Why Nigeria needs its real estate sector to work
Andrew S Nevin, PhD
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Since the start of the recession, government policies have targeted diversification with the objective of spurring non-oil growth. However, non-oil sector performance in the first quarter of this year declined to 0.7% from 1.4% in the fourth quarter of 2017. This setback was largely driven by disappointing performance in agriculture, construction, trade and real estates, which account for 48.3% of total real GDP. Manufacturing was the best performing segment in the non-oil sector, with growth reaching a 3 year high, while growth in agriculture slowed from Q4’2017. Trade and real estate sectors recorded disappointing numbers, causing the services sector to contract by -0.4%.
We have previously stressed the need for Nigeria to develop its real estate sector; the real estate market needs to function across the country in order for Nigeria to experience substantial economic gains. Real estate makes up 60% of the world’s assets and economies cannot work without functional property markets, which are used to generate economic capital across various industries. For instance, real estate serves as collateral for bank loans and other forms of financial assets are often backed by physical assets.
Property provides good security for capital generation because the demand for shelter will always be relevant in any society – everyone needs a place to live, work and carry out a range of day-to-day activities. They are also fixed assets and will always have value. Nigeria’s underdeveloped property market undermines its capital generating capabilities. Majority of people who own property do not possess formal titles and people who aspire to own cannot access sufficient credit to buy property. Furthermore, the cost of building in Nigeria is also significantly higher than similar developing countries due to poor infrastructure – As of 2013, the estimated cost of building a house in Nigeria was $50,000 compared to $36,000 in South Africa and just $26,000 in India. High costs, among other factors, places upward pressure on housing prices.
It is crucial that Nigeria overcomes its real estate challenges in order to experience substantial growth and development.
Brand Manager | PR & Communications Professional | Strategic Analyst
2 年Very valuable insight. I laud you sir. I was opportuned to meet you at the Nigerian Agribusiness Summit, years ago. Thank you for this post.
Marketing Mind
6 年Could a property entrepreneur be the answer?
Chairman - DSI Group Holdings - Free Zones & Economic Development
6 年A Certain Middle East Investor Group submitted an offer of USD $15.8 Billion to a Nigerian Group who were developing a New Town Project (Lagos) - Before the offer was made it was preceded with an 18 Month Study costing USD $4.5 Million and involved 20 Experts. That was dated 2011... Those who dither lose Great Opportunities. Money Likes Speed. The project is still asleep despite getting FZ Status.?
Affordable Home expert, CEO of AL’MA
6 年I agree with you Andrew. Participating in the creation or reinforcement of affordable housing companies would permit DFIs and Nigerian government to rely more on Mission Entrepreneurial Entities as key stakeholders, making them able to execute important investments for large scale projects with major impacts. Promoting market-based housing solutions needs to be explored for various categories of the Nigerian society, particularly for middle- and low-income households. Some form of subsidies should be made available to reach low income households.