Nigerian conglomerate UAC plans to raise 20 billion ($65.4 million) naira this year through a bond sale to refinance short-term borrowings at its real estate subsidiary, where losses have widened, group CEO Abdul Bello said on Thursday.
Bello said the company would restructure its real estate unit UPDC, which is suffering from a current oversupply in the market coupled with a drop in Nigerians’ purchasing power.
Nigeria has just emerged from its worst recession in a quarter of a century while consumers are struggling with double-digit inflation.
Bello told an analysts’ call that the harsh economic conditions were still affecting the housing market and that sales at UPDC fell 20 percent in 2017.
UPDC reported on Wednesday that its losses widened to 3.05 billion naira in 2017 from 1.23 billion the previous year. The group reported a pretax profit of 3.25 billion naira for 2017, but this was down 61 percent.
“We would use 2018 to refinance a short-term facility. We intend to have this business restructured,” Bello, who took over as chief executive this year, said. “We see long-term growth supported by a huge housing deficit.”
Nigeria, home to more than 180 million people, suffers from long-term a housing shortage. Few banks offer long-term mortgages as high interest rates make them unattractive for buyers while lenders worry about the default risk.
Officials have said Nigeria needs to build around 17 million houses annually to catch up with a fast-growing population which is set to more than double to 400 million in 2050, according to U.N. estimates. Nigeria will be then the third most populous nation after China and India.
UPDC cut its debt to 19.3 billion naira in 2017, down 15 percent from the previous year.
Shares in UAC, which has interests in foods, logistics and livestock feeds, rose 0.58 percent on Thursday to 17.30 naira while UPDC traded flat at 3 naira.
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