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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.

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.

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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.

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:

“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.

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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.

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.

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1 Comment

1 Comment

  1. Alexander c okonji

    March 13, 2019 at 10:11 am

    Its been not too friendly

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Energy

Electricity tariff increase is suspended for 2 weeks

The FG and the Nigerien Labour Unions have agreed to suspend the electricity tariff increase for a period of two weeks.

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Minister of Labour, Ngige, says labour demand will force government to sack workers

The Federal Government and the Nigerien Labour Unions have agreed to suspend the electricity tariff increase for a period of two weeks. This was part of the agreement reached between Labour and the Government as they deliberated to avert a nationwide strike that would have grounded an already deteriorating economy.

While the strike was over two major issues, an increase in electricity charges and fuel price respectively, the decision to call off the strike was based on the suspension of the electricity bills. The following terms of reference underpinned the agreement between Labour and the Government.

Terms of reference for suspension of electricity increase for 2 weeks.

Terms of reference “The Terms of Reference (ToR) are as follows: To examine the justification for the new policy on cost-reflective Electricity Tariff adjustments. “

  • Both parties are to examine the justification for the new policy on cost-reflective tariff adjustment
  • To look at the different Electricity Distribution Company (DISCOs) and their different electricity tariff vis-à-vis NERC order and mandate.
  • Examine and advise government on the issues that have hindered the deployment of the six million meters.
  • To look into the NERC Act under review with a view to expanding its representation to include organized labour.
  • The Technical sub-committee is to submit its report within two weeks.
  • During the two weeks, the DISCOs shall suspend the application of the cost-reflective electricity tariff adjustments. “The meeting also resolved that the following issues of concern to Labour should be treated as stand alone items:
  • The 40% stake of government in the DISCO and the stake of workers to be reflected in the composition of the DISCOs Boards.
  • An all-inclusive and independent review of the power sector operations as provided in the privatization MOU to be undertaken before the end of the year 2020, with Labour represented.
  • That going forward, the moribund National Labour Advisory Council, NLAC, be inaugurated before the end of the year 2020 to institutionalize the process of tripartism and socio dialogue on socio-economic and major labour matters to forestall crisis.

What this means: The decision reached between the government and labour means the service reflective tariff regime which started on September 1 2020 is effectively suspended. Customers are therefore no longer required to pay the service reflective tariffs and will revert to the previous MYTO tariffs of 2015.

  • By looking at the “different Electricity Distribution Company (DISCOs) and their different electricity tariff vis-à-vis NERC order and mandate” it appears labour might be looking to recalibrating the tariffs for some Discos.
  • According to documents on the tariff order published by the NERC, some Discos have tariffs for residential customers that are as high as N62/kWh while it’s just under N54 for others.
  • Labour could also get involved in determining the veracity of the tariff bands that determines which customers pay what as electricity tariffs.

 

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Business

Just-in: NLC, TUC suspend nationwide strike

Hike in electricity tariff to be suspended for 2 weeks, while new pump price of petrol remain unchanged.

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Ayuba Wabba, Why the FG should reverse 6% tenancy, lease stamp duty - NLC

The Nigerian Labour Congress (NLC) and the Trade Union Congress (TUC) have suspended the planned nationwide strike and protest that was to commence on Monday, September 28, 2020, over the recent hike in electricity tariff and petrol pump price.

This follows the agreement reached between the Federal Government and the organized labour during the meeting held by both parties which started on Sunday night and dragged on till the early hours of Monday morning.

The disclosure was made by the Minister of State for Labour and Employment, Festus Keyamo, through a tweet post on his twitter handle.

In the agreement between the Federal Government and organized labour, the hike in electricity tariff is to be suspended for a period of 2 weeks, while the new pump price of petrol is to remain unchanged.

According to the agreement, which was seen by Nairametrics, both parties agreed to set up a technical committee on Electricity Tariff reforms, comprising Ministries, Agencies, Departments, NLC and TUC, which will work for a duration of 2 weeks with effect from Monday, September 28, 2020, to examine the justification of the new policy in view of the need for the validation of the basis for the new cost-reflective tariff.

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This is due to the conflicting field reports which appear different from the data presented to justify the new policy by NERC, metering deployment, challenges, timelines for massive rollout.

The technical committee is to be headed by the Minister of State for Labour and Labour, Festus Keyamo.

Other members of the committee include the Minister of State Power, Godwin Jedy-Agba, Executive Chairman, National Electricity Regulatory Commission (NERC), James Momoh, Special Assistant to the President on Infrastructure, Ahmad Zakari as the Secretary.

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Also in the committee are Onoho’Omhen Ebhohimhen, Joe Ajaero (NLC), Chris Okonkwo (TUC) and a representative of electricity distribution companies.

The terms of reference for the technical committee include;

  • To examine the justification for the new policy on cost-reflective electricity tariff adjustments.
  • To look at the different Electricity Distribution Companies (DISCOs) and their different electricity vis-à-vis NERC order and mandate.
  • Examine and advice government on the issues that have hindered the deployment of the 6 million meters.
  • To look into the NERC act under review with a view to expanding its representation to include organized labour.

 

 

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Coronavirus

COVID-19 Update in Nigeria

On the 27th of September 2020, 126 new confirmed cases and 2 deaths were recorded in Nigeria

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The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 58,324 confirmed cases.

On the 27th of September 2020, 126 new confirmed cases and 2 deaths were recorded in Nigeria, having carried out a total daily test of 3,011 samples across the country.

To date, 58,324 cases have been confirmed, 49,794 cases have been discharged and 1,108 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 505,556  tests have been carried out as of September 27th, 2020 compared to 502,545 tests a day earlier.

COVID-19 Case Updates- 27th September 2020,

  • Total Number of Cases – 58,324
  • Total Number Discharged – 49,794
  • Total Deaths – 1,108
  • Total Tests Carried out – 505,556

According to the NCDC, the 126 new cases were reported from 12 states- FCT (30), Lagos (24), Rivers (23), Ogun (13), Katsina (9), Plateau (9), Ondo (6), Kaduna (4), Kwara (4), Imo (2), Bauchi (1), Edo (1).

Meanwhile, the latest numbers bring Lagos state total confirmed cases to 19,239, followed by Abuja (5,674), Plateau (3,388), Oyo (3,254), Edo (2,624), Kaduna (2,397), Rivers (2,347), Ogun (1,836), Delta (1,802), Kano (1,737), Ondo (1,631), Enugu (1,289), Ebonyi (1,040), Kwara (1,032), Abia (891), Gombe (864). Katsina (857), Osun (827),  Borno (741), and Bauchi (698).

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Imo State has recorded 568 cases, Benue (481), Nasarawa (449), Bayelsa (398),  Jigawa (325), Ekiti (321), Akwa Ibom (288), Niger (259), Adamawa (237), Anambra (234), Sokoto (162), Taraba (95), Kebbi (93), Cross River (87), Zamfara (78), Yobe (76), while Kogi state has recorded 5 cases only.

READ ALSO: COVID-19: Western diplomats warn of disease explosion, poor handling by government

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

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The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.

On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.

On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.

READ ALSO: Bill Gates says Trump’s WHO funding suspension is dangerous

 

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