With respect to the economy growth of Nigeria in the first quarter of 2014, Nigeria Real Estate Investment Company – MCO Real Estate (MCORE), takes a look on how the Nigeria Economy has fared so far.

In a report titled “Lagos Real Estate Investment Report Q1 2014”, MCORE takes a good look at the Nigeria’s economy before, now and after to see how the sector has been able to perform in the first quarter of the year and how it currently stands.

On the outcome of the GDP rebasing exercise which leaves Nigeria’s economy as the largest in Africa and attaining a growth increase at 8.2% from her previously reported 7.67% in 2013 late last year, MCORE looks at the hopes of this exposure leading to greater inward investment and subsequent greater improvement in the living standards of those at the bottom of the pyramid.

Looking on, MCORE report, focused on the Nigeria Real Estate market in general and the Lagos State market in particular believes the real sector will continue to grow, innovate and adapt, pinpointing the retail commercial office market as a strong area of attraction for rising young urban demographic groups. Further reports shows that inflation continues to retain its downward trend although with a slight uptick of 7.8 per cent in March compared to 7.7 per cent in February. However, eternal reserves have continued to come under sustained downward pressure with a decline from US$42.85 billion at the end of December 2013 to US$38.1 billion as at the end of April 2014.

According to MCORE’s report, the Central Bank of Nigeria’s ongoing monetary tightening policy coupled with a flight of international capital out of Nigeria, means that there is less money in the economy. This equates to rising interest rates from the few banks willing to lend out scarce capital that is in high demand. However, the long term picture for Nigeria economy remains very attractive.  This because, international corporates with a long term perspective are investing in the country and there is a rising consumer class leading to a need for modern retail space, commercial office space and residential housing. The market is very much driven by a growing local economy as opposed to one driven by international requirements.

Lagos being the capital city, continues to improve its infrastructure and service offerings the emerging rise of great structures not only on the Island but also on the mainland. This is reflected in rising land costs fundamentally driven by the demographics of a growing and more affluent consumer base and improved existing and new infrastructure. Now there is the increased demand for prime land for commercial office development which is reflected in the 56 per cent increase in land values in Victoria Island within one year alone from N244,000 per square metre as at April last year to N381,169 (US$2,242) per square metre as at March this year.

The low income sector of the housing market maybe a worry to the residential sector as demand is huge while supply of low income housing of any decent standard remains a trickle but with the Nigerian Mortgage Refinance Company incorporated by the federal government on June 24 2013, aimed at creating development of the residential mortgage market, this issue looks to be trashed out. The Nigerian Mortgage policy will enable renters own their own homes.

With the recent Central Bank policy of quantitative tightening in order to keep inflation under control, accompanied by the policy of Naira stability, Nigeria is set to remain the most favourable destination for retail in Africa driven by the fundamentals of an increasing population, rising real wages from increase in GDP per capita and growing urbanisation.

2014-05-04