In 2024, the National Bureau of Statistics (NBS) commenced efforts to rebase the Nigerian economy. The rebasing would impact how the Gross Domestic Product (GDP), which accounts for total economic activities, and the Consumer Price Index (CPI), which measures inflation, are both calculated and measured.
The last time the economy was rebased was in 2014
In simple terms, rebasing the economy essentially provides an opportunity to account for more recent economic activities and revenue streams that have not been previously captured into the pool. In addition to its potential to inform policy-making decisions at government levels and strategic planning for future development, it could relaunch Nigeria, its place, as the largest economy in Africa, following our recent slip on the pecking order as a result of currency devaluation and global economic headwinds.
Some of the early insights from the national statistics bureau on the back of the rebasing show that real estate has emerged as the third largest economy in Nigeria, only after crop production and trade. The sector is projected to reach $2.61 trillion by 2025 and a market size of $3.41 trillion by 2029. While these numbers show a sector that is on an upward trajectory, they may not exactly tell the full story.
Nigeria’s population continues to rise at more than 2.5 percent annually, creating the potential of a population bulge that could hit more than 400 million by 2050.
This burden with such exponential growth is that social services, such as real estate and housing, must also grow at the minimum, at equal proportion. Today, Nigeria’s housing deficit is estimated at 28 million, with 700,000 homes needed annually to cover this gap—this shows that while the real estate sector may be recording impressive numbers, we are nowhere close to where we should be as a nation.
The Nigerian real estate sector is currently hobbled by a number of existential challenges, and despite public and private efforts to address these challenges, they have at best remained recalcitrant like a stubborn demon. One of these major challenges is the land use act, which is the legal and regulatory framework that guides land ownership in Nigeria.
The land use act has itself become the problem it was envisioned to address. Real estate investors and private developers have to pray to surmount the bureaucratic bottlenecks that have become associated with land acquisition in Nigeria.
These barriers to access involve multiple layers of government approvals, permits, and licenses, and placing total control in the hands of the government has shut out investments that could have benefited the sector. Why should any investor put up with the regulatory bottleneck in Nigeria when they could go to other countries to invest?
In addition to the land administration challenge is the challenge of rising inflation and a low purchasing power. Nigeria’s inflation rate rose for the fourth consecutive month in December 2024 to 34.80 percent, according to the statistics bureau. In 2024, Nigeria’s inflation hovered between 32-34 percent, and this has had an impact on the cost of construction materials and also the ability of consumers to afford real estate; because their purchasing power and the lack of disposable income have been greatly eroded.
Similar to the rise in inflation is the interest rate, which has also remained significantly high. In a bid to bring down inflation, the monetary policy authority, which is the central bank in this instance, has continued to pursue a tightening policy, increasing the monetary policy rate. In November 2024, the interest rate was kept at 27.5 percent, reflecting inflationary pressure in the country.
Although the conventional wisdom of the monetary policy committee is in order, the downside to the sky-high interest rate is that it hampers new investment in real estate and other critical sectors. This also has a direct impact on mortgages and the cost of borrowing for ordinary Nigerians; the high interest rate discourages mortgage lending and makes home ownership beyond the reach of many Nigerians.
Despite this cloud hanging over the real estate sector, there is still a lot that gives reason for optimism and hope. The federal government has renewed its efforts on low-cost housing schemes for working people; the government is also projecting a 15 percent inflation target for 2025. If this target is achieved, it would also translate into a lower interest rate for business and attract new investment.
Other critical efforts that must be made in 2025 include the need for the government to set in motion its campaign commitment to overhaul the land administration process, streamline it in a way that lowers costs, eliminate delays, and make it more efficient. This would also open up the sector for new investment and make the operating environment considerably friendlier for businesses and investors.
Public and private sector partnership is also key to closing the housing gap; the government must partner with players, like Dukiya Investments, to close the housing gap. In an arrangement, the private sector brings the capital and technical expertise, while the government provides an enabling environment for the new investment. This sort of collaboration would improve the number of housing units that are delivered annually and get Nigeria closer to closing the deficit.
Social services, like housing, are critical to boost the economy; the impact of a strong and vibrant real estate sector is immense. It does not only have the ability to engineer economic growth; it can help to close the housing gap, improve government revenue, and deliver long-term prosperity to the people. This effort must begin in 2025.
Lukman Shobowale is the Co-founder of Dukiya Investments
