Development Prospects in Nigeria

GUEST COLUMNIST Anthony Aihie, Architect, is CEO of design union, Nigeria.

He writes for Global Homes from Lagos Nigeria. Design Union consists of the international award winning architecture firm, design union consulting LLC and design union developing Ltd, a high-end real estate development company.

 

Background

Nigeria, with an estimated population of 150 million, is the most populated country in Africa.

The mainstay of the Nigerian economy is oil being the 7th largest producer of oil and 2^nd largest producer of Gas in the world. The country has witnessed an unprecedented growth since the return to democracy in 1999. The Obasanjo administration took many bold steps in reforming the economy as well as started the fight against corruption with the establishment of the Economic and financial Crimes Commission (EFCC) and strengthening the judiciary of subsequent administrations. The results of government efforts are showing as the country has enjoyed an average GDP growth of 8% over the past 12 years. The country secured the largest debt relief ever with the forgiveness of $18b worth of Paris Club debt and though the debt profile is rising again due to liberal spending of subsequent administrations, efforts are being made to bring it under control.

 

Other aspects of the economy have experienced aggressive growth especially telecommunications. The telecoms industry is believed to have added over 50 million new lines and created thousands of new jobs. The banking industry was consolidated in year 2005, resulting in 25 stronger banks with minimum shareholders funds of $200m. Five Nigerian banks are now ranked in the top 100 banks in Africa and top 1000 worldwide.

 

A consequence of the economic turnaround is the increase in the middle class population and purchasing power of Nigerians. Foreign investments have thrived as seen in the successes of MTN(Telecoms), Virgin Nigeria (Airline), Actis (Investors), Citibank, Standard Chartered & Stanbic (Banking), GE (Power) among others.

 

Development

Nigeria is an underdeveloped country infrastructurally. Opportunities in the country represent some of the most lucrative anywhere in the world today. There is need for international standard airports, toll roads and bridges, shopping centers, markets, ground transportation terminals, water transportation terminals, entertainment venues, hotels, office and corporate buildings, educational buildings and hostels, travel plazas/convenience facilities, housing (there is an estimated 12 million units shortage in the Nigerian housing market a potential $5 trillion market). There are even opportunities in developing and maintaining public buildings – libraries, courthouses, prisons, hospitals and the like.

 

 

Statistics/Opportunity indicators

• The average Nigerian homeowner is used to developing his house with 100% equity
• Housing and corporate rentals are paid for, 2-3years at a go in advance in the first instance and whole yearly afterwards
• The average ‘serviced’ 180 sq. meter 3-bedroom apartment in the choice areas of Lagos and Abuja will cost $30,000 per year for rent. The upper end of the market (250 sqm ‘luxury’ apartments can go up $75,000 per year!
• The average working class 3-bedroom apartment will cost $4,000 in Lagos mainland and $2,000 as one gets further outwards.
• Office space in Victoria Island, Lagos rents for $140 to $300 per sq. meter per year. And businesses are expected to pay two full years in advance. An extra 15 to 20% is usually charged for services provided by the Landlord (security, standby power and in some cases air-conditioning). Office space in Lagos Island rents for between $70 to $110 per sq. meter.
• Shop space in the new shopping mall, The Palms, rents for over $450 per sq. meter. The development was fully subscribed on completion in December of 2005.
• Locally available mortgages run interest rates between 19% and 22% per annum. Tenure is rarely more than 10years.

 

Risks

The real risks of doing business in Nigeria is exaggerated by the focused reporting of the foreign press on negative news in the country. The result of this continuous damaging exposure is a pre-biased view of what to expect in Nigeria.

Contrary to many reports, most of Nigeria is safe to live and work in. There are some trouble areas in the Niger Delta oil cities where kidnappings are now a commercial activity and lately, Borno State in the far north where the ‘Boko Haram’ bombings are rife. Within most cities, few areas might be considered ‘unsafe’ due to the likelihood of mugging or petty theft. But these areas are usually well known and for the not-too –adventurous, staying out of these areas will ensure safety for the most part.

Electricity Power supply in the country is often interrupted by black-outs and this has made standby-power generators a necessity in all buildings. Most buildings have standby generators and one quickly gets used to the frequent changeovers.

 

Foreign Investors in Nigeria

For foreign investors in Nigeria, it is important to find reliable local partners to help the familiarization of the investor and ensure logistical success. The opportunities are enormous, competition is low and margins are high. However, it takes discipline, focus and patience as well as a good sense of humour to succeed in Nigeria. When success comes, it does in indices that will sound too good to be true to others in the developed world.

 

 

Below are two successful recent developments in Lagos, Nigeria.

Ocean Parade residences.

 

 

 

South atlantic petroleum towers, Victoria Island, Lagos