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HomeNewsGDP: Built Sector Targets $900bn By 2028

GDP: Built Sector Targets $900bn By 2028

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The built sector is crucial to the socio-economic development of Nigeria given its role as the preferred employment hub.  This is why the barriers to effective growth in the sector like unskilled manpower, difficulties in land acquisition, incessant building collapse due to use of substandard materials, delay in governor’s consent, absence of long-term financing, bogus interest rates, among others should be tackled headlong.

Surprisingly, shortage of liveable and affordable housing has continued to affect low and medium income earners who constitute over 80 percent of the workforce.

Presently, Nigeria’s Gross Domestic Product (GDP) is over $400 billion with the built sector is contributing five per cent to the national economy, irrespective of the over 17 million housing deficit. This is against positive growth rate in the United States of America where the housing sector contributes 36 per cent to their GDP and 30 per cent in South Africa. 

Recall that when the national technical working committee under the housing thematic area of the Vision 20:2020 was inaugurated in 18th April, 2009, they were asked to make recommendation towards the contribution of housing to Vision 20:2020 goal of the federal government.

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Part of the vision was to make housing available to all Nigerians by the Year 2020 and also make the housing sector one of the top three contributors to the nation’s economy by adding 10 million decent and affordable homes to the national housing stock by the year 2020.

The overall target for the sector was to contribute to Nigeria’s quest to achieve a GDP of $900 billion, with an annual GDP growth of 15 per cent by 2020. Given that $900 billion GDP by 2020 wouldn’t be feasible due to high rate of inflation and poor performance of the naira, experts in the built sector have suggested that attaining the target requires 10 years persistent growth, with contributions from other sectors of the economy.

A real estate developer, Arc Adewunmi Towolawi Okupe said that since Nigeria’s Gross Domestic Product (GDP) is currently on about $400 million that with N80 trillion investment that it could be raised to $900 billion by 2028. To achieve the task, he suggested that there would be significant improvement in the contributions of other sectors of the economy to the GDP.

Okupe maintained that with persistent growth in 10 years from 2018 to 2028, that the target could be attainable. He however, listed government insincerity, lack of concerted efforts, persistent infrastructure problems and dishonesty on key handlers of the economy as part of the problems that might cripple the plan.

In his contribution, immediate past chairman, Nigerian Institution of Civil Engineers (NICE), Abuja chapter, Engr. Ben-Osy Okoh who expressed divergent views stated that the growth rate of any nation is measured by the level of infrastructure inherent in the country.

He was worried that Nigeria’s investment in infrastructure is low, adding that since Abuja was conceived as Federal Capital Territory (FCT) in 1976 , 32 years down the line, the federal government failed to develop up to 25 per cent of infrastructure in the city.

According to him, “For instance, government will award a contract for a road project at the cost of N10 billion which is expected to be completed in three years. In the first year, N100 million will be budgeted for the project; the next year the project will attract zero allocation while the third year, it will be N1 billion; therefore, the project will never be completed in three years.”

He noted that with poor infrastructure budget that it is impossible for all levels of government to provide an enabling environment for the private sector to operate, stressing that the private sector boosts the economy in any developed countries.

Oko cited an example with Dubai in United Arab Emirate (UAE) where the economy is fully driven by the private sector saying that the country has mapped out the Expo 2020 Programme, expected to unveil the next tallest building in the world to be called a tower.

He asserted that UAE is not an oil producing country but majority of the funds needed to meet up the completion date of the project before 2020 would be sourced from the private sector since the country has an enabling laws that bolster private sector operators.

Oko said that there is a need for all levels of government to open up the space for more private sector participation, noting that investors are interested in investing in Nigeria but are skeptical due to insecurity.

While stating that investors won’t invest in any country that cannot protect their investment, he wondered why the tallest building in Abuja which is the world trade centre has been under construction for the past 10 years.

He maintained that problems in the sector heightened since power, works and housing ministries were merged as one and headed by a lawyer, describing it as an aberration given the challenges in the sector.

Former president of Mortgage Banking Association of Nigeria, Dr. Femi Johnson had disclosed that since the GDP was projected to grow from $481.07 billion in 2015 to $1.3 trillion by 2030 that residential and commercial real estate could contribute $644 billion to the growth if housing and urban development is properly harnessed.

Johnson noted that increased home ownership would stimulate spending and employment in the local economy as well as act as an important source of revenue for the local government. He regretted that the national rate of home ownership in Nigeria is very low and would not improve unless there is expanded access to mortgages.

According to him, only 2.5 per cent of all lands in Nigeria have titles since land registration began in 1863 and presently less than five per cent of houses have formal titles due to the prohibitive cost of titling and the slow bureaucratic procedures”.

He revealed that titles generally cost about 15 per cent of property value which could be as high as 22 per cent in some states, disclosing that title registration or transfer could take from six months to two years since the processes were usually slow, cumbersome, unreliable, and inefficient.

Johnson commended Lagos state government for reducing the cost to three per cent of the property value, disclosing the need for other states to emulate Lagos state by trimming the cost to a maximum of one per cent of the property value. The federal government has revealed that Nigeria needed about N80 trillion to unlock huge investment potentials inherent in the housing sector.

Managing director/chief executive of Federal Mortgage Bank of Nigeria (FMBN), Arc. Ahmed Musa Dangiwa pleaded with all levels of government and stakeholders to consciously promote and sustain efforts aimed at boosting development in the country.

Dangiwa enjoined local and international investors to tap into the potentials, saying that such potentials would transform the economy and propel national development. He said though all current indices are negative but the opportunities for growth and national development are unquantifiable, saying that housing promotes socio-political stability.

The MD emphasised that the quantum of housing deficit opened up huge potentials for mobilisation of investment into the sector particularly Foreign Direct Investment (FDIs), saying that FDIs would boost the economy and expand access to housing finance. He revealed that access to mortgages by Nigerians would be enhanced through the consequential availability of mortgage-able assets.

Dangiwa listed mortgage finance, land governance system, low wage structure, high cost of building materials as well as unchecked population growth and rapid urbanisation as the most critical challenges to housing provision in Nigeria.

He was worried that scarcity of long-term housing and mortgage finance constituted considerable challenge overtime, noting that apart from mortgages offered by FMBN through the National Housing Fund (NHF) that it’s impossible to access long-tenured mortgage at single digit interest rate in Nigeria.

The MD stated that land governance system made access to land and titles cumbersome and costly, a situation that led to difficulties in accessing mortgage finance for housing development.
On low earning, he said, “Most middle and low income earners cannot afford to purchase any home without subsidy due to the abysmally low level of household income while inflation and other macro-economic challenges have eroded their purchasing power.”

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