There is no doubt that these are truly challenging times. The slowdown in global economic activities, occasioned by both the impact of COVID-19 and the Russia-Ukraine crisis, has resulted in a cost of living crisis and a decline in the global volume of trade, leading to inflationary pressure at national, regional, and global levels.
As one would imagine, Nigeria has not been insulated from the financial shock and rise in global inflation. The Nigeria Bureau of Statistics (NBS) put the nation’s inflation at 21.47%, in November 2022, the highest so far recorded in the nation’s history. This has led to a rise in food inflation and a corresponding decline in purchasing power of most Nigerians, leaving more people in severe poverty.
Similar to other monetary Authorities in the world, the Nigerian Central Bank has continued to tighten its monetary policy, as part of measures to address the growing inflation. Notably, through interest rates and other monetary policies to cushion inflation. The increase in lending rate has however made Nigeria one of the countries with the highest lending rate in Africa, although while some may argue that these are necessary interventions to mitigate inflation, such interventions have had a severe impact on business and investment. For example, following the Monetary Policy review in September 2022, the Central Bank of Nigeria raised its interest rate to 16.5%, this made Nigeria the highest among other African countries, such as South Africa at 7%, Kenya at 9.6%, Morocco at 2%, and Egypt at 13.75%. These tightening measures have had a significant impact on business and investment.
Despite the economic uncertainties, the non-oil sector continues to show resilience, contributing to Gross Domestic Product (GDP) and sustaining government revenue. In the last year, the Agricultural sector contributed 25.9 percent of GDP, manufacturing 20.56 percent, while the Real Estate sector contributed 4.9 percent to the GDP. There were also significant contributions from financial services, communications, entertainment, and construction.
The real estate sector has maintained a sustained rebound from the impact of the pandemic, maintaining a strong performance. Already, Experts have predicted that the Nigerian Real Estate sector would expand by 5.2 percent in 2023, projecting a 6.5per cent contribution to GDP. In a few years, the contribution of the sector is expected to rise to the levels of the United States and China, where the real estate sectors contribute 14% and 13% of GDP, respectively.
As the revenue from the oil sector continues to decline, as we approach a gradual global shift from oil, Nigeria must begin to consider the Real Estate sector, as a key contributor to the economy viz its capacity to deliver sustained prosperity and the redistribution of wealth. Investment in real estate has the potential to hedge growing inflation, provide jobs, address poverty, bridge the housing deficit, redistribute wealth and enhance government revenue.
In terms of investment choices, real estate is also one of the most sustainable globally. Aside from its potential to hedge inflation, it is also insulated from price volatility. This can serve as a means to manage the impact of not just inflation but also currency depreciation. Similarly, as the country looks to reduce its poverty levels, real estate provides a sustainable approach to getting people out of poverty and providing sustainable prosperity.
For example, Government can embark on mortgage reforms and special financing strategies to provide Nigerians with financing options at a single-digit interest rate, to invest in real estate and home ownership. Moreover, such interventions are not new; an example is the Anchor Borrowers Programme, aimed at achieving rice sufficiency in the country. In the long term, this policy can both create empowerment and help to bridge the housing gap, which currently stands at 28 million housing units.
The real estate sector can serve as the key to addressing the growing unemployment. More than a third of eligible workers in Nigeria are unemployed, according to the NBS, the unemployment figures as of Q4 2020, stand at 33.28%. The real estate sector typically involves several value chains that involve labor at every level. Increased activity in the real estate sector will significantly address the nation’s unemployment challenges and support wealth creation.
The real estate sector can also help to grow government revenue. The government is currently faced with the trifecta of mounting debts, subsidies, and low revenue. Nigeria’s revenue to GDP currently stands at 8%, below the African average of 18%, showing that government revenue is one of the most inadequate globally. The real estate sector has great potential to sustain the economy in the long term. Significant investment and enabling business reforms in the sector can help the government to increase its revenue from the sector, through land-based taxes, improved tax revenue, and widen the tax net.
If properly harnessed, the Nigerian real estate sector can serve as the pathway to building a sustainable economic future. Significant investment in the sector, in addition to enabling business environment reforms and financing support for Nigerians, can accelerate the sector and its contribution to the growth of the economy and GDP.
Source: Businessday.ng
Event Set to Celebrate Managers Who Shape Careers and Drive Organizational Growth Business...
4 days ago Read MoreGlobal Leaders to Converge in Lagos for Landmark Event Driving Urban Innovation and...
5 days ago Read MoreIn a bold move to redefine affordable luxury housing, Nigerian real estate giant Gtext Holdings has...
13 days ago Read MoreIndustry Experts Urge Anti-Corruption Measures, Innovative Financing to Address Crisis By: Oche...
18 days ago Read MoreLAGOS, NIGERIA – Global real estate consultancy Knight Frank and UK developer Mount Anvil...
20 days ago Read MoreBy Oche Onum Lagos, Nigeria As Nigeria’s real estate sector braces for 2025, rapid...
24 days ago Read MoreBy Oche Onum Abuja, Nigeria In a landmark move to combat climate vulnerabilities in urban...
26 days ago Read MoreLAGOS, NIGERIA The Federal Government announced plans Wednesday to establish a Real Estate...
a month ago Read MoreAccording to The Guardian's investigation, 70% of Nigerian states rely on manual land...
a month ago Read MoreWhat is the Initiative? The Federal Government of Nigeria has unveiled an N100 billion private...
a month ago Read MoreAbuja, Nigeria’s gleaming administrative capital, has long symbolized hope for migrants...
a month ago Read MoreAbuja, Nigeria The Federal Housing Authority (FHA) has suspended all ongoing construction projects...
a month ago Read MoreLagos, Nigeria Amid Nigeria’s escalating housing affordability crisis, real estate...
a month ago Read MoreRenowned Nigerian gospel artist Mercy Chinwo has broken her silence in an emotional video...
a month ago Read MoreThe Nigerian real estate market is projected to hit $2.25 trillion by the end of 2025, according to...
a month ago Read MoreNigeria’s Minister of Housing and Urban Development, Ahmed Dangiwa, has called on...
a month ago Read MoreAffordable Housing and Luxury Properties Set to Propel Nigeria's Real Estate Market Over the Next...
2 months ago Read MoreHope for improved housing supply in Nigeria may remain unfulfilled, as the 2025 fiscal budget...
2 months ago Read MoreNigeria commemorated its annual Armed Forces Remembrance Day on January 15, honoring military...
2 months ago Read MoreNigeria’s ongoing GDP and CPI rebasing reveal real estate has overtaken oil and gas as the...
2 months ago Read More