Real estate and Nigeria’s emergence as economic hub

Real estate is real property consisting of land and the appurtenances on it like buildings, along with its natural resources such as plants (e.g. orchards, timber plantation, etc), minerals or water, and wild animals in a reserve; immovable property of this nature; an interest vested in this is also an item of real property. Real estate is more referred to as land, buildings or housing in general. Nigeria has 923,768 square kilometres of real estate. The value generated from this land mass or real estate depends on how it is planned, developed and managed to retain its quality. Real estate is like sand which contains silicon. Sand is everywhere but to extract its silicon requires a tedious process. Early numbers from the ongoing Gross Domestic Product (GDP) and Consumer Price Index (CPI) rebasing shows that real estate has displaced oil and gas as Nigeria’s third largest sector in the economy. Crop production and trade which are now Nigeria’s biggest and second biggest sectors respectively are in front of real estate in the recent rebasing.

For over six decades, agriculture was Nigeria’s biggest sector, contributing over 20 percent to the nation’s GDP. Between January and March 2021, the agriculture sector contributed 22.35 percent to the total GDP. The sector can be subdivided into crop production, livestock, forestry, and fishing. This time, crop production has been taken out of agriculture and has emerged the nation’s second largest industry. In the third quarter (Q3) of 2024, agriculture contributed 28.65 percent to overall GDP. Telecommunications, which was subsumed into information and communication, is a standalone sector and now the fourth largest sector in the economy of Nigeria. In the third quarter of 2024, information and communication contributed 16.35 percent to the GDP. Trade, now Nigeria’s second largest, contributed 14.78 percent to the GDP in Q3 of 2024. In the latest rebased GDP, crude oil and natural gas is fifth, construction is sixth, and food beverages and tobacco is seventh largest sectors in Nigeria.

In nominal terms, real estate services grew by 46.52 percent in the Q3 of 2024, higher by 43.70 percent than the growth rate reported for the same period in 2023 and lower when compared to the second quarter (Q2). Diaspora investment in real estate contributed a lot to the success recorded in the sector. The Diaspora investment will continue for some years to come as Nigerians believe in procuring homes in their homeland. On a quarter-on-quarter basis, the real estate growth rate was 16.15 percent. It contributed 5.43 percent to real GDP in Q3 of 2024 and 5.58 percent in the fourth quarter. There is a growing demand for Nigeria’s real estate in the residential, commercial and industrial sector because of their contributions to economic development. The nation needs about 1,000,000 new housing units annually to be able to meet the housing needs of people (20 million units) in the next twenty years. If 500,000 annually can be met in the next five years, the real estate market in Nigeria will achieve a value of $15.00 trillion by 2030!

The sector has huge potential that will be buoyed by the residential real estate which has a deficit of about 20 million, especially in Lagos, Ogun, Rivers and Kaduna States, and the Federal Capital Territory, Abuja. Among the various segments within the market, residential real estate holds the largest share, with a projected market volume of $2.25 trillion by 2025. Over the period of 2025-2029, the market is expected to exhibit a compound annual growth rate (CAGR) of 6.91 percent, resulting in a market volume of $3.41 trillion by 2029. The China real estate market size was valued at $661.0 million in 2023 and is predicted to reach $864.0 million in 2030, at a CAGR of 3.9 percent from 2024 to 2030. When compared globally, the United States is projected to generate the highest value in the real estate market sector, amounting to $136.6tn in 2025. If we compare the projected value of Nigeria’s real estate sector in 2030 to the USA’s $136.6 trillion, we can see that Nigeria has a long way to go!

The real estate market in Nigeria is experiencing a surge in demand for luxury apartments in major cities. A country that is adjudged the biggest economy in Africa is supposed to have a higher value of real estate than $91.1 million in 2023. The challenges Nigeria has in its real estate sector are mainly lack of affordable housing units due to low purchasing power, high dependence on imported building materials and low attraction of properties to foreign investors. Infrastructure, like security, electricity and roads, is a major bane of direct foreign investment (FDI) in Nigeria. According to the Lagos State Commissioner for Energy, Biodun Ogunleye, “Lagosians spend N17 trillion to generate their own power annually”. Foreign investors don’t fancy running generators. It is reported that Spain’s Prime Minister, Pedro Sanchez, has floated a ban on non-EU citizens from buying properties in Spain. Foreigners are banned in Canada from buying properties until 2027 because of their pressure on supply of properties. The professionals in real estate agencies in Nigeria seem not to be interested in foreign property investors other than the Diaspora investors!

For the real estate sector of Nigeria to perform better, the federal government must be ready to invest in infrastructure like modern cities master plans (eco-city, inclusive city, smart city, green etc), security, parks and gardens, tarred roads, pipe-borne water and relatively stable electricity. Foreign real estate investors have options and information technology has made it easier for foreign investors to compare real estate investments in different locations especially real estate future potentials, yield or rate of return on capital, CAGR, rents, operation cause, legal issues on acquisition of properties and level of infrastructure provision. Nigeria has a very high potential in waterfront properties which are highly sought after by foreign tropical holiday homes buyers but most of our waterfronts are not organised for luxurious buildings. The housing development model of Dubai needs to be adopted for Nigeria to reach its potential in real estate in record time.

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