Housing News

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N1.07trn to Hit Money Market This Week

Liquidity in the Nigerian money market is expected to increase as N1.07 trillion inflows from combination of Treasury Bills maturity, Open Market Operation ( OMO) and Primary Market Auction (PMA) hit the system this week.

A breakdown of the inflows show that N536.3 billion will come from Treasury Bills maturity, N356.5 billion from OMO and N179.8 billion from PMA.

The money market last week recorded total inflow of N347 billion from matured OMO bills. However, the Central Bank of Nigeria (CBN) auctioned and sold OMO bills to mop up N527 billion, which caused a spike in average money market rates by 2,011 basis points.

Treasury bills closed on a negative note. Yields across the curve increased marginally by 1 bps on the average to 13.40 percent from 13.39 percent the previous day, according to analysts at FSDH research, an arm of FSDH Merchant Bank Limited.

Yields on medium and long term maturities increased by 4bsp, while the yields on the short- term maturities declined by 4bsp.

Increasing VAT is Not The Ultimate Solution to Nigeria’s Revenue Problem

Nigeria’s finance Minister, Zainab Ahmed, recently admitted that Nigeria has a revenue problem. That was a euphemistic method of describing Nigeria’s current predicament.

Since 2015, national expenditure has doubled but the nation has continuously failed to meet revenue targets, necessitating the need to incur debt to meet the government’s obligations.

The reasons for Nigeria’s declining revenue are not farfetched. Nigeria derives the bulk of its government revenue and foreign exchange earnings from oil exports. However, the inflow of petrodollars has steadily declined in recent years owing to a fall in the price of crude oil from a peak of $113 per barrel in 2012 to around $60 in 2019. A situation which has resulted in the inability of the government to meet revenue targets.

To make up for the shortfall, the government has attempted to increase revenue generated from taxation, with the number of taxpayers doubling since 2015. Nevertheless, there remains a gaping hole in the nation’s coffers necessitating the need for heavy borrowing to make up the revenue shortfall.

However, Nigeria’s revenue shortfall is only half of the problem. The state of the government’s expenditure also leaves more to be desired. Currently, the government expends most of its earning on debt servicing with data from the Debt Management Office (DMO) revealing that 60 percent of government’s revenues goes into debt servicing. What is left goes into public administration, particularly paying salaries of public servants and government employees. It is therefore not difficult to deduce that not only does Nigeria have a revenue generation problem, it has an equally seriously problem with expenditure management.

It was therefore unsurprising that last week’s announcement of a proposed increase in the Value Added Tax (VAT) rate from 5 percent to 7.5 percent has been met with condemnation. While the federal government’s desire to increase the VAT rate is understandable, given that Nigeria not only has one of the lowest VAT rates in Africa, but also one of the world’s lowest ratios of tax to GDP; increasing the VAT rate in current circumstances is illogical at best.

In an economy which still grapples with the aftereffects of the recession it suffered in 2016, as well as spiralling unemployment and a low growth rate, increasing taxes is counterproductive to economic growth.

Typically, nations struggling with low economic growth and other forms of macroeconomic pressure tend to reduce tax rates in order to spur production and boost consumption, Nigeria instead has done the opposite. By increasing the VAT rate, the government is directly increasing tax burden on companies and consumers, thus reducing disposable income available for consumption of goods and services. This is far from ideal for the growth of the economy.

In addition, contrary to the rhetoric emanating from the government that the increase in VAT has no effect on poor people, the VAT is a regressive tax which affects the poor more than it affects the rich. Basic commodities including food, transportation etc. will invariably become more expensive, with the severest effects suffered by the nation’s poor. In a nation already adjudged the poverty capital of the world, a policy which results in higher cost of living should be the last on the government’s agenda.

Therefore, rather than increase the VAT rate or introduce new ones, the government’s priority should be improving tax collection. Currently, Nigeria ranks as one of the nations with the largest VAT gap in Africa. This implies that the government currently does not collect as much VAT as it should lends credence to the opinion that the focus should be on improving tax collection, not increasing rates.

There is an urgent need to improve the nation’s tax collection system such that the informal sector is adequately captured while also expanding the nation’s tax base to cover more taxable persons.

Furthermore, rather than increase the VAT rate, the government should be focused on addressing structural deficiencies in the macro economy, as well as improving the ease of doing business across the nation. Both acts will help to engender economic growth and ensure the successes of businesses, two scenarios which will expand the economic pie and result in higher tax revenues to the government, without destroying the spending power of citizens and bottom lines of businesses.

Also, perhaps there is a need to drastically reduce government expenditure.

In summary, Nigeria has a revenue problem. However, there are no short-term solutions to this problem. Increasing taxation without addressing the underlying fiscal and structural issues might increase government revenue in the short run but will ultimately render the Nigerian people and nation worse off in the long run.

Source: Businessdayng

Council To Deliver Modular Homes on Rooftops

A London council has agreed a programme to deliver modular housing on rooftops in the borough.

Southwark Council’s cabinet resolved on Tuesday to build upward extensions on existing blocks, with residents of the top floors to remain in their homes.

To minimise opposition from people living in affected blocks, the authority has put together a set of “rooftop development principles”.

It will crane in factory-built homes to keep the development process as short as possible and give first refusal on the new units to tenants living directly below them.

And it has promised to carry out improvements to the existing blocks, without charging leaseholders for new roofing, lifts or landscaping.

In an opinion piece for Inside Housing, Leo Pollak, cabinet member for social regeneration, great estates and new council homes at Southwark Council, said: “Councils have traditionally been reluctant to take on rooftop housing at any scale – the anxieties many residents might feel about construction and additional load above their heads could be hard to overcome, leaseholders might challenge the detail of any costs attributable to the development, the numbers of new homes on scheme wouldn’t justify the use of officer time, and so on.

“Southwark are taking a different approach to rooftop housing, recognising both the caution and consideration needed in making a credible offer to residents, but also the enormous potential of upward extensions to provide hundreds (if not thousands) of high-quality, durable new council homes on top of existing blocks.”

Leaseholders will also be offered the chance to purchase a share of one of the new homes above them, with no rent paid on the part they do not own.

Officers are set to start exploring which of the council’s blocks could be suitable for upward extension, while the council is also developing a rooftop design guide.

Southwark Council will attempt to apply the principles to its existing rooftop schemes – with 44 new homes under construction at the Chilton Grove development using traditional building methods.

Work is also due to start shortly on another 28 rooftop homes in the borough.

Source: Insidehousing

WMCA Enters 4,000-Home Partnership With Developer

The West Midlands Combined Authority (WMCA) has struck a deal with Lovell Partnerships, which will see the house builder deliver 4,000 homes over eight years

It will include a joint venture with 21,000-home housing association WHG to build a series of schemes across the region.

West Midlands mayor Andy Street said: “This ground-breaking partnership with Lovell will help us to address these challenges by bringing together their expertise with the WMCA’s powers and resources to build more than 4,000 homes on former industrial land.

“This way we can unlock more brownfield land for homes and jobs and, just as importantly, protect the precious greenbelt land at the same time.”

He said regeneration expert Lovell had already brought forward stalled housing sites, including in the Black Country where there are high levels of brownfield land.

Schemes in the new deal include 225 homes on a dozen infill sites owned by Sandwell Council and a 283-home development in Walsall.

Stuart Penn, regional managing director at Lovell, said: “Lovell Partnerships are delighted to be the first house builder to enter into a pioneering partnership with the WMCA to unlock housing development on stalled brownfield land.

“By combining our industry expertise and local knowledge, with a willingness to think innovatively, we will unlock significant areas of brownfield land for much-needed housing development.

“Our shared commitment is to deliver high-quality, multi-tenure communities at ‘scale and pace’ while ensuring we leave a lasting legacy everywhere we work.”

More than 14,500 homes were built in the West Midlands in 2018.

WMCA has a £350m housing deal with the government to oversee development of 215,000 new homes by 2031. Ministers handed the combined authority a £41m payment as part of the deal last month.

Mike Bird, portfolio holder for housing and land at the WMCA and leader of Walsall Council, said: “We believe this partnership with Lovell will be highly effective in speeding up the supply of land, predominantly brownfield, for development.

“It will help deliver attractive schemes that ultimately give everyone the opportunity for a decent home and job.”

Source: insidehousing

The Economic Advisory Council (Eac)

The Federal Government of Nigeria announced the members of the EAC on September 16, 2019. The new body which replaces the existing Economic Management Team (EMT that was headed by the Vice President) is to be led by Professor Doyin Salami as Chairman, Dr. Mohammed Sagagi – Vice-Chairman, Dr. Mohammed Adaya Salisu – Secretary, who happens to also be a Senior Special Assistant to the President on Development Policy. Other members are: Prof. Ode Ojowu, Dr. Shehu Yahaya, Dr. Iyabo Masha, Prof. Chukwuma Soludo, Mr. Bismark Rewane. The team is no doubt a top rate one. The team has a female member- Dr Iyabo Masha, who was until August 2019 the IMF Representative for Sierra Leone. The percentage of female is about 12.5%, a ratio of 1 to 7. Perhaps President Buhari should have appointed more females for a more gender balance composition.

The EAC appears to be modelled after the United States National Economic Council , though the Council of Economic Advisers model will have been more institutionalised because the latter was established by the Congress and the members’ appointment is subject to the Senate approval.

As stated in a report by the Mr. Femi Adesina , SA to the President on Media & Publicity , this advisory council, which  will be reporting directly to the President, will advise him on economic policy matters, including fiscal analysis, economic growth and a range of internal and global economic issues working with the relevant cabinet members and heads of monetary and fiscal agencies. In addition, the EAC will have monthly technical sessions as well as scheduled quarterly meetings with the President. The Chairman may, however, request for unscheduled meetings if the need arises (I like this part because it fosters flexibility). One thing is missing: its tenure. We don’t know for how long the EAC will be in existence.

 

From the face of it, the EAC composition appears to be pro-growth and can kick start a bullish run on the Nigerian economy, other key factors being equal. It is a good signal and confidence-boosting. And the administration will attract more attention and respect from the international market. We must however face the fact that this administration has about 30 -36 active months to consolidate on its recent gains and lay a solid foundation for higher economic growth and create more jobs. Time is running out fast. So let us take a look at the economic statistics staring at the EAC:

  • Gross Domestic Product (GDP) grew by 1.94%(year-on-year) in real terms in the second quarter of 2019. On a half year basis, real growth in the first half of 2019 stood at 2.02%. The Federal Government’s growth estimate for the 2019 fiscal year is 3.01%. But the IMF is projecting a 2.1% growth for 2019.
  • Unemployment rate was at 23.1% (Q3 :2018) up from 18.1% a year earlier. The African countries having higher rates than Nigeria are Namibia (33.4%), Angola (29 %), South Africa (29%) and Mozambique (25%). Countries such as Libya (17.3%), Tunisia (15.30%), Rwanda (15%), Kenya (9.30%) have lower rates compared to Nigeria. More details are contained here
  • Underemployment was at 20.1% (Q3: 2018)
  • Inflation rate at 11.08% (July 2019). The Federal Government’s estimate for 2019 fiscal year is 9.98%
  • The key benchmark interest rate ( monetary policy rate ) is 13.5% with asymmetric corridor at +200/-500 basis points
  • Out of the actual 2018 FGN budget of N7.455trillion the debt service was N2.152trillion, which represented a 28.8%. The FG also recorded a variance of 23.9% (shortfall) in the total expenditure- N9.120 trillion vs N7.455 trillion. The actual amount of debt service was even more than capital expenditure (N2.152 trillion vs N1.743 trillion)
  • The key projections contained in the Draft Medium Term Expenditure Framework /Fiscal Strategy Paper (MTEF)/FSP 2020-2022 released on September 10, 2019 by the Federal Ministry of Finance, Budget and National Planning are shown thus: The real GDP growth is projected to be 2.93% (2020), 3.35% ( 2021) , 3.85% (2022). Using an official exchange rate of N305/US$ , the real GDP is projected to be US$458bn ( 2019) , US$468bn (2020) , US$522bn ( 2021) and USD588bn ( 2022). If an exchange rate of N350/US$ which mirrors the actual rate available to much of the population is used the real GDP will be lower than the projected figures.
  • The personal cost (inclusive of pension costs) for 2019 is over N3trillion (more than a third of the entire budget) and it is rising. New borrowing as a percentage of total FGN Budget (including Government Owned Enterprises -GOEs and project-tied loans) between 2020- 2022 is averaged to be about 15%. Debt service to Revenue ratio (including Government Owned Enterprises -GOEs and project-tied loans) for the projected period is averaged to be about 34%. Deficit as percentage of FGN Revenue (including GOEs & project-tied loans) is averaged to be about 26%. Capital expenditure as percentage of Non-Debt Expenditure to be about 29% on average. It is 41% in 2019. So FGN is planning to spend less on CAPEX between 2020-2022. This is strange though. The draft document concludes that “Nigeria faces significant medium-term fiscal challenges, especially with respect to revenue generation and rapid growth in personnel costs”. The draft MTEF 2020-2022 can be downloaded here

So, what should we expect from this EAC? For one, most if not all the members of the council have a market ideological bent. But they will be reporting to the President who seems not to have a soft spot for free market. Perhaps the President’s mindset is now changed. Secondly, it is important the apparent ideological differences are resolved from the onset.

Nigeria has been running perennial budget deficits and keep increasing. It is equally troubling that much of the public debt goes to recurrent expenditure. Eventually Nigeria will have to adjust. As I mentioned, the EAC does not have much time but a lot can be done. I guess the council will work with the Economic Recovery and Growth Plan (ERGP) of Buhari’s administration. It is its major economic blueprint. The ERGP objectives are to: restore and sustain growth; invest in our people and build a globally competitive economy. Given the ERGP, the EAC would likely tilt towards stabilization polices for the remaining duration of the administration. This administration ends in 2023.  The first 90 days of the EAC will either confirm a good signal or a bad one. It will show whether the initial optimism will be sustained or will fade away quickly.

Going forward, in its advisory role to the President/FGN, the EAC will have to:

  1. Look for more sustainable ways to generate revenue.
  2. Reduce leakages in government spending to the barest minimum.
  3. Help answer the question whether Nigeria (administrative -wise) wants an expansive government or restrictive type.
  4. Decide whether to borrow more from the international markets right now or borrow domestically
  5. Evaluate the question of subsidy /under recovery in the pump price of petrol.
  6. Evaluate the government strategies at generating more revenue from taxes taking into consideration other bottlenecks Nigerian businesses currently face which make them to be less competitive.
  7. Advise the FG whether it is in Nigeria’s interest to go ahead with launching of ‘ECO’, the planned single currency for Economic Community of West African States (ECOWAS) in 2020; given the divergence criteria in most member States.
  8. Consolidate on the Ease of Doing Business initiative
  9. Work with the monetary authorities to fight inflation.
  10. Fight the unemployment.
  11. Assess the current state of the currency swap deal with China.
  12. Assess the various intervention schemes (not the monetary policy mandate) of the Central Bank of Nigeria in the real sector of the economy.
  13. Ensure a better coordination between Ministries, Government Owned Enterprises (GOEs) and other key agencies.
  14. Ensure Nigeria is an attractive destination for Foreign Investment. It is obvious the quantum of domestic investment can not take Nigeria forward. Nigeria needs on a much bigger scale both the Foreign Direct Investment and Foreign Portfolio Investment.
  15. Look at other areas that need critical infrastructure such as ports, education, works, housing and power. This is also calling their attention to the fact that as contained in the draft MTEF, a reduced amount is proposed to be spent on CAPEX between 2020-2022. This could be counterproductive.

The FG will have to decide on what it wants to do with Government Enterprise and Empowerment Programme (GEEP) and other intervention schemes on one hand and the new Ministry of Humanitarian Affairs, Disaster Management and Social Development on the other. Does it want to merge them and why?

The pedigree of the EAC members notwithstanding, their pieces of advice and recommendation will as a matter of fact be confronted with the growing insecurity in the country. An unstable country will find it difficult to attract and retain investment. The existing ones will leave and the potential ones will go elsewhere. The Federal Government of Nigeria needs to do whatever it takes to address the challenges of the growing insecurity. It is trying but it needs to do more. Nigeria needs to lay a solid foundation and increase its potential GDP. However, expecting to triumph economically in an insecure environment is synonymous to clapping with one hand.

 

Nigeria has never been short of sound recommendations from her best brains, major challenges have been corruption, the absence of a solid commitment and resources to implement such recommendations   My best wishes to the members of the EAC.

By Shola Ogunniyi , a Risk Advisor, writes from Lagos.

Twitter: @Obzzzy

 

 

 

 

What You May Not Know about Buhari’s New Economic Advisory Council Members

1. Doyin Salami

He is a senior lecturer at Lagos Business School where he leads sessions in the economic environment of business. He has also served as director of programmes for five years until January 2005.

Mr. Salami is a doctoral degree graduate of Queen Mary College, University of London. His research interests include corporate long-term financial management; macroeconomic policy; corporate competitiveness and risk management; and characteristics of small and medium enterprises (SMEs).

He served as member of the Monetary Policy Committee of the Central Bank of Nigeria and had been a member of the Federal Government’s Economic Management Team.

2. Bismarck J. Rewane

Mr Rewane is the Managing Director/Chief Executive Officer of Financial Derivatives Company Limited in Lagos.

He has more than thirty years of experience as an Economist, Banker & Financial Analyst. He is a Chartered member of the Institute of Bankers of England and Wales and a Fellow of The Nigerian Institute of Bankers.

3. Chukwuma C. Soludo

The former CBN governor was born on 28th July, 1960, and hails from Aguata Local Government Area of Anambra State. After his secondary school education, he proceeded to the University of Nigeria, Nsukka, where he graduated with a first class degree in Economics. He also undertook his postgraduate and doctorate degrees in Economics from the same University winning on both occasions, the prize for the best graduating student.

Mr Soludo, a professor, had cumulative four years of post-doctoral training in some of the world’s most prestigious institutions, including: The Brookings Institution, Washington, DC; University of Cambridge, UK, as Smuts Research Fellow and Fellow of the Wolfson College; the UN Economic Commission for Africa as a Post-Doctoral Fellow; University of Warwick as a Visiting scholar and Visiting Research Scholar at Center for African Economies, University of Oxford (with funding by the Rhodes committee). He also attended over a dozen specialized courses and has had extensive research, teaching and consultancy works in different areas of economics.

He has worked at the World Bank both as a short and long-term consultant since 1993 and also at the United Nations Economic Commission for Africa, Addis Ababa.

4. Sheu Yahaya

Prior to his appointed as the Chairman of the Board of Directors of Development Bank of Nigeria Plc (DBN) in March 2017, Mr Yahaya was the Bank’s Interim Managing Director.

He has an outstanding career in Academia and Development Finance, having held several management and executive roles, including Executive Director at the African Development Bank and member, Monetary Policy Committee of the Central Bank of Nigeria.

Before joining the African Development Bank, he served as Deputy General Manager at Nigeria Export-Import Bank (NEXIM). He was a lecturer in Macroeconomics at the Department of Economics in University of Sussex, UK and Head of Economics Department in Bayero University kano, Nigeria.

5. Ode Ojowu

Ode Ojowu (born August 16, 1948) is a Nigerian economics professor and a former Chief Executive of the National Planning Commission. He was also Chief Economic Adviser to Former President Olusegun Obasanjo between 2004 and 2005.

He has held positions at the International Monetary Bank, the World Bank, and the United Nations Development Programme .He was a professor of economics at the University of Jos.

In 2008 Ojowu was appointed head of the governing council of the Benue State University.

6. Mohammed Sagagi

Mr Sagagi has a Certificate Course in Making Markets Work for the Poor from Springfield Center, Durham UK; PhD (Economics) from University of Warwick, Coventry, England (1985) with thesis on Commercial Policy and Industrialization in Nigeria; and M Sc. (Economics) from the University of Warwick, Coventry, England (1981).

He bagged his B Sc. in Economics with First Class Hons. from Ahmadu Bello University, Zaria, Nigeria in 1977. He serves as Political Economy and Government Relations Adviser at a DFID-funded Programme on Skills Development and Entrepreneurship (Mafita) in Northern Nigeria.

He is an Economist and Development Consultant with a strong academic background and extensive private sector experience in Nigeria. His expertise and ability to carry out research, conduct diagnostic studies, design interventions as well as formulate practical development strategies.

According to his details, he has interests in political economy and sustainability of interventions- and play crucial roles in ensuring that Political Economy and sustainability issues are (a) integral to design and (b) part of the day-to-day management of all interventions. He has participated in a number of Federal, State and Local Governments of Nigeria reform programmes.

7. Salisu Mohammed

Born in 1959 in Mamudo, Potiskum LGA, Yobe State, Mr. Salisu is married with 3 children. He bagged PhD in Economics from Lancaster University, Lancaster, United Kingdom (1990). His thesis was titled Oil Exports and the Nigerian Economy: An Econometric Study. He also bagged MSc degree in Economics from University of Maiduguri, Maiduguri, Nigeria in1986 and BSc (FIRST CLASS HONS) in Economics also from University of Maiduguri, Maiduguri, Nigeria, in 1982.

8. Iyabo Masha

Iyabo Masha is a global economist with a demonstrated history of working in central banking and financial markets, economic management, international lending, finance and development. Strong focus on macroeconomic stabilization policy research and implementation.

She has worked with the International Monetary Fund since 2003 in Washington D.C. Metro Area. According to her, the assignments in more than 10 emerging markets (Asian and African countries) focus on comprehensive economic management including: (i) policy reform advisory services and dialogue with governments (ii) financing and lending programs; (iii) analytic research and economic modeling and forecasting. Specifically, she helps design for national governments and central banks, implementable solutions specific to their circumstance.

She also ensures that key economic and financial policy reforms are focused on fiscal and debt sustainability; foreign reserve adequacy; improving the transmission mechanism of monetary policy; achieving depth, safety and soundness in the financial sector; and managing capital flight.

She worked at Central Bank of Nigeria’s Research Department between 1998 and 2003. She also worked with the World Bank between 1997 and 1998 as well as the IRIS Center, University of Maryland at College Park as a consultant.

She is the immediate past IMF Representative for Sierra Leone.

BREAKING: Finally, Buhari sends Oyo-Ita on indefinite suspension

In a surprise move, President Muhammadu Buhari has sent Winifred Oyo-Ita, the head of service of the federation, on an indefinite suspension.

He also named Folashade Yemi-Esan as the acting head of service “with immediate effect”.

Oyo-Ita is being probed over allegations of corruption by the Economic and Financial Crimes Commission (EFCC).

More to follow…

Making The Case For Housing As a Human Right

Scottish Housing Day is about celebrating the impact that housing makes to the lives of people and communities across the country, as well as communicating to people about their housing options.

This year, for the fourth annual Scottish Housing Day today, we are making the case for housing as a human right.

The Scottish government is considering what legislative protections are needed to embed social, cultural and economic rights – including the right to a home – in the Scottish legal system.

Shirley-Anne Somerville, cabinet secretary for social security and older people, and Alan Miller of the University of Strathclyde, will jointly chair a National Taskforce for Human Rights Leadership.

The scale of the taskforce’s agenda is daunting. To put in place a legislative framework supported by resources to ensure Scotland is a world leader in putting human rights into practice will not be easy.

“Human rights are an absolute, and therefore our expectations of housing standards should be the same, irrespective of tenure”

But incorporation matters. By moving the issue from an international to a national arena, we can ensure that our government considers human rights in its policy deliberations.

Crucially, it means we can provide citizens with a means to challenge councils, landlords and the government through the courts if they violate a minimum set of rights.

This is a challenge; legislation will be only the first step and educating the public and the judiciary about the value of this approach will take time.

However, we know from experience in Scotland and in other countries how a rights-based approach to housing can improve the experiences of tenants, customers and homeowners.

Underpinning any approach to human rights must be improving the consistency in what people experience across different types of housing tenure, whether that be social rent, private rent or homeownership. Human rights are an absolute, and therefore our expectations of housing standards should be the same, irrespective of tenure.

For example, we should be ambitious for tenants whose homes are in a state of disrepair and whose health is compromised to encourage them to compel their landlord to make the improvements needed.

We should be ambitious about ensuring that victims of domestic abuse are no longer made homeless by services designed to look after them but are instead able to stay in their own home with support services provided.

And we should be ambitious for every single person to live in a home that they can afford.

And while no one tenure should dominate discussions, as improvements in availability, affordability and accessibility are needed across all sectors, many housing problems can be linked to the shortage of affordable homes.

We hope that as the Scottish government considers the incorporation of human rights into domestic legislation, there is a clear vision and the resources available to achieve it.

The human right of all our citizens to a safe, affordable home will only be realised when there is appropriate funding for housing, and when housing professionals to deliver the homes and services that communities depend on.

Source: insidehousing

Fashola: Some Communities Demanding N10bn Compensation for 2nd Niger Bridge

Babatunde Fashola, minister of works and housing, has blamed some communities for uncompleted projects, disclosing how a demand of N10 billion compensation was made for work to continue on the 2nd Niger bridge.

Speaking with reporters at the end of the federal executive council (FEC) meeting presided over by President Muhammadu Buhari, the minister said huge demands have led to uncompleted projects across the country.

Fashola said budget funding gaps also worked against completion of roads projects in the country in the last four years.

He added that his office had not received funds since his reappointment as minister, as there are still paper work processes ongoing.

“Getting FEC approvals is one half of the story, but we don’t get all of the cash. Even the local communities are not helping issues ,” he said.

“As we speak, some people are asking us to pay N10 billion now as compensation for the 2nd Niger bridge… there is a gap between infrastructure needs and income. People are also complaining that government is borrowing too much.

“We have heard that funds have been released, but we are yet to get anything. I have not received any money since I came to office, this time around.”

On abandoned 20,000 projects alleged by the national assembly, Fashola said nothing of such exists.

“I think first of all it is important we all speak the same language. There is a clear distinction between uncompleted and abandoned projects. First of all, my ministry does not have 20,000 projects,” the minister said.

“The right question should be what are we doing about completing projects, one of the things we have done is finding out why projects are not completed. In some cases the rates have become obsolete so the price range has changed, cement price has changed, the change rate has changed, inflation has gone into the quantity it was awarded before it came.

“So, we are trying to resuscitate some of those projects because we know that the contractors will not go back to work if the pricing is not right.”

The minister also disclosed that the FEC approved a total of N8.2 billion for roads projects.

Source: thecableng

High vacancy rate in VI, Ikoyi drives down rent by 8% in H1

…tenants could save as much as $2,100 per year

In the first half of 2019, demand activity in the A-grade office rent market slowed relative to that of H2 2018, where a number of large transactions were concluded especially towards the end of the year, data by Broll Property Intel, the research and intelligence arm of Broll Nigeria, has revealed.

In the review period, 33,000 square metres (m²) of office space was delivered to the A-grade market, adding 61-percent vacancy rate, up from an average of 57percent as at the end of 2018.

As a result, the median average rent for A-grade offices in Victoria Island (VI) and Ikoyi dropped marginally by a joint 8.21 percent in H1 2019.

Businessday analysis of the H1 data by Broll reveals that the average asking rent for office building in Ikoyi stood at $700/m² per annum, this is $50 or 6.67 percent decline from the $750 which the properties were rented for in the last quarter of 2018.

The same was reported for A-grade property in VI as the average asking rent dropped by 1.54 percent or $10 from $650/ m² per annum in Q4 2018 to $640 in H1 2019.

A survey by Businessday revealed that an office occupied by one to five persons will require a space ranging from seven to 35 square meters. When that is inputted into the rent for A-grade office in VI and Ikoyi, the amount paid by tenants will be, at least, $4,900 and $4,200 per annum for the respective locations.

“Asking rents have remained fairly unchanged in certain nodes. However, A-grade properties in VI and Ikoyi have recorded marginal declines,” Broll Nigeria said.

Going by Businessday calculations, the marginal decline in rent of A-grade properties could mean that prospective office tenants may be saving $350 and $70 for 7 square metres office which can be occupied by one person in VI and Ikoyi respectively. This represents a joint reduction of $420.

A potential tenant could also be saving as much as $ 1,750 and $ 350 for A-grade office properties in VI and Ikoyi if he/she is renting a 35m2 office space that can accommodate five persons. This represents a joint rent reduction by $2,100 per annum.

Data by the real estate firm revealed that the median average rent in Lekki and Ikeja in the first half of 2019 was unchanged from the Q4 2018 figures at $240 and $325 respectively.

Also, the rent of B-grade property was constant in Ikoyi, VI, Lekki, Ikeja, and Abuja as the median average asking rent stood at $600/ m2 per annum, $450/m2 per annum, $194/m2 per annum and $180/m2 per annum, respectively.

“Yes, rental prices have dropped slightly in both housing and office space in the premium areas of VI and Ikoyi and in some other locations. One percent reduction in the rent of the properties in those high end areas could translate to a huge amount of money because the prices of the properties can be very high,” James Oanrewaju, a real estate agent, confirmed to Businessday by phone.

According to Broll Nigeria, about 27,000m² of developments nearing completion are expected to be delivered by year-end. Other projects under construction estimated to be about 82,000m² will be delivered in 2-3 years. Meanwhile, approximately 64,000m² projects have been put on hold.

As a result of this data, Broll Nigeria revealed that landlords are looking at a prelet of about 50 percent before proceeding any further with construction.

“However, given the current vacancy rate of premium quality buildings in the market, the likelihood of achieving this pre-let goal may be unobtainable,” the real estate firm said.

Meanwhile, most landlords in the property industry still perceive the market to be a tenant’s market and continue to offer competitive leasing terms to prospective tenants on a case-by-case basis, especially with the anticipated increased supply.

“This is more so the case with developers with debt servicing obligations associated with their properties,” Broll Nigeria said.

The risk of not knowing when a property will be bought off the market is one of the reasons for the high cost of acquiring property in Nigeria.

Source: Businessdayng

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