The real estate industry is an important player in Nigeria’s social and economic development. With a compound annual growth rate of 9.1% from 2003 to 2012, real estate is among the fastest growing industries in the country. Major drivers of the industry’s growth have been urbanisation, rising income of citizens and the ever-increasing population. Consequentially, there has been an increased demand for residential buildings in the country as well as higher infrastructure demands by the Nigerian government. Despite the industry’s remarkable growth performance, Nigeria’s housing sector still remains under developed and this is evident from the country’s current housing deficit of 17 million units.
Nigeria’s housing deficit is an indication that the housing sector has more opportunities for growth in the medium to long term. With the country’s population at approximately 169 million, the demand for affordable housing particularly in major cities like Lagos, Port Harcourt and Abuja have experienced substantial increase over the years. The booming middle class, economic growth and the urbanisation of major cities across the country have collectively fuelled this demand.
It is also important to note that the housing sector in Nigeria has continued to suffer from an oversupply of high-end properties, most of which were built prior to the global financial crisis in 2008. However, much of the country’s 17 million housing deficit exists in the low and middle class segments of the housing sector, with Lagos accounting for over 30% of this deficit.
In an attempt to ensure the provision of affordable housing for many of the populace, the state and federal governments of Nigeria have respectively embarked on several housing schemes, through the ministry of land and housing, and other agencies. While there have been efforts by the government to reduce the country’s deficit, the Federal Mortgage Bank of Nigeria (FMBN) estimates that the country needs about ₦56 trillion (US$34 billion) to finance this huge housing gap. Given this circumstance, it is evident that the intervention of private sector investment in the sector is needed to fill this huge gap.
In recent times, the government has established partnerships with private housing developers in building middle class housing estates in Nigeria. Under this partnership, the Nigerian government provides the land while the developers are expected to construct and finance the housing units. Since the establishment of this scheme, over 89 estate developers have taken up this initiative and more Public-Private Partnership (PPP) projects are expected to come on stream, creating more opportunities for investors.
The housing sector is essential to the socio-economic transformation of the country and holds a great potential in the realisation of Nigeria’s vision 2020. With the country’s population growth of 2.3% per annum, rapid urbanisation of major cities and rising income level, there is a sustainable demand for affordable residential housing in Nigeria in the near term, making the sector attractive to potential investors.