What Buhari’s return in 2019 will mean to real estate sector in Nigeria
After almost four years of dismal performance as reflected in sharp drop in productive capacity, reduced consumer purchasing power and poor standard of living for citizens, Nigerians are edgy and apprehensive of a possible return of Muhammadu Buhari-led government in the aftermath of the 2019 general elections.
Experts are asking questions as to what another four-year term under Buhari would mean for the economy and its various sectors, including real estate, considering that the current business environment, which is not enabling, will persist.
“Buhari’s government is anti-business which is why the business community does not want him back”, the experts note, arguing that if Buhari wins the 2019 elections, more young professionals and businesses will leave the country in search of friendlier business environments.
Many companies and industrial concerns have left the country in the last three years for what the experts describe as “government’s anti-business stance” that does not support growth in both the services and productive sectors of the economy.
Besides the locals who are leaving the country, relocating their children and putting them in schools abroad, many expatriates, especially those working in oil and gas, telecoms and other service companies are either returning to their home countries or relocating to other African countries.
The fear is that these developments might increase in tempo if the status quo persists into 2019 and, for real estate, this has grave implications for the sector which is, at the moment, struggling.
“The implication of these developments for the property market is that the high vacancy situation in the market will become worse; more buildings will be empty and that will affect their market value”, Roland Igbinoba, President/CEO, Pison Housing Company, affirmed in a telephone interview.
The real estate sector in Nigeria has been in negative growth territory for quite a while. Indeed, the sector has been in recession in the last 10 consecutive quarters, long after the wider economy exited recession in the second quarter of 2017.
By the last count, it was estimated that over 300,000 square metres commercial and 200,000 square metres residential real estate space are unoccupied and, according to Broll Property Services’ recent (Q3,2018) Viewpoint on the office market, about 40,000 square metres office space will be coming into the market in the next six to 12 months.
Igbinoba stressed that there would be increased vacancy rate in the Grade A office market and his reason was that the expatriates who were leaving the country coupled with those who may live in the aftermath of the general elections are the ones that rent such office space.
“The upper residential market will suffer the same fate because it is only the corporates and expatriates that rent houses in that segment of the market”, he said, adding that even retail market would continue to struggle because of the drop in consumer purchasing power which is affecting that space.
However, what is happening or is going to happen, according to Igbinoba, is beyond election or Buhari as president. “What we are looking at here is political risk, but it goes beyond that. Macro-economic factors also play a major role and so focus should be more on them”, he posited.
MKO Balogun, CEO, global Property and Facilities International Limited, affirms, arguing that if people and companies are leaving Nigeria, it is not because of Buhari as president or the likelihood of his return to power after 2019 elections.
“People are leaving the country because of our economy which is a rent-economy; the economy is not standing on a sustainable model, so people come from outside, make what they can make and move on. That is what is happening. The economy has a weak super structure”, he emphasised.
Continuing, he said, “let’s not lose sight of one thing. Some of the companies that are leaving the country are running away from the anti-graft stance of the Buhari government which is making Nigeria uncomfortable for them. Take, for instance, The First Group which has relocated to Ghana”.
The First Group is a Dubai-based British real estate development firm that helped a good number of Nigerians to buy and own property in choice locations in Dubai. The company had to close its Abuja and Lagos offices after it was fingered in the controversy surrounding some properties in Dubai allegedly owned by Tukur Turatai, the Chief of Army Staff.
In addition to Baolgun’s suggestion on the need for an all inclusive government that will fix the economy, Igbinoba is of the opinion that there should be more focused attention on the real estate sector like what is done in Agriculture. “Let there be an intervention fund for the sector; recapitalize the Federal Mortgage Bank of Nigeria (FMBN), and build infrastructure”, he advised.
CHUKA UROKO