Leasing: A Critical Financing Option in the Nigerian Financial Arena

Abstract

The study examined the effect of lease financing on the performance of quoted consumer goods companies in Nigeria for the period - 2009 to 2018. Specifically, the study assesses the effect of finance or capital lease, leveraged lease and the moderating effect of firm size on lease financing and performance of consumer goods companies. It also employed historical research design in investigating cause and effect relationship among the variables. Using Desk Survey Method, data were collated from Annual Reports and Accounts of the companies. The Ordinary Least Square (OLS) Multiple Regression Technique, as well as descriptive statistics, was employed in the analysis of data. Pre-tests such as Panel Unit Root test and Johansen/Fisher combined co-integration were adopted to check the presence of non-stationary and long-run relationship respectively. Vector Auto Regressive Lag and Panel Vector Error Correction Model were also employed to address the issue of short-run and long-run dynamics. Estimated results showed that finance lease had a significant positive effect on the performance of quoted consumer goods companies in Nigeria. Leveraged lease and firm size exerted a significant negative effect on the performance of quoted consumer goods companies in Nigeria. Based on the results, it was recommended amongst other things that the amount of debt used in the firm capital mix should be proportionate to the size of the firm in terms of its assets and capacity to produce consumer goods. Also, firms should reduce the use of finance or capital lease as a financing option given the overall negative effect of lease financing on the performance of consumer goods companies in Nigeria; and rather adopt the use of operating lease which has an overall significant positive effect, especially in the short run.