Business News
Nigeria’s hospitality sectors face investment shortages as spate of abandoned projects increase
The hospitality and real estate sectors are yet to fully recover from the effects of the Covid-19 pandemic.
The Nigerian hospitality sector has been one of the hardest-hit industries by the COVID-19 pandemic; travel restrictions and other reactive measures were adopted, which affected them negatively.
From earning revenue as high as $2 billion in 2018, the Nigerian tourism sector is seeing 5.7 million fewer travellers due to the pandemic, putting 149,400 jobs at risk and short-changing Nigeria’s economy by $1.1 billion.
According to Nairalytics data, listed hospitality companies recorded a 56% drop in net cash investments going from N11.3 billion in 2019 to N4.9 billion in 2020. Two of the owners of Nigeria’s largest hotels Transcorp and Ikeja Hotels recorded the most drop in capital investments as depicted in the chart below.
READ: Hotels in Nigeria are on the verge of collapse
Data provided by Nairalytics
How this affects investment in hospitality
Reduced hotel occupancy rates
In its recent report on “What 2020 means for Hospitality and Housing,” W. Hospitality Group in Nigeria had said that the country’s hotel occupancy rates were largely driven by foreign tourism, with business tourism accounting for 70% of hotel demand in Lagos State alone.
Following the ban on domestic/international flights, the state’s hotel occupancy rates dropped from 70% in February 2020 to nearly 15% in April, before a post-lockdown recovery.
READ: COVID-19: Abuja Sheraton suffers 88% drop in revenues
Though the lockdown has been eased and the travel ban lifted, operators are not yet out of the woods. Prominent hotels like The Wheatbaker, Sheraton, The George, Southern Sun and Eko Hotels & Suites are not operating fully; some of them even spread their tentacles into new areas like food delivery, bakery and outdoor events, among others, as they explore safer means to stay afloat.
Reduced foreign investment
Travel and tourism are key to attracting investment and developing the economy. The tourism sector alone contributed 5.1% to the country’s GDP in 2019, unlike in 2020. With fewer travellers visiting the country for business and leisure, new and existing projects have noted less activity from the typical patrons.
Similarly, revenue losses from the industry plunged the country even lower into recession, rendering the industry unattractive for investments.
Estate Intel stated, “The dwindling patronage has indeed created existential issues for businesses as revealed by the Q2 and Q3 financials of some major listed hotels on the Nigerian Stock Exchange where revenue losses as high as 90% were recorded.”
This means that investors typically exited ‘risky’ assets to seek safer havens and hedge their exposures, and that might not change so quickly in 2021.
READ: Unmarked hotels and short-stay apartments report high occupancy rates during COVID-19
Decreased purchasing power to rent or acquire residential properties
With 149,400 jobs at risk, some businesses within the Nigerian travel industry have had to lay off their workers. The combined effect of job and income losses within and beyond the hospitality sector hampers the purchasing power for luxury properties including housing.
While new projects will “take much longer to be realized due to the lower demand and funding issues (shortages of debt and equity), the increases in costs due to the currency devaluation, as well as owners’ lack of willingness to continue existing projects will create shortages on the supply side of the industry,” Estate Intel added.
In summary, the loss of business from travel and tourism may have a silver lining which is reducing the dependency on foreign demand by exploiting local tourist participation and forging strategic alliances. In essence, they need to adapt their business model by looking inwardly and working locally.
Business
Lagos agricultural sector to generate $10 billion in the next 5 years
The agricultural sector in Lagos state is projected to generate as much as $10 billion within the next 5 years.
The Lagos State Governor, Mr Babajide Sanwo-Olu, has projected that the agricultural sector in the state could generate as much as $10 billion within the next 5 years.
This is as the governor noted that Lagos could no longer afford to rely exclusively on other states for its food, adding that it was time to unlock its immeasurable agricultural potential through the implementation of the 5-year roadmap.
This disclosure was made by the Governor at the formal launch of the state’s 5-year Agricultural and Food Systems Roadmap, on Thursday, adding that most of the investments would be private sector-driven while the government acts as the catalyst and enabler.
Governor Sanwo-Olu opined that the Roadmap would also lead to wealth generation, value creation, food security, the industrialisation of the agricultural sector and the entrenchment of inclusive socio-economic development of the state.
He said that the roadmap essentially focuses on 3 pillars, which are: growth of the upstream sector, growth of the midstream and downstream sectors as well as improvement of private sector participation.
What the Lagos State Governor is saying
Sanwo-Olu, in his words, said, “Our strategies for sustainable Agricultural Development shall focus on three pillars. First, we will grow the upstream sector through interventions by leveraging technologies that are capable of lowering the cost of production of value chains; Focus on growing the midstream and downstream sectors that are of value and lastly, we will improve on private sector participation by developing and initiating policies that will encourage more private investments in agriculture.”
The projection is that the total investment in the Agricultural Sector from the government, private sector, donor agencies and development partners will run into over $10 billion in the next five years. While we expect most of the investment to be private sector-driven, the government will continue to provide the needed infrastructure while the private sector will be encouraged to lead the key projects.’’
The governor pointed out that the state had already started the revamping of its Agricultural Land Holding Authority (ALHA) to support investment in agriculture, giving assurance that the coconut belt would also be strengthened with increased private sector involvement.
Sanwo-Olu listed some State’s landmark investments that will aid smooth delivery of the Roadmap to include the Lagos State Aquatic Centre of Excellence (LACE) that would boost fish production from 20% to 80%, the Imota Rice Mill, the Lagos Food Production Centre Avia, Igborosu-Badagry as well as other statewide agriculture-focused initiatives.
He said, “I am greatly encouraged by the interest already generated in the Five-Year Agricultural Roadmap and I hope it will be sustained and backed with concrete action on the part of our development partners and the international community. I assure you that the Lagos State Government is putting in place deliberate incentives to make your investment safe, secure and profitable.’’
Sanwo-Olu, therefore, urged potential and established stakeholders in the agricultural sector to partner with the state in order to transform the agricultural sector for food security, wealth generation, poverty eradication, economic diversification, rapid industrialisation and accelerated socio-economic growth.
Bottom line
This is a very laudable initiative from the Lagos State Government especially at a time the country is looking at diversifying its economy. The successful implementation of this programme with the expected benefits from the value chain will contribute significantly to the economic development of the state and the country in general.
The investment in the transformation of agriculture to agribusiness is one way of achieving the dream of attaining self-sufficiency in food production and creating more wealth.
Business News
NNPC, SEEPCO sign gas development agreement for domestic market
The execution of the deal is to help reduce gas flaring in the country and a show of NNPC’s commitment to facilitating the country’s transformation into a gas-powered economy.
