In its traditional way of doing things, the Lagos State government recently signed into law an ambitious N3.366 trillion budget for 2025 after it was reviewed and passed by the state’s house of assembly.
The large-size budget which is, arguably, bigger than the budgets of the five South Eastern states put together, comes with strong leaning on physical expenditure which cornered 62 percent of the budget.
Babajide Sanwo-Olu, the state governor, noted at the signing of the budget that it is structured around five key pillars designed to ensure economic stability, environmental stewardship, and social equity.
He listed those pillars as Infrastructure Sustainability, Economic Diversification, Social Inclusion and Human Capital Development, Environmental Sustainability and Governance and Institutional Reforms.
Analysts are of the view that the lion share of the budget given to infrastructure is not surprising considering the need to open up the state in order to take care of its high urbanization rate and expanding population now estimated at 20 million.
According to the analysts, the huge allocation to infrastructure development bodes well with the state’s drive to provide more housing for the residents just it is expected to support and ease private sector efforts in that regard.
Only recently, the state governor announced plans by the state government to open up the hinterland with the construction of several kilometres of roads in the 20 local government areas and the 37 local council development authorities (LCDAs). This is expected to aid developments in those areas.
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Lagos is a difficult city for living and working. The stress and misery level in the state is quite high, all because of its inadequate and collapsed roads infrastructure. Commuting on most of its roads is a nightmare that makes life miserable for users of those roads.
This is why analysts note that, depending on the revenue performance and disciplined implementation of the budget, the priority on infrastructure holds out great hope for housing delivery in the state.
Infrastructure financing gap remains a critical global challenge for sustainable development and economic growth in developing economies. In Nigeria, the situation is dire and the country’s low infrastructure stock is said to be the main reason for the low performance of its housing sector.
Infrastructure deficit is a national problem and, according to Emmanuel Odemayowa, MD/CEO, Cavalli Business and Investment Group, the value of Nigeria’s total infrastructure stock, which includes road, rail, power, water, telecoms, airports and seaports, represents only 35 percent of the country’s GDP.
“This is far below the level of peer emerging markets where the average is 70 percent,” he said, pointing out that to optimize the contribution of all these sectors, “Nigeria needs to invest $3 trillion in infrastructure over the next 30 years.”
Adetokunmbo Ajayi, CEO, Propertygate Investment and Development Company, agrees that infrastructure is the reason development is not happening in some parts of the country, including areas where land is available and ‘cheap’.
In Lagos particularly, Ajayi noted that there were many places that developers could have acquired land for development purpose but they can’t because the land is not accessible due to poor infrastructure.
“In fact, there are developers who have gone ahead to do development in places that are far from the city centre, hoping that people would come, but nobody is coming because people would rather be tenants than buying property in places that are very far from their work or business area,” he said.
“I have seen cases of people abandoning their houses and moving closer to become tenants because they don’t see the essence of living in one’s house if one is spending an average of 7 to 8 hours commuting as a result of bad roads,” he added.
What Lagos budget priority attention on infrastructure means, therefore, is that more developers would be encouraged to do developments in the hinterland while more home seekers would also be encouraged to buy homes outside the city centre.
This is expected to be a win-win situation for both the state government and the residents. More residents owning homes means higher social security and more revenue for the state coming in form of tenement rates and personal income tax.
It is also expected that this infrastructure dimension will help to decongest certain locations and open up new town development opportunities, thereby improving the transit premium of these locations and making them attractive for real estate investment.
In the short term, there will be demand for land assets in key locations for major real estate developments. There will be opportunity for public private partnership (PPP) investments leading to a reduction in the cost of infrastructure estimated at 30 percent construction cost.
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