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Nigerian leasing market has scope for more IT spend

InnoVent’s Head of Business (Africa), Michael Lamwe.
InnoVent’s Head of Business (Africa), Michael Lamwe.

For over a decade, the Nigerian leasing industry has consecutively and consistently recorded growth in business transactions. After recording a sharp decline in growth from 14.5% in 2019 to 4.3% in 2020, the industry recovered with a 28.65% growth in 2021, this is according to research by the Equipment Leasing Association of Nigeria (ELAN).

However, looking at the distribution of the lease volume by asset type, when it comes to IT, Nigerians seem reluctant to buy into this trend. 

Car purchases made up 55% of all leases, other unclassified equipment was at 16%, plants and machinery accounted for 10%, and aircraft and ships made up 5%.

IT, comparatively speaking, was laggard, says InnoVent’s Head of Business (Africa), Michael Lamwe, hardly appearing as a blip in the report at 14%, bundled in with other office equipment. “As a result, we believe that there is huge scope for growth in this area, especially when one considers the size of the ICT market and Nigeria’s economy which is worth $441.5 billion,” says Lamwe.

Nigeria is witnessing immense growth in ICT and is regarded as Africa's largest ICT market with 82% of the continent's telecom subscribers, 29% of internet usage, and broadband penetration hitting 42.79%, with 200 million active mobile lines.

“All these factors point to an increased need for computing devices, which leasing, as an alternative to a bank loan or CAPEX, can offer businesses and institutions a lower cost of acquisition that could be instrumental considering the looming environmental factors,” says Lamwe.

Nigeria is not immune to the global slowdown in spending, as its exchange rate is wobbling against the almighty dollar. According to the International Trade Administration, though Nigeria remains a major ICT powerhouse on the continent, there have been reports of a recent slowdown of the sector caused by rising exchange rates. Downstream effects include foreign exchange scarcity, wide disparity between the dollar and the local currency (naira), impacted investment, and increased cost of equipment procurement.

This makes the investment case for leasing much stronger as this is a solid area in which companies can cut back on costs without dropping productivity or harming profit. “What is needed now is for IT executives to find ways to keep bringing in technologies that will enable the business to meet its objectives, without breaking the bank. Leasing is a win-win solution for this dilemma,” says Lamwe.

Leasing providers like InnoVent provide companies with the ability to acquire fit-for-purpose hardware – from end-user devices to storage and networking – at a lower cost of finance that compares favourably to traditional forms of finance.

“Our offering negates the need for companies to pay financing costs on an asset that loses value each year,” says Lamwe. “InnoVent offers a subsidy that reduces the total cost of ownership. Further to that, companies can acquire the equipment they need today and pay for the investment over the leasing term. Meaning, you will get full usage of the equipment over the leasing term without having to pay the full purchase price,” says Lamwe.

In uncertain times, ensuring a business has a healthy cash flow is key. Leasing is a cash-flow positive way to ensure you have the technology needed to improve work processes and remain competitive.

Whether an organisation is cash rich or follows a conservative CAPEX model, cash can be effectively utilised in other areas of the business for strategic or operational requirements, or simply left in investment instruments that yield a superior return.

Globally, worldwide IT spending is projected to total $4.5 trillion in 2022, an increase of 3% from 2021, and CIOs’ investment plans are not expected to be deterred by inflation or currency volatility, according to the latest forecast by Gartner.

“The cost to keep up with these global trends shouldn’t be a deterrent for Nigerian CIOs and IT leaders. Leasing could be the solution that ensures you always have the best equipment to keep up with the speed of business and technology,” concludes Lamwe.

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