to be new to production in Nigeria nor can it be said to be in its infancy as many people think. Some members of ELAN in their continue effort to make leasing one of the main source of business financing have spear headed the introduction of new leaving products. The ELAN news letter of February 1988 on the new development in the industry reported that … 1987 was a year of corporate acquisition in Nigeria and lese financing prove a viable instrument for concoctive lease or lease syndication with either direct ownership of assets by the syndicated members. As a result of this:
Continuental merchant bank led the first syndicated lease of #20 million in faviour of spin tax Nigeria ltd while international merchant Bank (IMB) let a #30 million lease syndication in favour of united spanese ltd. Also another innovative product pack aged in the leverage lease, a special form of lease transaction involving basically three parties – the lender or group of lenders, a lessor and a lessee. There is also the cross
| 1 - 5 of 96 Reviews |