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, have 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. In its latest report, 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 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 Central Bank of Nigeria has continued to tighten its monetary policy, as part of measures to address the growing inflation, notably through interest rate and other monetary policies to cushion the 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 intervention have had severe impact on business and investment.
For example, following the Monetary Policy review in September 2022, the Central Bank of Nigeria raised 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 per cent of GDP, manufacturing 20.56 per cent, while the real estate sector contributed 4.9 per cent to the GDP.
Also, there were significant contributions from the 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 per cent 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 and we approach a gradual global shift from oil, Nigeria must begin to consider the real estate sector, as a key contributor to the economy vis-a-vis its capacity to deliver sustained prosperity and the redistribution of wealth. Investment in real estate has the potential to hedge growing inflation; provide employment opportunities; break vicious cycle of poverty; bridge the housing deficit; redistribute wealth and enhance government revenue.
