Leasing in Nigeria: A hidden engine for inclusive growth

INTRODUCTION

As Nigeria works to stabilise its economy amid elevated inflation, tight credit conditions, and evolving business pressures, leasing has emerged as a powerful yet underused tool to fuel enterprise growth and industrial productivity.

Lease financing gives businesses, particularly small and medium enterprises, access to essential equipment and capital assets for a set period through structured and predictable payments without the burden of immediate ownership.

In today’s climate, where flexibility and financial discipline are critical, leasing offers a practical path to risk mitigation, sustained business operations and inclusive economic growth. Despite its promise, leasing remains out of reach for many Nigerian businesses not because it lacks relevance but because of limited awareness, uneven access, and underdeveloped support systems.

Globally, lease financing has proven to be a reliable driver of financial inclusion and productive investment. It enables businesses to acquire essential tools and machinery without the need for substantial collateral or the burden of high-interest loans.

In Nigeria, where more than 40 million micro, small, and medium enterprises struggle with limited access to finance and face over N13 trillion in unmet credit demand, leasing offers a scalable and practical solution to one of the country’s most persistent development challenges. Capturing even a fraction of this demand could unlock a N3 to N4 trillion market opportunity, catalyse investment in equipment, boost productivity, and accelerate formalization across Nigeria’s most dynamic sectors.

In 2024, the total value of leases in Nigeria reached N5.16 trillion, a 23 per cent increase over the previous year. Demand continues to rise across key sectors, including transport and logistics, oil and gas, manufacturing, and agriculture. Yet this growth has not translated into broad-based access. Leasing remains concentrated among large corporates, while MSMEs continue to face barriers to entry. This is not unique to Nigeria. Across Africa, leasing remains underdeveloped relative to global benchmarks.

In 2022, Africa accounted for only 0.3 percent of the world’s $1.47 trillion leasing volume. Even among Africa’s top performers, Morocco leads with an average lease penetration rate of just 1.10 percent between 2019 and 2021, followed by South Africa at 0.71 per cent, while Nigeria lags at 0.185 per cent. These numbers highlight the continent’s untapped potential for asset financing and enterprise growth. For Nigeria to unlock the full benefits of leasing, it must deliberately extend access to MSMEs and underserved sectors. This will take more than market momentum. It requires a strong, supportive legal and institutional framework that builds trust, standardization, and accessibility.

Strengthening the legal and institutional framework
Nigeria has made commendable progress in strengthening the legal foundation of its leasing industry. The enactment of the Equipment Leasing Act (ELA) in 2015 and the establishment of the Equipment Leasing Registration Authority (ELRA) in 2023 introduced much-needed structure, enforceability, and transparency. ELRA’s reforms, particularly in contract registration, licensing, and regulatory oversight, are not just bureaucratic milestones. They established the framework for a more reliable and investable leasing environment.

What is most encouraging is that these reforms are dynamic and responsive to market needs. ELRA’s digital registration portal has streamlined contract processing, reducing registration time from weeks to days while enhancing legal enforceability. This digitization signals a broader shift toward ease of doing business that makes Nigeria more competitive regionally. Critically, it has worked with the judiciary to build understanding of leasing structures and enforcement mechanisms, recognizing that sustained growth demands more than laws on paper. It requires institutional understanding, coordination, and coherence across all market participants.

Complementing these efforts are the contributions of industry groups like the Equipment Leasing Association of Nigeria (ELAN), which continues to advocate for long-term financing access, simplified tax frameworks, and MSME integration. Yet even with these advances, legal and institutional reforms alone cannot unlock the full potential of leasing.

Building a functional and inclusive leasing ecosystem requires Nigeria to activate key market actors. Commercial banks must provide the capital that powers leasing portfolios. Insurance providers are critical for de-risking transactions and protecting leased assets. Original equipment manufacturers can drive demand by offering vendor financing, residual value guarantees, and after-sales support. Together these players form the link between policy and practice, ensuring that leasing is not only legally viable but also commercially scalable.

Tackling the economic realities: Beyond legal reform
Beyond regulatory reform, Nigeria must confront the economic realities that determine whether leasing can deliver meaningful impact. Foreign exchange volatility stands as perhaps the most immediate barrier, given that imported capital equipment dominates most lease portfolios. When the naira weakens unexpectedly, a manufacturing lease that seemed affordable can suddenly become prohibitive, forcing businesses to either abandon expansion plans or accept substandard equipment that compromises productivity. This unpredictability, compounded by scarce hedging options, creates a climate where neither lessors nor lessees can plan with confidence. The result is a cautious market that underinvests in the quality assets Nigeria’s economy desperately needs.

Tax treatment presents another significant barrier that requires immediate attention. While Nigeria’s framework allows for deductions on lease payments and accelerated depreciation, equipment leasing, except for agricultural purposes, remains subject to VAT as it is classified as a supply of service under the VAT Act. The 2025 Tax Reform Bills aim to streamline tax administration and reduce compliance burdens, but they do not currently exempt equipment leasing from VAT.

The reforms may, however, pave the way for clearer guidance and more consistent application, particularly around imported leases where ambiguity has led to double taxation and compliance challenges. Addressing these issues through regulatory clarity and guidelines would enhance market confidence and reduce friction.

Confronting these barriers is critical to unlocking leasing’s full potential. Tax clarity, improved access to foreign exchange, and incentives for local production of leasing-grade equipment would reduce market risk, lower costs, and improve uptake across the economy. These reforms would not only strengthen the leasing ecosystem but also create the conditions for leasing to become a mainstream financing option for Nigerian businesses of all sizes.

More importantly, they would open the door for broader inclusion. By making leasing more affordable and accessible, these reforms would help extend opportunities to women- and youth-led enterprises that are often excluded from traditional finance due to lack of collateral, limited credit histories, or informal structures. With deliberate design, leasing can become a powerful tool for inclusive growth, providing underserved groups with access to productive assets without the burden of ownership.

Government and development finance institutions can play a catalytic role by providing credit guarantee schemes, offering tax incentives for inclusive leasing, and integrating leasing into broader MSME and entrepreneurship programs. Institutions like ELRA and ELAN are well positioned to embed these priorities into policy and practice, ensuring that leasing serves not just as a financial tool but as a driver of inclusive economic transformation. This vision for inclusive leasing is not theoretical. Nigeria has already demonstrated what is possible through LECON Finance Company.

BOI Leasing (LECON): A public model for market transformation
Leasing has long been part of Nigeria’s industrial development agenda, with roots dating back to 1989 when LECON Finance Company emerged under NIDB, now BOI. The experience of LECON, the leasing subsidiary of the Bank of Industry, shows what is possible when reform, institutional capacity, and development finance align. LECON remains Nigeria’s oldest and most deliberate effort to institutionalise development-focused leasing. What sets it apart is not just its longevity but its commitment to expanding access in sectors often overlooked by conventional finance, especially MSMEs.

Over the past three decades, LECON has financed more than 230 projects across critical areas of the economy. It has helped smallholder farmers acquire mechanized equipment, supported schools in acquiring equipment that enhances learning, and enabled healthcare providers to modernize infrastructure. In manufacturing, it has funded machinery that boosts competitiveness. In transport and logistics, it has facilitated fleet expansion that strengthens supply chain efficiency.

LECON’s impact goes beyond disbursing leases. It has served as a catalyst, deepening Nigeria’s leasing ecosystem and illustrating what structured, development-focused leasing can achieve. Through competitively priced, asset-backed leases paired with advisory services, LECON has lowered barriers for MSMEs while modeling the best practices in risk management, contract design, and sector targeting. Backed by the Bank of Industry and driven by a development finance mandate, it has reached enterprises that would otherwise remain excluded. Its consistent A– credit rating from Agusto & Co reflects sound institutional governance and financial health.

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More importantly, LECON has helped legitimize leasing in Nigeria. It has proven that the model can be responsible, commercially viable, and developmentally impactful. Its work has moved leasing from the margins of finance to the center of national economic strategy.
LECON’s success shows what is possible when leasing is purposefully aligned with national development priorities. The task ahead is to build on this foundation and scale leasing to meet emerging needs in green, agricultural, and digital transformation — areas where it can drive inclusive and sustainable growth.

Expanding leasing’s role in green, agro, and digital sectors
As Nigeria advances toward a greener, more digital, and inclusive economy, leasing presents an opportunity to accelerate transformation across key sectors. Green leasing, targeting solar systems, electric vehicles, compressed natural gas vehicles, and other energy-efficient systems, can reinforce the country’s climate commitments while reducing operational costs for businesses. The upfront cost of a commercial solar installation, for instance, can be prohibitive for SMEs, but leasing makes clean energy accessible with immediate cost savings on electricity bills.

In agriculture, leasing modern machinery can boost productivity and reduce post-harvest losses that currently waste up to 50% of some crops, according to Nigerian Stored Products Research Institute (NSPRI). Tractors, harvesters, and processing equipment that cost millions of naira upfront become accessible through lease arrangements tailored to agricultural cycles and seasonal income patterns.

Micro-leasing smartphones, POS devices, and last-mile delivery tools can empower youth-led businesses, gig workers, and informal traders. A motorcycle for delivery services, costing an average of N500,000 upfront, becomes accessible through weekly payments
that align with income generation, enabling economic participation for those previously excluded by capital requirements.

A coordinated strategy for national impact
Seizing these opportunities calls for more than isolated efforts. It requires a clear national plan to make leasing a central part of Nigeria’s development finance system. This includes updating and harmonizing laws and regulations across all states, linking leasing to MSME support programs, and building strong partnerships between government and the private sector to attract more investment.

It also means creating policies that encourage local production of equipment and support digital solutions that can make leasing more affordable and easier to access. Technology, especially fintech platforms, can lower costs, improve credit checks, and help leasing reach more small businesses.

Conclusion – The time to act on leasing is now
Leasing is not just a tool for today’s challenges. It is a lever for tomorrow’s prosperity. With the right policies, partnerships, and institutional will, leasing can move from a niche practice to a national engine for inclusive growth and shared prosperity. The foundation is in place through legal reforms and institutional development. The market opportunity is clear and compelling.

The development impact is evident in models like LECON and the rise of digital innovations.
What is needed now is coordinated action across government, the private sector, and development partners to address the specific barriers that hold leasing back, including foreign exchange volatility, tax treatment, and access limitations. The time to act is now. The opportunity is large, but the need is greater. Nigeria’s economic transformation depends on unlocking the productive power enterprises. Remember: “why own it, when you can lease it?”

Dr Olusi is Managing Director/CEO,

Bank of Industry Limited.