As the global economy is trying to restart and pick up momentum after the unprecedented spread of the COVID 19 virus, Nigeria too is looking to jumpstart its economic motor.
Nigeria did not suffer as much as some nations with regards to the number of cases and deaths related to the COVID virus, but its economy received a heavy blow.
Nigeria was already struggling with the impact of rock bottom oil prices and was now hit with a virus left hook that buckled her knees.
Nigeria’s real estate sector which is the 5th largest contributor to GDP had struggles in the past several years and is still slowly recovering from the 2016/17 recession.
Now that the lockdown has been eased and the economy is getting back on its feet, we will examine the outlook and condition of the real estate sector for the remainder of 2020.
Nigeria’s residential scene is different from those in the West. In Nigeria, tenants typically pay rent 1 to 2 years in advance, whereas abroad they pay monthly or quarterly, so the effects of the lockdown overseas had an immediate negative impact.
Nigeria will not feel the true hit, until late Q3 or Q4 of 2020, when many folks will have to pay up for the next coming year.
We expect that tenants will petition property owners to be lenient considering many renters lost their jobs or had their salaries slashed and have depleted their savings during the lockdown. But we also expect landlords to stick to their guns to collect as much revenue as possible — the outcome will be interesting.
Since Nigeria has a massive housing deficit (> 17 million units), we don’t expect this to change — people will still need places to live. We could see the deficit increase since companies may be reluctant to invest in the construction of more housing projects during uncertain times.
This gaping deficit is a huge anchor that is weighing down the real estate sector and is a problem that needs to see tangible solutions implemented immediately.
The commercial real estate climate also suffered under lockdown measures. With many companies embracing work from home protocols and telecommuting with the help of digital tools such as Zoom and Microsoft Teams to name a few, the need to be in the office was not as apparent.
Large corporations experienced better than expected revenues during the lockdown and it exposed the reality that physical office space is not as paramount as once thought — this could change the commercial landscape in the coming years.
Wrecking balls and cranes screeched to a halt and remain parked on the many construction sites across Nigeria — there was little activity during the lockdown, which created a ripple effect in every major city.
We expect this to pick up now and there will be a steady ramping up phase to resume stalled projects.
This sector was hit the hardest since trading and commerce were directly affected by the government lockdown enforcement. Markets were shuttered, buka joints closed, and the normal hustling hawkers were scattered few and far between.
This sector wasn’t completely crippled since the local officials could not enforce their policies everywhere, but the local and poorest residents were impacted the most by the lockdown.
This sector will be the quickest to rebound, however, since the ever-hungry and resourceful Nigerians are already steaming back full bore.
What Will Recovery Look Like Long Term?
Recovery will be slow but steady. When oil demand picks up, so too will the rest of the economy — for now anyway, and as Nigerians in the diaspora feel confident of their own financial situation, they may begin to send money home for housing projects.
Foreign investors too will soon dust off their wallets and resume investing in construction projects across the nation, we predict.
Will The Feds Help?
What is really needed is a direct injection or stimulus package from the federal government to help kick start the recovery.
Rent relief packages for office and residential tenants could span the gap and help stabilize businesses. Direct cash payments for the poorest citizens could help ease suffering and raise their confidence.
Slashing local fuel prices too would help people bounce back from the imposed lockdown.
Realistically there will not be much assistance from the government, so Nigerians will have to grind it out through these next several months to get the economy burning again and subsequently stabilize and grow the real estate sector themselves — like they always do.