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PwC reveals Nigeria’s real estate is holding about $900 billion to ransom.

A report by @PwC_Nigeria has revealed that Nigeria still holds between $300 billion to $900 billion worth of dead capital in residential real estate and agricultural land alone.

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Real Estate

Nigeria, Africa’s largest economy —with its gross domestic product (GDP) of $530 billion, growth expectations hinged at 2.3% in 2019, and a long-term average growth rate of 3.5% —still holds between $300 billion to $900 billion worth of dead capital in residential real estate and agricultural land alone.

According to a report recently released by PricewaterhouseCoopers limited, the high-value real estate market segment holds-in value between $230 billion—$750 billion, while the middle market segment holds in value between $60 billion—$170 billion.

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Experts have long emphasised on the need to explore the untapped potentials in a bid to grow the economy. This is especially in respect to the volatile crude oil prices in the world oil market which has posed a challenge.

PWC reveals real estate holds $900 billion in ransom

Aerial view of houses lived by residents.

What is Dead Capital? “Dead capital“, according to the Peruvian economist and development scholar Hernando de Soto who coined the concept in 2001, are “assets that cannot be converted to economic capital”.

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[READ FURTHER: Lagosians cry over Land Use Charge]

According to the economist, capital, which is the resource used to increase productivity for wealth generation in an economy, is the most essential component of societal advancement and thus, deserves the utmost priority when developing solutions for advancing countries.

Analysis from the report: The residential and agricultural real estate sector, according to the report estimates by PwC, is one of the major forms of dead capital. With over 40 million households in a total country population of 200 million, The report reveals that a typical Nigerian house is over capacity with an occupancy rate of seven persons in a room.

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Furthermore, the report revealed that approximately 95% of Nigerian household dwellings have no title or a contestable title.

Despite various developmental plans, Nigeria continues to wrestle with rising poverty and unemployment levels, coupled with the epileptic manufacturing and industrial base. This is despite the fact that economic development could have been made possible by harnessing capital from areas that are often overlooked by people.

[ALSO READ: Bank credits to real estate sector low]

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Nigeria's Real Estate Sector recorded positive growth after three year low

Why dead capital? Some of the factors responsible for the dead capital in Nigeria’s residential and agricultural real estate segments include, but not limited to the following:

  • The lack of credit access by small businesses and the prevalence of dead assets.
  • The state of Nigeria’s housing and property markets.
  • The high cost of land.
  • The high cost of securing and registering a secure land title.
  • More so, the land tenure system which is still being practiced in the communal and informal sector has made it quite a stressful process for anyone to own and register a land legally.

What can Nigeria do to bring dead capital life? According to the report, Nigeria is underperforming and one of the ways to end the underperformance is to unlock dead capital. This could be done through the following ways:

  • Structural Reforms: The conversion of dead capital to live capital through structural reforms would help in the conversion of most of the capital in the informal economy (which is currently valued at 65% of GDP) into the formal economy.
  • The development of electronic asset registries which are backed by blockchain technology could position the residential and agricultural real estate in Nigeria, therefore, unlocking the dead capital needed for the nation’s growth and development.
  • Systemised Trust Creation: The creation of trust in the system and increased participation in the segment will bring about capital conversion in this economic class through fiscal receipts into the formal economy.

In order to circumvent the above challenges, the country needs to invest in establishing proper and seamless land administration, as well as implement policies that will improve land accessibility. This, as industry sources believe, would also increase capital for infrastructure in the sector whilst stimulating economic activity.

[READ THIS: CBN sets deadline for retrieval of N7.9 trillion bad notes]

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Patricia

Charles Abuede is a graduate of Economics and Statistics from the University of Benin. He has worked as a business correspondent at Voidant Wireless Service (Pryde TV) and Entrepreneurs.ng. He is currently a Research Analyst at Nairametrics. You can reach him on [email protected] or @CharlesAbuede on LinkedIn and @AbuedeCharles on twitter.

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Financial Services

Zenith Bank and GTBank are considering paying interim dividends despite COVID-19

Analysts earlier predicted that banks may hold off on dividend payments as a way of cutting down on costs in view of COVID-19.

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Zenith Bank’s board of directors is set to meet on July 23rd, 2020 to consider the tier-1 bank’s audited financial statements for half-year 2020. The directors will also consider “the proposal for recommendation of interim dividend for shareholders,” said a notice that was sent by the company to the Nigerian Stock Exchange.

In a similar development, Guaranty Trust Bank Plc said in a statement to the NSE that “issues relating to half-year dividend may also be discussed” when its board of directors meet later this month.

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Zenith Bank and GTBank, which are two of the most profitable banks in Nigeria, have always paid interim dividends to their shareholders. However, analysts earlier predicted that many banks may hold off on dividend payments as a way of cutting down on costs, in view of COVID-19 and its attendant economic implications. It is, therefore, fascinating to see that Zenith Bank and GTBank are considering interim dividends nonetheless.

Elsewhere, banks around the world have either been warned not to pay dividends at all or to be careful with dividend payouts. In April, The Economic Times reported that the Reserve Bank of India advised Indian banks to suspend dividend payments in order to conserve their capital amid the pandemic. In a similar development, regulators in Europe also banned European banks from paying any dividend in 2020. In Australia, banks were advised to slash their dividend payouts. Meanwhile, over in North America, the US Federal Reserve announced in late June that it will temporarily restrict dividend payouts by some of the country’s biggest banks, the New York Times reported.

As Nairametrics had repeatedly reported, the COVID-19 pandemic is expected to adversely impact different sectors of the Nigerian economy, including the financial institutions. An earlier report by Nairametrics quoted Augusto & Co to have predicted how the pandemic would weaken Nigerian banks’ assets. An April report by PwC also highlighted some of the ways COVID-19 could impact Nigerian banks.

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In the meantime, the Banking Industry Risk Indicator (BIRI) in Nigeria stands at a score of 12.14 out of 100, according to a recent analysis by Fitch Solutions, as Nairametrics reported.


Do note that Zenith Bank Plc has declared a closed period for the trading in its stock starting from July 6th, 2020. The closed period will last until 24 hours after the company’s half-year 2020 financial report is released to the public. In the meantime, all persons with inside knowledge of Zenith Bank’s affairs shall be prohibited from buying and selling the company’s stock during the closed period. 

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Financial Services

GTBank declares closed period as directors meet July 22nd to consider H1 result

GTBank reported a net interest income of N64.28 billion in Q1 2020 as against N53.58 billion in Q1 2019.

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GTBank H1 2020 result

Guaranty Trust Bank Plc (GTBank) has declared a closed period ahead of the release of its audited half-year 2020 financial statements.

A corporate disclosure that was signed by the Company Secretary (Erhi Obebeduo) and sent to the Nigerian Stock Exchange said the closed period commenced on July 3rd, 2020. In line with the listing rules of the NSE, the closed period is expected to last until twenty-four hours after the bank’s financial statements have been released to the public.

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Note that the implication of the closed period is that all persons with insider knowledge of the company’s affairs are hereby prohibited from trading the company’s stock.

READ ALSO: Fidelity Bank announces closed period as it readies to release unaudited Q1 2020 result

Meanwhile, members of GTBank’s board of directors are scheduled to meet on July 22nd to consider the audited HI 2020 financial statements. A separate notice that was sent to the NSE said:

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“Pursuant to the post-listing requirements of the Nigerian Stock Exchange for quoted companies, Guaranty Trust Bank Plc hereby informs you that the board of directors of our bank is scheduled to meet on Wednesday, July 22, 2020, to consider the audited financial statement for the half-year ended June 30, 2020. Issues relating to half-year dividend may also be discussed at the meeting.”

The audited financial statements for half-year 2020 shall be sent to the Central Bank of Nigeria for approval prior to being made public through the Nigerian Stock Exchange.

READ ALSO: Analysis: GTB is minting profits but CBN is squeezing its cash.

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Recall that GTBank reported a net interest income of N64.28 billion in Q1 2020 as against N53.58 billion in Q1 2019. In the same vein, the tier-1 bank’s profit before tax grew by 2.1% to N58.2 billion, up from N57 billion in Q1 2019. Profit after tax also grew from N49.3 billion in Q1 2019 to N50 billion in Q1 2020.

GTBank closed last week’s trading on the Nigerian Stock Exchange with a share price of N20.80, according to trading reports seen by Nairametrics. Year to date, the stock has lost by more than -19%.

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Coronavirus

COVID-19: WHO stops hydroxychloroquine, HIV drugs trial after failure 

The WHO boss had earlier warned that the worst is yet to come from the coronavirus pandemic.

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Dr Tedros Adhanom, Head of the World health organization (WHO), COVID-19

The World Health Organization (WHO) has announced that it was going to abandon its trials of the malaria drug, hydroxychloroquine and combination of HIV drug, lopinavir/ritonavir on hospitalized patients that have coronavirus disease after they failed to reduce the death rate. 

This is a major setback for the WHO in the face of a second wave of the virus outbreak in US, China, Asia and some American countries. The United Nations (UN) health agency reported over 200,000 new cases of the disease globally, the first time in a single day. 

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According to a statement from the WHO, ‘’These interim trial results show that hydroxychloroquine and lopinavir/ritonavir produce little or no reduction in the mortality of hospitalized COVID-19 patients when compared to standard of care. Solidarity trial investigators will interrupt the trials with immediate effect.’’ 

READ ALSO: Nigeria’s ratings risk downgrade over rising debt and lower revenue

The WHO has hinged its decision on the recommendation of the trial’s international steering committee and does not affect other studies where those drugs are used for non-hospitalized patients. 

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Another aspect of the WHO-led trial is looking at the potential effect of Gilead’s antiviral drug remdesivir on COVID-19. The European Commission gave remdesivir a conditional approval for use on Friday after it was discovered that it helps reduce hospital recovery times. 

The trial which is led by WHO started with five branches looking at possible treatment approaches to coronavirus. They include, standard care, remdesivirhydroxychloroquinelopinavir/ritonavir, and lopanivir/ritonavir combined with interferon. 

The WHO Director-General, Tedros Adhanom Ghebreyesus, disclosed on Friday that almost 5,500 patients in 39 countries had been recruited into its clinical trials and that interim results were expected in the next two weeks. 

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There are about 18 experimental COVID-19 vaccines that are being tested on humans with almost 150 treatments under development. 

A top emergency expert from WHO, Mike Ryan, said it would not be wise to predict when a vaccine could be ready because while a vaccine candidate might show its effectiveness by the end of the year, the challenge might be how soon it could be mass-produced. 

READ MORE: Developing countries will pay less for COVID-19 drug – Gilead reveals 

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The WHO boss had a few days ago warned that the worst is yet to come from the coronavirus pandemic due to lack of global solidarity and the susceptibility of most people to the virus, which still has a lot of room to move. He stated that contact tracing of people that are infected with the virus is the most important step in fighting the coronavirus pandemic. 

The UN health agency had also revealed its plans with its partners to buy 2 billion doses of COVID-19 vaccines for the most vulnerable people across the globe. The plan projects that the doses of the COVID-19 vaccine will be distributed to countries with special priority on high-risk persons like people above 65 years, health care personnel and other adults with ailments like diabetes.  

 

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