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Real Estate

Drop in Real Estate Investment Affecting Nigeria’s Job Market

Amidst a large and growing population, Nigeria has a high unemployment rate which increased from 18.8 percent in the third quarter of 2017 to 23.1 percent in the third quarter of 2018, according to the National Bureau of Statistics (NBS).

Contrary to what obtains in most economies, a growing population in Nigeria means more citizens are getting poorer. A recent Bloomberg report quotes the International Monetary Fund (IMF) as saying that the country’s population is growing while gross domestic product per capita is shrinking, adding that the trend would continue until at least 2024.

But this trend could be reversed or halted if more investment is encouraged and made in the country’s construction and real estate sector, analysts say. The construction industry, they note, has high growth prospects, predicting that by 2020, the country alongside India will enjoy higher growth rates than notable nations like China.

According to a 2012 report by Business Monitor International, investment inflows into Nigeria’s construction industry are expected to reach $9.4 billion (about N1.5 trillion) by 2021, giving the industry very bright prospects and outlook, especially in the areas of job creation and wealth generation.

However, these bright prospects are being eroded by heavy debt burden arising from unpaid contract jobs by the federal, state and local governments which runs into hundreds of billions of naira, discouraging fresh and increased investments in the sector.

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Solomon Ogunbusola, former president, Federation of Construction Industries (FOCI), affirms that despite the prospects in the sector, investment in the sector remains very low because industry players are operating under serious constraints including high interest rate on bank loans.

Ogunbusola notes further that low investment in the sector means heavy job loss, explaining that even N100 million invested in the construction sector has the capacity to create jobs for over 100 workers besides the multiplier effect of job creation.

Paul Onwuanibe, CEO, Landmark Group, agrees, pointing out that millions of jobs are held back by low investment in the real estate sector where the construction of one square metre of real estate space creates three jobs.

Onwuanibe lamented that in spite of the growth potential coupled with opportunities in the sector, investment is still very low for reasons that ranged from unfavourable tax system to long, costly and cumbersome property registration and titling procedures.

“Some quality discussions one has had in the last six to eight weeks show that investors are ready and willing to come into this country to invest, but everybody is looking to see how things get better and easier. We are looking at $2-3 billion investment that is waiting to come into Lagos State alone,” Onwuanibe said.

“In real estate, that will make a huge difference. It is estimated that every one square metre space of construction creates employment for three people. So, when there is a real estate activity on 1,000 square metres of real estate, 3,000 jobs are created,” he added.

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Onwuanibe argued that if an investor has $1 billion, he could build 200 housing units which translate to several thousands of jobs to be created “and those who are employed will be spending money they earn in the economy and the economy will be growing”.

“It is understandable that the government here is still emerging and so needs money upfront, but it is important not to kill the future by over-taxing and punishing businesses,” he warned, contending that Nigeria could change its unemployment and poverty story by making simple policy changes.

Only recently, Steve Hanke, a renowned professor of Applied Economics at Johns Hopkins University in the United States, released the Misery Index 2018 which ranked Nigeria as the 6th most miserable nation in the world with a Misery Index score of 43.0.

Hanke explained that Misery Index score for any country was simply the sum of unemployment, inflation and bank lending rates minus the percentage change in real GDP per capita. This means that unemployment is a major source of misery and poverty both of which are prevalent in Nigeria.

Nigeria was recently adjudged the headquarters of poverty-stricken people in the world and, according to the World Poverty Clock, six Nigerians fall into extreme poverty every minute.
The Bloomberg report expressed the fear that if this current trend persists, more than 120 million Nigerians, or 45 percent of the population, will be living in extreme poverty, that’s less than $1.90 a day, by 2030.

Source: By Chuka Uroko

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