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1.1 Background of the Study
The need for good leasing financially in Nigeria cannot be overemphasized, although equipment leasing as we know it today has been in existence in the country for over thirty years in Nigeria.
Leasing being one of the v arious sources of business finance such as overdraft, advance and term loans are available to organisations/individuals from the product range of financial institutions. However, the peculiarly of a lease financing arrangement is that it permits the user, the use of asset by making period payments, which are called rentals without necessary owning the asset, as ownership of the leased assets is bestowed on the leaser (owner).
1.2 Statement of the Problem
In spite of the tremendous growth and development of leasing in the country over the last decade, there are still several bottle neck that militate against faster growth and these should be removed to ensure a more vibrant industry. The unstable nature of the economic and investment climate in Nigeria presents challenging problems. These were very frequent and unpredicted changes in Federal Government that led to turbulence and created threats to industry in general and the leasing business in particular.
Such changes have included the prohibition of offshore guaranteed in Nigeria as a means of leasing the monetary debts burden. The instability of the operational character of the foreign exchange market as a result of which, the cost of the imported capital goods and equipment has become so prohibitive that it is now beyond the acquisition capacity of many companies operating in Nigeria. The lessor’s is another cause for concern, the reduction, cancellation, and imposition of many tariffs on specific capital goods further aggravates an already bad situation.
The absence of precise and adequate regulation on accounting and taxation policies on lease financing, is still a major bottleneck, specifically, existing, tax regulations restricts to a rather low level the amount of capital allowance that lessor’s can claim on acquired asset, particularly in risking area like agriculture equipment acquisition.
The level of private sector participation in the leasing industry is low as evidence by an absence of a secondary market for leasing and the number of few independent in the market has impacted negatively on the development of the industry too. In the United States, amongst the biggest lessors are Gt capital AT and T capital, Xerox capital, Bell Atlantic capital, Philip Morries Capital etc, these are all subsidiaries of large corporation. Unfortunately, we lack the presence of such organisation in Nigeria.
In 1989, the decision of the federal government requiring all states and government agencies as well as parastatal to transfer their fund from commercial, and Merchant Bank to the Central Bank of Nigeria created a liquidity crisis for the banking industry, thereby necessitating the immediate recall of all outstanding loans in order to keep banks afloat. Thus, little was left for leasing as a medium/ long fund based product.
1.3 Objectives of the Study
The objective of the study is to find out how leasing can be use to generate income and develop a standard that establish the principle of lessees and lessors.
Below are the objectives of the study:
1. To find out how leasing as a tool for generating income affect the performance of the firm
2. To know if the use of proper accounting techniques has a significance impact on the amount of income generated.
3. To generate income through proper accounting techniques.
4. To find out if lack of awareness of leasing will result to insufficient generation of fund
5. To ascertain weather leasing can be use to generate income through accounting techniques or method.
1.4 Significance of the Study
The major aim of leasing is to render immediate service and to generate income, one of the importance or significance of this study is to find out how leasing can be use to generate income through proper accounting techniques.
This study cannot be overlooked because it will be of great importance or help to all those who want to go into leasing or adopt it as a means of generating income and making profit.
This study will also be useful to staff of C and I Leasing Plc, Warri by revealing to them the importance of leasing.
1.5 Research Questions
This research work is intended to find answer to the following research questions:
a. Does lack of awareness of leasing result to insufficient generation of fund?
b. Does the use of proper accounting technique have a significant impact on the amount of income generated?
c. How does leasing as a tool for generating income affect the performance of a firm?
1.6 Limitation of the Study
The factor that limits the scope of this work can be grouped into two categories they are controlled and uncontrolled variables. Some staff treat questionnaires that are retrieved while some vital information that would have added to the substance of the work was not given as it was claimed to be the management decision and they view such request as probing into their facilities. In addition to this, time is also another thing that slows down the work and the issue of not on seat each time I went to the company to retrieved my questionnaire from them.
1.7 Definition of Terms
a. Lessor:- The party who provide the equipment to be leased and may supply service and add value as well. They purchase, manage and in some cases remarket equipment as part of the lease process and tailor the financing to fit the needs of the user.
b. Lessee:- Is the user of the equipment. The lessee, at the point has gone through the lease financing.
c. Finance Lease:- A finance lease (also known as capital or full payment lease) is a contract involving payment over a period of time of specified sums sufficient in total to amortize the capital outlay of the lessor.
d. Lease:- A contractual arrangement to grant the use of specific fixed assets for a specified time in exchange for regular rental payment over the tenor of the arrangement.
e. Operating Lease:- Is a contract under which the asset is not wholly amortized during the primary periods, and the lessor pays all maintenance and servicing costs.
f. Sales and Lease Back:- An arrangement whereby a firm sells its existing assets to a financial company and then lease the same asset back to the firm that sold it to continue the use of the equipment as before.
g. Sales-Type Lease:- An arrangement whereby a firm leases its own equipment thereby competing with an independent leasing company.
h. Direct Lease:- A lease under which a lessor buys equipment from a manufacturer and leases it to a lessee.
i. Residual Value:- This is the value of a lessor’s property at expiration of the lease period in a finance lease.
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