TABLE OF CONTENTS
CHAPTER
ONE
INTRODUCTION
1.1 Background of Study
1.2 Statement of Problem
1.3 Scope and Limitation
of the Study
1.4 Aim and Objective of
the Study
1.5 Definition of Terms
CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
2.1 Definition of Terms
2.2 Provision of a Lease Agreement
2.3 Accounting Treatment for Lease Agreement
2.4 Accounting for Finance Lease by the
Leassee
2.5 Accounting for Operation Lease by the
Lessee
2.6 Accounting for Finance Lease by the
Lessor
2.6.2 Accounting Treatments under A Sale And Lease
Back Transaction
2.6.3 Operating Lease
2.7 Finance or Capital Lease
2.8 Operating and Finance Lease Arrangement
Variants Sale and Lease Back
2.9 Benefit Derivable From Leasing Arrangement
by a Lessor
2.10 Financial Leverage
Consideration
2.11 Benefits Derivable From a leasing
Arrangement by Lessee Server as
Collateral
2.12 The
Growth of Leasing Industry in Nigeria
REFERENCES
CHAPTER THREE
3.0 Research Methodology
3.1 The
Research Question
3.2 Characteristics of
the Population
3.3 Date Collection
3.4 Administration of
Questionnaire
3.5 Methods of Data
Collection
3.6 Limitation of the
Methodology
CHAPTER FOUR
4.0 Data Presentation and
Analysis
4.1
Introduction
4.2 Presentation of Data
4.3. Testing
of Hypothesis
CHAPTER FIVE
Summary of the Study, Conclusion and Recommendation
5.0 Introduction
5.1 Conclusion
5.2 RECOMMENDATION
JOURNAL ARTICLES
BIBLIOGRAPHY
CHAPTER
ONE
INTRODUCTION
1.1 Background of Study
The introduction of leasing business into the Nigeria
economy could be traced back to the sixties by the overseas leasing companies
based in the United Kingdom. This leasing arrangement had contributed to the
growth of Nigerian economy in the sixties before the break out of the Civil War
in 1967. The Oil glut of the late sixties had a mojor impact on the prosperity
in Nigeria, the resultant effect led the nation to embark on an impressive
industrialization programme requiring heavy capital out lay. As most of the
foreign contractors could not afford the immediate cash impact of the purchase
of such capital assets, leasing came in as a profuct alternative to financing.
The advent of
new Merchant Banks in Nigeria in the seventies also accelerated the growth of
leasing as a means of assest financing in Nigeria. From an level of N7.6
million in 1977, the leased assests volume grew to N 26 million by 1980 in Nigeria.
The
period between 1986-1991 as against N206.7 million in 1986. As a result of the
structural Adjustment programme (SAP) introduced in 1986.
The
SAP was introduced to achieve the following.
1. To
restructure and diversity the productive base of the economy in order to reduce
dependence on the oil sector and imports.
2. To
achieve fiscal and balance of payments viability over the imports.
3. To
lay the basis for sustainable non-inflationary or minimal inflationary growth.
4. To
lessen the dominance of unproductive investment in the public sector, sector’s
efficiency and intensity the growth potential of the private sector.
Equipment leasing
volume has been growing tremendously from N26 million in 1980 to N5 billion
1993. The chairman of Equipment leasing association of Nigeria (ELAN), MR
Loakunle Olabisi remarked during “ELANS” Anniversary in November, 2000 that
“over N20 billion worth of assets have been leased in the various sectors of
the economy.
Many
Nigerian companies had been ruined because of the malady of illiquidity which
led to insolvency and bankruptcy of most firms despite annual declaration of
huge profit and dividends.
Due
to financial mismanagement, all the money realized from the sale of crude oil
were squandered. Cash problem was equally extended to the Nigerian business
firms. As a result of lack of cash, most firms were unable to acquire the
necessary foreign exchange to import raw materials. Plants and machinery and
other factor inputs. The Equipment leasing Association of Nigerian (ELAN) with
only six Merchant Banks as members at inception ELAN has grow to over 1200 at
1997.
The introduction of licensing policy
which discouraged investment in capital asset in favour of spare parts and raw
materials affected the growth of leasing by the leasing industry. However the
growth of leasing by second tier foreign Exchange market (SFEM) and the
structural Adjestment programme (SAP) in 1986 brought returned a relief to the
leasing industry. The exchange rate of N1 to before SAP and SFEM made it difficult
for most companies to finance their huge capital asset requirements due to the
attendant problems of the required in borrowing from the Banks. Financing of
capital through leasing became more viable to most companies. With the exchange
rate fluctuating between N 85 and N88 to 1 in 1998 thus, SAP and SFEM became
the most fundamental institutions in the Nigeria economy, that affected
positively the growth of the leasing industry in Nigeria. Several Government
policies over the years also encouraged the leasing industry such as the
removal of the Nigeria, Airways monopoly on domestic routes which encouraged
private participation in domestic flights. The privatization of Government
parastals, like Nigeria Airways, Nigeria Telecommunications (NITEL) plc Nigerian
port Plc the media manufacturing companies, will engance leasing transactions
to make them more efficient in the operations. In view of the recent
pronouncement by the federal Government on privatization and commercialization
of Government parietals, the leasing industry in Nigeria is poised for greater
volume of capital assets in this millennium.
1.2 Statement of Problem
The
problem to be examined in this study are enumerated as follows:
1.
To find out the operational
difficulties faced by leasing companies relating to industrial inspectorate Act
of 1970 by not encouraging as a product alternative to asset financing.
2.
To ascertain Negative impact of the
new statement of accouraging standard SAS II.
3.
To find out effect of leasing not having
any special tax privileges on lensed asset.
Volume
which discourage leasing practice that is the leases is not allowed to claim
capital allowances on the equipment leased.
1.3 Scope and Limitation of the Study
This research work concentrates on twenty
notable companies in the leasing industry in Nigerian. Since it is humanly
impossible to embark on the aforementioned tasks, the study was therefore
limited to twenty notable companies located in the western and Eastern zone in
how well conducted that is freed from certain limiting factors. This study
therefore is no exception to this assertion. Apart from the limiting factors
caused by the down policies of the selected firms.
1.4 Aim and Objective of the Study
The questionnaires were tailored to
answer the research questions this internal validity on the research, External
validity, on the other hand, is assumed by the fact that the finding are
generalisable given the number of respondents their level of involvement in
leasing activities and the facts that they all control what goes on in their
branches throughout the county.
1.5 Definition of Terms
The following words are defined as
they are used in this study.
1.
Lease
“A
lease is a contractual agreement between an owner (the lessor and another party
(the Lease) which conveys to the lease the right to use the leased asset for
anagreed period of time in return of a consideration usually periodic payments
called rents.
2.
Operating
Leases
“is
a lease in which the less or while giving the use to the less property,
relating practicall all the risks, Obligations and rewards of ownership (e.g
obedience and appreciation)
3.
Finanace
Or Capital Lease
is
one in which ownership risks and rewards are transferred to the lessee, who is
obligated to pay such cost as insurance maintenance and similar chage on the
property. Usually the agreement is non-cancelled and the lessee has the options
to buy the property for a normal amount upon the expiration of the lease.
4.
Leveraged
Lease
“is
a three lease involving a lender (often a financial institution) in addition to
the usual lessee. The suppliers, in most cases the greater part of the purchase
prior of the leased asset.
5.
Sale
And Lease Back
“is
a lease in which the seller of the property lease it back from the buyer.
6.
Capital
Investment
An
expenditure in as asset whose return expected to extend beyond year.
7.
Lease Term
Is
the duration of the lease which may vary from a few month to the entire
expected.
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