Real estate in Nigeria is one of the largest and most important industries. It offers many opportunities for people who want to invest and make money. However, it also has some challenges that make it difficult for everyone to enjoy the benefits.
This article will explain the key points of the Nigerian real estate market, in simple terms, so you can understand its importance and the opportunities it offers.
1. Housing Deficit
Nigeria faces a very big housing problem. The country has a housing deficit of about 22 million units.
This means that there are not enough houses for everyone who needs one. Many people in Nigeria either rent homes or live in overcrowded spaces. The problem is so large that it is one of the biggest in the world.
The country has been trying to build more homes, but the demand keeps growing as the population increases.
In comparison, Nigeria has one of the lowest homeownership rates in the world, with only about 25% of people owning their own homes. Other African countries like South Africa (56%) and Kenya (75%) have much higher homeownership rates. This makes owning a home in Nigeria harder than in many other places.
2. Urbanization and Population Growth
Nigeria is the most populated country in Africa, with over 220 million people. By the year 2050, Nigeria is expected to become the third-largest country in the world, with a population of around 400 million people. This large population is both an opportunity and a challenge for the real estate market.
About 52% of Nigerians live in urban areas (cities). As more people move to cities in search of jobs, better living conditions, and schools, the demand for housing in these urban areas keeps growing.
Cities like Lagos, Abuja, and Port Harcourt are the most popular places where people are looking for homes. This high demand means that housing prices in these cities are rising quickly.
3. Concentration of Real Estate Value
Real estate in Nigeria is mostly concentrated in a few cities. About 70% of all property deals happen in Lagos and Abuja. This is because these two cities are the economic and political capitals of Nigeria.
Lagos, being the commercial hub, accounts for about 30% of the demand for real estate in Nigeria. Many businesses, offices, and foreign companies are located in Lagos, making it one of the busiest places for real estate.
4. Contribution to the Economy
The real estate sector plays an important role in Nigeria’s economy. It contributes around 6.85% to Nigeria’s Gross Domestic Product (GDP), as of 2022.
This is lower than the 8.6% contribution recorded in 2016. The decline was largely due to Nigeria’s economic recession and the impact of the COVID-19 pandemic. However, the sector is recovering and is expected to continue growing.
5. Land and Property Prices
Land and property prices in Nigeria, especially in cities like Lagos and Abuja, can be very high. For example, in upscale areas of Lagos like Ikoyi, land prices range from N350,000 to N800,000 per square meter.
In other expensive areas like Victoria Island and Lekki, prices are also high. Similarly, in Abuja, areas like Asokoro, Maitama, and Garki have land prices ranging from N300,000 to N600,000 per square meter.
For those who invest in real estate, rental yields (the profit you make from renting out property) in high-demand areas like Lagos range between 4% and 7% annually. This means that property owners can make money by renting out their homes or office spaces.
6. Foreign Investment
Nigeria remains a popular place for foreign investors looking to invest in real estate. However, some challenges, such as currency devaluation and regulatory issues, make it harder for foreign companies to invest in the Nigerian real estate market.
In 2020, foreign direct investment (FDI) in real estate was valued at around $1.5 billion. This shows that foreign investors are still interested in Nigeria despite the challenges.
7. Government Initiatives
The Nigerian government has been trying to address the country’s housing deficit by working on different housing programs. One of the major programs is the National Housing Program (NHP), which aims to build 500,000 affordable homes across Nigeria. The goal of this program is to provide homes for people who can’t afford expensive houses. Even though this program is a good start, there is still much work to be done to meet the growing demand for affordable housing.
One of the biggest problems for homebuyers in Nigeria is the lack of access to mortgages (home loans). Mortgage penetration in Nigeria is only 0.5% of GDP, which is very low compared to 2% in Ghana and over 30% in South Africa. This is because mortgage interest rates in Nigeria are very high, often above 20%, making it difficult for many people to afford homes.
8. Infrastructure Development
Nigeria has some major infrastructure projects that are helping to improve the real estate market. For example, the Lekki Free Trade Zone and the Eko Atlantic City in Lagos are two big projects that are attracting real estate investments. These developments are improving property values in nearby areas. When infrastructure is improved—such as roads, electricity, and water supply—it makes it easier for developers to build new homes and businesses.
9. Affordable Housing
While there are many luxury housing developments in Nigeria, there is still a strong need for affordable housing. Most Nigerians are low- to middle-income earners, and many cannot afford expensive homes. Both the government and private developers are trying to find ways to meet this demand. However, there are still challenges, such as high construction costs and limited access to financing.
10. Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts (REITs) are another way people can invest in real estate without buying property directly. However, REITs are not yet very common in Nigeria.
There are only a few REITs listed on the Nigerian Stock Exchange, with a market value of around N40 billion (about $100 million). This is much smaller compared to South Africa’s REIT market, which is valued at over $45 billion.
Challenges in the Real Estate Market
Although the Nigerian real estate market has many opportunities, it also faces several challenges. These include:
- Title Documentation: About 75% of land in Nigeria does not have proper titles, which makes it difficult for people to prove ownership.
- Infrastructure Issues: In some places, even basic infrastructure like roads and electricity is missing, making it expensive to develop property.
- High Borrowing Costs: With mortgage interest rates ranging from 15% to 25%, homeownership is out of reach for many Nigerians.
Opportunities for Growth
Despite these challenges, there are still many opportunities in the Nigerian real estate sector. These include:
- Affordable Housing: There is a growing demand for homes that low- and middle-income Nigerians can afford.
- Commercial Real Estate: As more businesses grow, there is a need for office spaces and retail outlets.
- Industrial and Warehouse Spaces: With the rise of e-commerce and local manufacturing, the demand for warehouses and industrial spaces is increasing.
Conclusion
However, the market is filled with both challenges and opportunities. With proper planning and investment, real estate can be a great way to build wealth in Nigeria.
