In a few days, precisely on Monday, May29, 2023, Nigeria will usher in a new administration with Bola Ahmed Tinubu as President.
There are many expectations from the incoming government in the areas of economy, security, agriculture, management of our foreign debt; foreign exchange reforms, public service reforms, real estate and housing, etc.
For the purpose this write-up, the focus is on the expectations of Nigerian masses on housing because this is one of the keys to their well-being. However, before delving into espousing the agenda, it is important to review some exciting statistics and facts pertaining to Nigerian real estate.
Nigeria has a population of 223 million (United Nations – 2022) spread over a land area of approximately 923,000 square kilometres. Less than 10 percent of this land mass has formal title.
The housing stock is estimated at 10.71m units with the housing deficit said to be between 17m – 22 million units. The estimated housing requirement annually is put at 700,000 units if there is to be any chance of beginning to address the deficit. However, the annual production of houses nationwide is less than 10,000 units.
The urban population is put at 52.75 percent of the population figures and grows at the rate of 3.39 percent annually.
Mortgage facilities are basically from minimal to non-existent, meaning that most property purchases are cash-based or through other private funding means.
Home-ownership in the country is put at 23 to every 1000 Nigerians compared to South Africa where it is 69 percent and Kenya at 75 percent.
In terms of infrastructure, out of Nigeria’s 195,000 kilometres of roads, only 35 percent is asphalted. Ghana has 109,000 kilometres with 13 percent asphalted; and in Kenya, only 8 percent of the 178,000 kilometres of their road network is asphalted.
As per electricity production, Nigeria produces 4,500mw; Ghana (2500mw) and South Africa (59,000mw). Nigeria’s population far outstrips both countries Ghana (6 times) and South Africa (3 times).
Despite these obvious challenges and shortcomings, real estate contributes 5.45 percent (2021) annually to the gross domestic product (GDP) of the country.
With these statistics in mind, it is not very difficult to begin to set agenda for the incoming government. The incoming president is well versed in private sector and public sector activities having been a governor and a senator at different times.
The belief is that the harmonizing of experiences from both sectors will place him in a pole position to deliver on the many expectations of the Nigerian people.
Review of the land use act.
If there is one major impediment to the growth and lack of performance of real estate in Nigeria, it is the Land Use Act which vests the control and management of land in the state and federal governments.
The provisions of the 44-year old Act are no longer in consonance with the realities and dictates of current times and Nigerians in general. Without getting into legalese, many sections need to be reviewed.
Section 1 of the Act which vests all land in the state needs to be reviewed. Too much power has been placed in the hands of the governors, many times leading to abuse and uncertainty of title.
We are all witnesses to executive statements where a few years ago, a governor in one of the northern states woke up and announced the cancellation of all the Certificates of Occupancy titles ever issued by his state.
That was an unfortunate declaration from every perspective being that he did not even consider, at the barest minimum, the impact and loss of confidence in the title documents that were issued by his state. Add to this the numerous commercial and financial transactions possibly backed by these same C of O’s where they have been used as collaterals and which, by his simple declaration, made them worthless paper documents.
Sections 21 and 22 of the Act provide for the need to obtain Governor’s Consent before alienation. Section 28 speaks of power of revocation while Section 29 talks of compensation. These are some of the provisions of the Act that must be reviewed.
There are many more sections that are no longer in consonance with the realities of today and have contained unfair provisions from the onset. They have been short-changing Nigerians who have had to deal with the state or federal governments on land issues.
The difficulty in achieving the amendments to the Act must be tackled head on politically and diplomatically to arrive at the desired result.
The fact that many governors see land within their states as cash cows that boost their internally generated revenue has made them come up with unfriendly and aggressive policies in this regard. This has forced many owners not to seek formal ownership for their lands, resulting in what is known as dead capital.
Land is owned but without formal title cannot be used as a factor of production or used for transactions because of fear of fraud and other limitations that come with not having formal legal title to one’s land.
Successful amendments to the Act will no doubt increase and deepen real estate transactions, increase the housing stock and, in the long run, reduce the housing deficit.
Review landlord and tenant relationships laws
Another big disincentive to real estate investment today are the laws governing landlord and tenant relationships.
Many states have enacted their own laws to guide tenancies etc but more often than not it is lopsided in favour of the tenants. Add to this the numerous cases and congested courts and it makes property administration, rent recovery etc a nightmare.
We, therefore, find cases where a tenant can pay a year’s rent in advance and then engage his landlord in court for 8 years on a flimsy technicality, avoiding any rent payments and suddenly disappearing a few days to judgment being delivered.
This scenario has discouraged a lot of investors who simply divert their investments to other safer assets.
Well-balanced, firmer and fairer laws governing landlord and tenant relationships will encourage more investments in real estate and even, in effect, facilitate the much desired monthly payments of rents.
Infrastructure and services.
We had, in the earlier paragraphs of this write up, given out data on population, land size, electricity, road network etc. We pray the incoming administration to be deliberate and strategic about infrastructural development and services.
The country has an urban migration rate of 3.39 percent annually. This migration is not only economic, but also a function of the lack of infrastructure and services in the rural areas. The fact is that the absence of infrastructure and services in the rural areas also adds to the inhibition or low economic production both at macro and micro levels.
Stemming urban migration will reduce the pressure on urban housing which will in effect reduce the cost of accommodation making it more affordable in the long run. A lot more emphasis should be placed on PPP & BOT models for the provision of infrastructure and services.
Long-term affordable mortgages.
In meeting the yearnings of Nigerians to have their own homes, the government has to strengthen the mortgage industry. Federal Mortgage Bank of Nigeria (FMBN), The Nigeria Mortgage Refinance Company (NMRC) and so many other primary mortgage banks need to be strengthened financially and legally. A total review of their operations should be undertaken.
A dynamic mortgage industry is possible only with an economy that is buoyant, where there is a penchant for savings. Savings provides the pool for long term funds that can be used for mortgages.
Continued Research into Cheaper Local Building Materials.
One of the means – in the absence of easy access to mortgages – by which Nigerians become homeowners is to gradually develop their own properties over a number of years.
Whilst this has achieved marginal success at about 25 percent, we are firmly of the belief that this figure can be inched up gradually by the continued funding of research into cheaper local building materials.
The Nigerian Building and Road Research Institute (NBRRI) has done a fair amount of work in this regard. Research results should be made public and more accessible.
Accurate housing data
As stated earlier, the estimated housing stock in Nigeria is 10.71 million units while the housing deficit is estimated at 17 million – 22 million units. A lot more work needs to be undertaken so that the types of housing, location, needs etc by the various age groups can be easily deciphered.
This will enable proper planning, zoning and even the possibility of government involving and incentivizing private sector participation so that real estate developers and developments are focused on areas of need and types of accommodation required.
The success of this will help greatly reduce the deficit currently being experienced.
In concluding, it is clear that the incoming administration has its work cut out for it in many sectors of the economy and real estate in particular.
What we have advocated is only a fraction of what needs to be done in the real estate space to unleash the potential of the sector and possibly double its contribution to the Gross Domestic Product (GDP).
What is needed now as always is an enabling environment for the economy and for free enterprise to thrive. With these, a lot of things will fall in place.
We believe that the journey towards actualizing the real estate hopes, expectations and aspiration of Nigerians to, at least, live in decent accommodations and eventually own their own homes will be given priority as the new administration takes charge.
Chudi S. Ubosi, FNIVS, is the Managing Partner, Ubosi Eleh + Co – Estate Surveyors & Valuers – and former President, FIABCI, Africa Region.
