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Despite setbacks, Nigeria’s real estate investors to expect windfall in 2019

Data shows that out of 15 trillion credit (Bank loan) to the Private Sector in the last quarter of 2018, real estate got ₦622 billion.

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Nigeria's Real Estate Sector recorded positive growth after three year low, Real estate: Declining credit reflects underlying weakness 

Recent statistics have shown that the Nigerian real estate sector has been suffering setbacks. Out of the ₦15 trillion worth of credit facilities (bank loans) that were given to the private sector in Q4 2018, real estate only got ₦622 billion. This represents just 4% of the total loans/credit.

A quick analysis of the 2018 selected banking sector indicators’ report, as released by the National Bureau of Statistics (NBS), revealed that the total bank credit for the real estate sector declined by 12% between Q3 and Q4 2018. During the third quarter, the real estate sector got ₦710 billion, while the corresponding value in Q4 declined to ₦622 billion.

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Bank credit falls for the 4th consecutive quarter

Although the sector received  ₦622 billion worth of loans in Q4, the amount represented the third consecutive quarter decline in the amount of bank loans allocated to the sector. In 2018, for instance, credit allocated to real estate decreased from ₦784.2 billion in first quarter, to ₦622.7 billion in the last quarter.

5-year low of bank credit to real estate sector

The latest dip in the bank’s credit/loans to the sector is not a new trend. In Q1 2015, credit allocated to the private sector was ₦615 billion, which fell to ₦548.2 billion in Q2 of the same year. By Q4 2015, bank credit to real estate stood at ₦692.2 billion.

Comparing the value of loan in Q4 2015 with that of Q4 2018 shows a 10% decline. In other words, it reveals an all-time low since 2015. This suggests that the cyclical growth movements in the real estate sector can be traced to the decline in banks’ credit available to investors.

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Agricultural sector receives much more credit facilities than real estate 

The agricultural sector has benefited the most from credit facilities given to private investors. For instance, during the last quarter of 2018, the agricultural sector received the highest bank’s credit of ₦3.5 trillion.

Similarly, the Oil and Gas and Manufacturing sectors are ranked second and third respectively, as their total credits stood at ₦2.2 trillion and ₦1.4 trillion for the period under review. However, the Education and Mining sectors got the lowest credit allocations.

Nigeria’s Real Estate Sector is growing nonetheless

Without a doubt, the real estate sector has continued to be an important sector in the Nigerian economy. Figures have shown that the sector contributed immensely to Nigeria’s gross domestic product (GDP). For instance, in 2018, it contributed ₦1.26 trillion to the country’s national income.

However, the percentage contribution of real estate to GDP declined to 6.41% in 2018 from 6.85% in 2017. Notwithstanding, the real estate sector is engulfed with big potentials.

What analysts say

In developed climes, the mortgage sub-sector plays an important role in stimulating the real estate sector. But while there have been several mortgage schemes and initiatives in Nigeria, the impact has remained somewhat unfelt.

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In the meantime, investment analysts have expressed different views on the outlook of the real estate sector. Executive Director and Co-founder of Pertinence Limited, an investment firm, Mr. Sunday Olorunsheyi, said earlier in January:

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“It will be difficult to project the fortunes of the Real estate sector, owing to factors such as lack of clear and consistent policies from regulators and a high degree of uncertainty, especially due to the general elections.”

On the other hand, the Chief Executive Officer of Lifepage Group, an investment holding firm, Oladipupo Clement, scored the industry high.

“More landed properties were sold and bought in 2018 than apartments and houses, due to high capital requirement and cost of fund.

Despite uncertainties, such as a decline in oil prices, political instability, inflation and the rising cost of funding, the real estate sector will still thrive.”

Windfall for investors and the growth potentials

If you ask me, I would say the Nigerian real estate sector is what you may want to invest in. Investors in the real estate sector are likely to smile to the banks soon,  as they get returns on their investments.

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Generally, Nigeria’s real estate sector was sluggish in 2018 because of the lull in the nation’s economy. Real estate experts will likely experience better performance this year because of improvements in the economy, and the anticipated political and economic stability in the country after the just concluded general elections.

There was excess liquidity in the economy during the election period. Recall that the President recently expressed concerns over the huge amount of foreign currency flooding the country, intended to influence the general elections.

As the general elections wound up, the movements of both foreign and domestic currencies for electioneering processes will likely spread and drive patronage in the residential and commercial angles of the real estate sector. Eventually, what this does sometimes is to pressure the price of estate properties to increase, which implies higher revenue for investors.

Similarly, 2019 will spark the beginning of new governments in some states across the federation. These states will have either consolidated or new policies, which may drive economic activities uniquely away from past administrations. Again, contracts and appointment lobbying will also form a block on its own. All these interplays are likely to redistribute income in some ways, and the real estate sector is likely to benefit in no small measure.

How the economy reacts

Growth in the real estate sector in Nigeria will have impact on the economy significantly, from the jobs it creates to revenue generation.
Specifically, the real estate’s multiplier effect in terms of job creation is significant. Also, real estate activity stimulates the economy indirectly through the value-added impacts of the purchase of goods and services that stem from real estate-related businesses and transactions.

1 Comment

1 Comment

  1. Alexander c okonji

    March 13, 2019 at 10:11 am

    Its been not too friendly

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Around the World

Buhari nominates Okonjo-Iweala as DG World Trade Organization

President Muhammadu Buhari nominated the former Minister of Finance and Coordinating Minister of the economy, Ngozi Okonjo Iweala, as the Director-General of the World Trade Organization (WTO).

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Nigeria’s former finance minister, Okonjo-Iweala, gets IMF appointment

President Muhammadu Buhari has nominated the former Minister of Finance and Coordinating Minister of the Economy, Ngozi Okonjo Iweala, as the Director-General of the World Trade Organization (WTO).

This was seen in a tweet posted by the Presidential aide on Digital and New Media, Tolu Ogunlesi, in the early hours of Friday, June 5, 2020.

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In the statement, Ogunlesi said that the current Director-General of the intergovernmental organization, Roberto Azevedo, is stepping down from his position on August 2020, a year ahead of the end of his tenure.

Azevedo, who has been the head of the WTO since 2013, is stepping down at this critical period of global economic crisis and the trade war between the United States of America and China.

This means that the election that was earlier scheduled for 2021 when his tenure was supposed to expire might be coming up much earlier for a new four-year term.

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Tolu Ogunlesi in his statement said, ”President Muhammadu Buhari has nominated Okonji-Iweala as Nigeria’s candidate for the position of the Director-General of World Trade Organization. DG Azevedo is stepping down in August 2020, a year earlier, so the election of the new DG, originally scheduled for 2021, may take place much earlier”.

Details later…

 

 

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Just-in: AfDB board agrees to an independent probe of Akinwumi Adesina

The independent review shall be conducted by a neutral high calibre individual with unquestionable experience, high international reputation and integrity within a short time period of not more than two to four weeks maximum, taking the Bank group’s electoral calendar into account.

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Dr. Akinwnmi Adesina, Lutoyilex Construct Ltd, Fraud, AfDB

The Bureau of the Board of Governors of the African Development Bank (AfDB), has agreed to authorize an independent review of the report of the ethics committee of the bank’s board of directors on the allegations levied against the President of the Bank, Akinwumi Adesina.

This was contained in a communique which was released and signed by the Chairperson of the Bureau of Board of Governors, Ms Niale Kaba, after the meeting of the bureau board of governors on June 4, 2020, with respect to the complaints against the President of the bank.

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In taking the decision, the Bureau agreed that the ethics committee performed its role on this matter in accordance with the applicable rule under resolution B/BG/2008/11 of the board of governors and that the Chairperson of the Bureau of Board of Governors performed her role in accepting the findings of the ethics committee in accordance with the said resolution.

The bank’s board of governors in its statement said, ‘’Based on the views of some Governors on the matter and the need to carry every Governor along in resolving it, the Bureau agrees to authorize an independent review of the report of the ethics committee of the board of governors relative to the allegations considered by the ethics committee and the submissions made by the President of the Bank Group thereto in the interest of due process.

‘’The independent review shall be conducted by a neutral high calibre individual with unquestionable experience, high international reputation and integrity within a short time period of not more than two to four weeks maximum, taking the Bank group’s electoral calendar into account.

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‘’The Bureau agrees that, within a three to six months period and following the independent review of the ethics committee report, an independent comprehensive review of the implementation of the bank’s group whistleblowing and complaints handling policy should be conducted with a view to ensuring that the policy is properly implemented, and revising it where necessary, to avoid situations of this nature in the future.’’

Following the allegations of unethical conducts, questionable appointments and contract awards by a group of whistleblowers and the subsequent clearance of all charges by the bank’s ethics committee, the United States Government, who is the largest shareholder outside Africa, asked for an independent probe of those allegations.

The US treasury secretary questioned the integrity of the committee’s process as well as the internal processes of the bank.

Adesina, a few days ago, met with President Muhammadu Buhari, where he assured of the country’s support towards his travails and his second term bid for the Presidency of the multilateral institution.

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Business News

FG removes cap on petrol price, allows marketers to fix price

The price cap per liter in respect of Premium Motor Spirit (PMS) is removed from the commencement of these Regulations.

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Subsidy and PIB

The Federal Government has removed the cap on Premium Motor Spirit (PMS) price, popularly known as petrol.

This was disclosed by the Petroleum Products Pricing Regulatory Agency (PPPRA) via a memo, which was dated March 30, 2020, but realised on May 4, 2020, titled ‘Market Based  Pricing Regime for Premium Motor Spirit (PMS) Regulations, 2020.

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What it means: With the new development, marketers now have the freedom to fix the price of the commodity and sell above the price given by the agency.

Executive Secretary, PPPRA, Abdulkadir Saidu, explained that the agency would continue to monitor trends in the crude oil market and advise the Nigerian National Petroleum Corporation (NNPC) and oil marketers on the monthly guiding price for the commodity.

“The price cap per litre in respect of Premium Motor Spirit (PMS) is removed from the commencement of these Regulations. From the commencement of these Regulations, a market-based pricing regime for PMS shall take effect,” he said.

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Meanwhile, Nairametrics had reported that the agency announced a new retail price band for oil marketers.

In a circular dated May 31st, as seen by Nairametrics, the downstream regulator said oil marketers are now expected to sell petrol within the price range of N121.50 and N123.50. Part of the circular said:

“Please recall the recently approved pricing regime which became effective March 19, 2020, and the provision for the establishment of a monthly price band within which petroleum marketers are expected to sell PMS at the retail stations.”

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