What FG’s N1.45trn budget for infrastructure means for real estate, economy
The federal government’s N1.45 trillion allocation to infrastructure in the 2022 budget estimates which President Muhammadu Buhari presented to the National Assembly last week Thursday means much for Nigeria’s roads, real estate sector, and the economy, experts have said.
The N1.45 trillion allocation, which represents 8.9 percent of the N16.39 trillion budget, is the second-highest, coming after defence and security which got N2.41 trillion, about 15 percent of the budget. It is followed closely by education which has N1.29 trillion, representing 7.9 percent of the total budget.
According to the experts, Nigeria has an infrastructure deficit valued at $3 trillion, requiring about N100 billion annual investment for the next 30 years to bridge, citing the Nigerian Infrastructure implementation Master Plan (NIIMP).
The world bank estimates that every 1 percent of GDP that is invested in infrastructure comes along with an additional 1 percent increase in the GDP level and property prices tend to rise along with GDP growth, meaning that Nigeria stands to gain a lot more from this budget allocation.
With the N1.45 trillion, therefore, experts hope that the deficit would be reduced significantly and that would mean improved condition of the roads that could connect more communities, thereby encouraging more investment in real estate.
“If budget discipline is anything to go by and the government chooses to be disciplined in implementing the 2022 budget, the impact will be much. Apart from improving the state of the roads, it will lead to an upward review of property prices which will, in turn, encourage more investment,” said Olisa Ebigwei, CEO, Soe Properties, a Lagos-based real estate investment company.
Damola Akinsulire, managing director, Alpha Mead Development Company, agrees, adding that the decision to spend that huge amount of money on infrastructure means a deliberate plan to decongest cities and connect more communities just as it will open up new town development opportunities.
“This means improving the transit premium of these locations and making them attractive for real estate investment. So, in the short term, I see an increase in demand for land assets in key locations witnessing major infrastructure development,” he said.
He explained that infrastructure represents about 50 percent of the construction cost for property developers, meaning that if the government takes off the burden of providing infrastructure, it will not only lead to improved land values but also compel developers to review their house prices downwards towards affordability.
“I see opportunities for more public-private partnership (PPP) investments because more investors will be encouraged to move to the hinterland to develop houses; I also see a lot more PPP arrangements playing a key role in managing the infrastructure deficit,” he said.
Paul Onwuanibe, CEO, Landmark Group, developers of Landmark Village in Lagos, is of the view that if the government focuses on developing pieces of infrastructure such as energy and power, giving rise to electricity, petroleum, and gas pipelines, they will add value to the property market.
He added that the provision of pipe-borne water, enhanced security, and roads which will enable tourism to bring forex inflow to the country, and railway system, leading to improvement in service in areas where entertainment is a big industry, will all add value to the property market and, by extension, to the nation’s economy.
On an incremental basis, budgetary allocation to infrastructure in Nigeria has risen from a little above N200 billion in 2016 to N1.45 trillion in the proposed 2022 budget. This is very significant.
But Nigerians say it is yet to be seen where these increases have gone into, given the poor state of most federal roads, especially in the South-Eastern part of the country. Babatunde Fashola, minister of Works and Housing, however, explained recently that, in the last six years of the Buhari’s administration, infrastructure spend has yielded 13 kilometres of roads at various stages of construction, rehabilitation, and maintenance.
The minister, who spoke at ‘An Evening with the Minister of Works and Housing’ hosted by the Lagos Business School, assured that all the roads and other infrastructure projects, including the Second Niger Bridge, would be completed within the life of the Buhari administration.