In the Q2:2021 GDP Report published by the National Bureau of Statistics (NBS) last week, Nigeria’s GDP grew by 5.01% (year-on-year) in real terms. This relatively high GDP growth rate can be largely attributed to a low base-effect in light of the sharp 6.1% decline in the GDP growth of Q2:2020. Following Nigeria’s gradual recovery, it is safe to say the country’s economic performance is now close to pre-covid levels.
How did Real Estate Services and Construction Perform?
Albeit worse off, the Real Estate Services and Construction sector followed a similar pattern with Nigeria’s overall GDP growth in Q2:2020 reporting strong declines of -22% and -32% respectively. However, these sectors have now returned to positive growth recording 3.85% and 3.70% respectively.
It is important to note that in measuring the growth rate of the Real Estate Services sector, the NBS tracks the tax returns of Real Estate firms and not actual brick and mortar transactions while it tracks the quantum, volume and sales of construction materials to track the performance of the construction sector. This explains why Real Estate and Construction took huge hits in Q2:2020 following the lockdown and closure of construction sites. Nigeria’s reliance on imported construction materials and the increased pressure on foreign reserves during that period also contributed to the sharp slump.
Barring Q1:2019, Nigeria’s Real Estate Services sector recorded negative growth rates in 18 quarters between Q1:2016 and Q3:2020. The sector might just have made a fresh start as it recorded positive growth rates (year-on-year) of 2.81% and 1.77% in Q4:2020 and Q1:2021 respectively. The much improved positive growth (year-on-year) of 3.85% recorded in Q2:2021 might not just be a result of the low base effect but also a consistent way forward for the sector.
In contrast to Real Estate Services, the Construction sector has proved to be stronger as it only had a few stints of negative growth in Q3:2017 and Q1:2018. The sector can put the sharp decline in Q2:2020 behind it as it looks forward to more consistent growth.