Investing in real estate: A shield against naira volatility

The relentless depreciation of the naira has left Nigerians grappling with a crippling economic reality. With inflation soaring to 34.8 percent and the currency losing more than 40 percent of its value against the dollar, protecting one’s wealth has become a battle against time.

For the average Nigerian, the days of relying on savings or traditional investment vehicles are over. In this financial climate, real estate is not just an investment—it’s a necessity.

Real estate: A haven in a collapsing economy

Among the basic necessities of life, shelter comes third, behind food and clothing. It is essential not only for survival but also for a sense of stability and security. While cash savings are eroded by inflation, property values continue to rise, offering Nigerians a rare beacon of stability. Over the last five years, property prices in urban centres like Lagos and Abuja have surged by more than 50 percent.

A prime example is Lekki, where a three-bedroom apartment that cost ₦50 million in 2019 now demands ₦300 million—a stark illustration of real estate’s role as a hedge against a collapsing currency. As inflation pushes the cost of living skyward, rental prices inevitably follow, ensuring that property owners see their incomes rise even as the value of the naira shrinks.

Real estate’s unquestionable role in Nigeria’s economic future

The real estate sector’s growing significance is not merely anecdotal; it’s backed by cold, hard statistics. In the first quarter of 2024, real estate contributed 5.20 percent to Nigeria’s GDP, surpassing even crude oil and natural gas in importance.

This shift is indicative of a broader trend: the property sector is emerging as the cornerstone of the nation’s economy, a vital engine that cannot be ignored. With the naira’s value fluctuating wildly, Nigeria’s future will depend heavily on its ability to harness the potential of real estate.

Why real estate is superior to treasury bills and bonds

While treasury bills and bonds have traditionally been safe havens for investors, their appeal has diminished in the face of Nigeria’s soaring inflation rates. Treasury bills, which now offer yields of around 18 percent, are barely keeping up with inflation, which is currently at a staggering 34.8 percent.

Bonds, too, suffer from similar limitations, offering nominal returns that do little to preserve real purchasing power. In contrast, real estate continues to appreciate, providing a far more reliable hedge against inflation.

Real estate not only offers consistent value appreciation but also tangible returns through rental income, making it a far superior investment in an environment where inflation relentlessly devalues other financial assets.

The fact is, while treasury bills and bonds may preserve capital, they cannot grow wealth in an inflationary environment like real estate can. Property ownership provides not only an asset that appreciates but also a source of recurring income, positioning it as the most effective investment for Nigerians looking to safeguard their financial future.

The rental market: A lifeline for the average Nigerian

For those unable to afford outright property purchases, the rental market is a lifeline. Cities like Lagos and Abuja are teeming with opportunities for short-term rentals, where well-placed properties generate substantial monthly income. Airbnb rentals in Victoria Island and Ikeja can yield anywhere from ₦200,000 per day to ₦4 million a month.

For those with more modest properties, traditional rentals have seen a 30 percent increase in rates over the past three years. Real estate is no longer an investment reserved for the wealthy—it’s a vehicle for financial survival.

Challenges, yes, but not impossible to overcome.

Admittedly, real estate comes with its own set of challenges—high initial costs being the most prominent. But this is not an insurmountable obstacle. Flexible payment structures and mortgage options are making property ownership more accessible than ever.

With government policies slowly shifting towards greater attention to housing, real estate is poised for even further growth. The key is seizing the opportunities now, before the market becomes even more saturated.

Conclusion: A strategic imperative for financial security

In a country where economic volatility is the norm, real estate offers the only true shield against the unpredictable forces of inflation and currency devaluation. The growing significance of property ownership as a long-term strategy cannot be overstated.

For Nigerians, the question isn’t whether to invest in real estate, but rather, how long they can afford to wait.

With the naira in freefall and inflation showing no signs of slowing, property is not merely a safe investment—it’s a critical lifeline. It’s time to invest wisely, act decisively, and protect what’s rightfully yours.

Dr Tosin Fatukasi, MD/CEO Lomel homes limited, a Lagos-based real estate developer of Gold-stripes court Lekki Ajah.