1.1BACKGROUND OF STUDY
Investment proposals and decisions by business entities and individuals could evolve due to certain reasons.
These include decisions concerning the following;
(a)New products or expansion of existing product
(b)Replacement of equipments or building
©Exploration and others
These decision involve huge capital expenditure on capital investments. Therefore, for any of them to be meaningful there must be decisions on the sources of such huge capital fund
In Nigeria apart from privately or personally financed investment projects, various other identifiable sources of finance exist. These include retained earnings (internal sources) Launding / donaton banking and non – bank financial institutions etc.
Funds obtained from financial and non – bank financial institutions could be in the form of loans and overdrafts. These be used for outright purchases of the needed capital investment, machineries and equipment or as working capital, where funds are not readily available for outright purchases, or where there is need to save the available funds for investments in more profitable assets / ventures, or for other reasons, other alternative means such as leasing could be employed.
According to the Advance Learners Dictionary of current English, leasing is:
A contract or agreement by which one person the lessor, aggress to allow another the lessees, the use of land and building for a certain period of time usually in return for money payment called rent.
This definition tends to infer that only Land and building are Leasable. This is untrue as many other things can be leased. In the words of Okeke, J.R. one gets the land building but recent events have proved in the business world at large the philosophy of leasing has been extended to other categories of fixed assets.
Equipment leasing can also be defined as a contract between a lessor and a lessee for the live of a specific asset select from a manufacturer or vendor such an asset by the lessee. The lessor retains ownership of the asset. The lessee has possession and use of the asset on payment of specific rentals over a period
Leasing there, occurs when a person or entity obtains the use of an asset without acquiring ownership. Ownership remains with the lessor, the lessee has a contractual relationship with the agreement to pay a specified rental fee for the use of the assets.
Many people see equipment leasing as being the same as other forms of installment payments including hire purchase. This is not correct. Hire purchase is:
A contract of hire paid by installments under which the hirer may become the owner of the goods if he completes payment of hire purchase.
In hire purchase therefore, ownership remains with hirer on use, while in equipment leasing, ownership is divorced from the user or lessee.
Leasing has a rich and Lengthy history. The earliest records are those of transactions occurring some time before 200 B.C in the ancient Sumerian city of our, and according to the lease documents as found in the clay tablets in 184 showed recorded transactions to have ranged from leases for agricultural tools. Land and water rights, to oxen and other animals
In Nigeria, the first recorded equipment leasing activity occurred during the early 1960’s when equipment leased to the Nigerian lessees by off – shore united kingdom leasing companies. Since the, the rate of growth of equipment leasing activities has been at a snail – slow speed until recently.
The reason for this unimpressive growth could be due to:
Lack of awareness
The exclusive preserve of the business to a particular group of financial institutions (merchant bankers) by the banking (amendment) Act. 1979 until recently,
The existing regulatory control on interest rates and the foreign exchange regime;
Ownership factor was being rated above the availability of use of assets;
Little or no interest shown in investment and manufacturing by our business man and other investors.
However, the economic reforms and programmes as pursued by federal military government are yielding some dividends.
Emphasis has shifted from the time hionoured import and / or backward integration. This, therefore, accounts for the increase in investments in the manufacturing sector of he economy, and the corresponding increase in the demand for machines and equipment through asset financing methods.
Unfortunately, there has been this problem of capital inadequacy.
This could be due to: the high interest rates associated with bank Loans in general, non – availability of foreign exchange for the importation of the required machineries and equipment and even when the foreign exchange is available, high exchange rate militates against its affordability by the investing public
To alleviate these problems, grater awareness in leasing as an alternative means of obtaining and suing the needed nearly equipments and machines for operations without outright purchase or cash outflow is being pursued for example on June 29th, 1983, six Nigeria Merchant bank formed the equipment leasing association of Nigeria (ELAND) which has its objectives.
The promotion and protection of interest of members of the association in the exercise of their business as equipment lessors membership of this Association of lessors was deregulated. For example, according to the central Bank of Nigeria (CBN) monetary, policy Guide line for 1990 fiscal year, commercial banks can now engage in the equipment leasing business.
TABLE OF CONTENTS
APPROVAL PAGE :……………………………ii
TABLE OF CONTENTS:………………………… vi
1.1Background of study
1.2Statement of the problem
1.3Objectives of study
1.4Significance of the study
1.6Scope and Limitation of the study
2.0REVIEW OF RELATED LITERATURE
2.1Nigeria leasing Industry
2.2iBanks as Lessors
2.2ivOther finance Companies
2.3Types of Lease Contracts
2.4The leasing transaction
2.5Management of Leasing
2.6Tax implications of leasing
2.7Evaluation of a leasing
2.8Lease V.S Buy decision
2.9Who lease and what can be leased
2.10Advantages and disadvantages of equipment leasing
2.11Insurance for leases contracts
CHAPTER THREE: RESEARCH DESING AND METHODOLOGY
3.1Outline of chapter
3.2Sources of data
3.5Population of study
3.7Data collection system
4.0 Presentations, Analysis and Interpretation of Dats
4.1choice of capital Acquisition through equipment leasing
4.2Degree of awareness
4.3Interpretation of analysis
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMENDATIONS
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