If Nigeria, Africa’s largest economy, doesn’t unlock the potentials in its property industry, resolve issues around dead capital and Land Use Act, and set up a functioning mortgage system, its economy will continue to move southwards, stakeholders from different sectors of the economy have said.
Unlocking the potentials in Nigeria’s real estate sector would mean more revenue from the 70 to 80 percent dead capital, affordable housing for over 23 million Nigerians, lower unemployment rate and higher economic growth, the different industry players who spoke at the recent webinar by the International Real Estate Federation (FIABCI) titled ‘Access to Credit’ said.
“Not only is real estate sector one of the key sectors, but it is also the most important for Nigeria because it doesn’t matter what you do in agriculture, power or manufacturing, if those sectors do well and the real estate is not functioning, we are still going to have an economy that’s not working for Nigerians,” Andrew S. Nevin, Partner and Chief Economist at PwC, said.
While the GDP of the real estate sector fell sharply by –18.15 percentage points from -3.84 percent in the second quarter of 2019 to -21.99 percent in the corresponding quarter of 2020, Nigeria’s economy shrank 6.1 percent in the same quarter, the first contraction since 2017. This also implies that the economy is now a quarter away from recession.
On growing the Nigerian economy, the Lagos State Commissioner for Finance, Rabiu Olowo, said the government has just two tools (taxation and expenditure) that it uses to stimulate and oil the economy to enable growth.
“In the fiscal policy toolbox, the government uses taxation and expenditure, and statistics shows that we are not doing well in Nigeria as the tax-to-GDP ratio shows we are at 6 percent and that of Lagos is less than that of Nigeria,” Olowo said, in his speech as the special guest at the second webinar series.
According to the commissioner, “taxation is a fiscal tool that has a direct impact on all sectors of the economy and real estate is not an exception and, in view of this with the current economic realities, it is much more important to refocus our attention on taxation because that’s one of the ways our economy can grow going forward.”
He also added that from African perspective, Nigeria has a lot to do in ensuring that taxation becomes a unified tool of engagement and trust between the people and the government.
“Real estate is going to be a big lever for rebooting this economy. It is absolutely critical that we look at what is happening at the bottom of the market,” Femi Adewole, MD/CEO, Family Homes Funds, said.
Exacerbated by the impact of the coronavirus pandemic, Nigeria can now be best described as one that is stagflated. The condition, described by slow, declining or contracting economic growth and relatively high unemployment, or economic stagnation, which is at the same time accompanied by rising prices (i.e. inflation), tips Nigeria into top six most miserable countries globally.
The current economic state of the country means deeper dwindling of consumers’ purchasing power, which implies that incomes of many Nigerians can only buy less of their usual consumption basket, a situation of the poor getting poorer in real terms, and the middle class thinning out.
According to Adewole, there is need to scale up micro-lending to empower those at the bottom of the pyramid to grow and contribute to not just the real estate sector but the economy at large.
Before Nigeria’s property market was hit by the impact of COVID-19 pandemic, access to affordable housing was crippled by lack of non-functioning mortgage system, high cost of property development made worse by the country’s 41 years old Land Use Act, etc.
“Land is a major barrier to extending low-interest rates mortgages in a state like Lagos,” Tobi Lawal, MD/CEO, Lagos Building Investment Company plc, who said it has delivered over 22,000o mortgages to Lagos state residents, noted.
While explaining that there are only 50,000 mortgages in Nigeria, Nevin said, being a property owner in Lagos, he went through his property perfection process in a period of two years.
“My observation is that the federal government recognizes the real estate issues but they continue to say they are going to build affordable housing for Nigerians and I don’t think that’s a credible story because the federal government doesn’t have resources to really fund this, and it doesn’t really have the capacity to do this in all 36 states,” Nevin explained.
Meanwhile, individual efforts at increasing Nigeria’s real estate properties by way of developing more houses shows that offering insights into possible solutions has not helped to reduce the demand-supply gap or increased the ownership level estimated at 25 percent.
Despite its large-size population, Africa’s largest economy is crawling behind its peers in terms of homeownership level. Whereas homeownership rate is 84 percent in Indonesia, 75 percent in Kenya and 56 percent in South Africa, Nigeria with a lot more populous has 25 percent.
According to Adele Adeniji, FIABCI Nigeria Chapter President, the ‘Access to Credit’ webinar was tailored towards sharing the narrative and experience of Nigeria’s property market with the aim of collating and presenting recommendations that will bring about the review of policy that will provide a broad range of access to multiple forms of competitive credit to citizens and as well as to investors in the real estate industry.
“Our goal is to create more awareness about the importance of property scorecard to Nigeria’s built industry, serve as an advocate in championing the call for review in policy that has halted the progress of property transactions and activities and to present a narrative and the opportunity in both the local and foreign markets,” Adeniji said.