(Business in Cameroon) – During a meeting with local press in the framework of his official visit, Sergio Pimenta, IFC’s Vice President for the Middle East and Africa, indicated his institution’s interest in the Cameroonian real estate sector.
“As far as the housing deficit is concerned, the IFC will bring in companies, which will build more houses, and financial institutions that will elaborate mortgage plans to help residents acquire the said houses,” the vice-president said.
The initiative comes at point in the country where access to decent housing is increasingly complex for residents. About ten years ago, the government launched the construction of social housing but the various actions still have a really low impact.
The only thing to know now is which segment the IFC will support. From land acquisition to development, there is a surcharge and lack of a permanent urban development strategy. The government did set guarantee and subsidy mechanisms for mortgage loans but the country’s model seems a bit outdated. In addition, the collaborative initiatives launched by Ecobank and Afriland along with various institutions have not yet provided efficient solutions.
Land access is also a real challenge. The procedures are time-consuming and laborious according to indicators published by the Doing Business 2019. Such a situation can delay projects and overcharges.
– Fixing This Can Grow The Economy To A Thousand Billion!
The Nigerian real estate sector is dominated by informal property holdings valued at nearly one trillion dollars. Harnessing the untapped potential could give the economy a major boost.
It reads something like this; “Nigeria holds no less than USD 300 Bn and as much as USD 900 Bn worth of ‘dead capital’ in residential and agricultural real estate alone.”
That was the conclusion drawn up by world-renowned consulting and advisory firm, PricewaterhouseCoopers (PwC) after their deep dive into the neglected parts of Nigeria’s real estate sector.
It was a startling revelation and it easily got tongues wagging both for and against the numbers submitted by the firm.
But even as it’d actually be quite a stretch to think they could ever get the figure spot on, the general feeling is that they are not that far from the truth — between Ikorodu in Lagos and Isihor in Edo, you would find so many undeveloped landed-assets that would’ve been enough to get one some major bank loans if only the banks were crazy about landed-assets that lack verifiable ownership proof.
Well, that’s pretty much the problem — so many landed-assets and so little economic value attached to it because the owners of the assets are just not able to see the gains of having their property duly titled. The result of this is a stockpile of dormant assets with very little to offer in terms of economic relevance.
The mere thought of how much value could be added by harnessing this dead capital in the Nigerian real estate sector is enough to get anyone’s motor running. Ideally, it should be providing the country with the required capital resources needed to boost growth and create wealth for its 200 million-strong population.
And it can’t come at a better time given that the International Monetary Fund (IMF) recently prophesied doom by suggesting in its latest report on Nigeria that income per head will decline in the near term as economic growth continues to be outpaced by a faster population rise. Unlocking the potential in dead assets might be the antidote that could reverse the unavoidable lunge for perdition.
To make things clear, dead capital or dead assets is an economic term used to refer to properties that are informally-held, and so not legally-recognised. It is this uncertainty of ownership that takes away from the true value of the asset and the ability to lend or borrow against it.
Such possessions are not well-recorded. Because of this, they can hardly be converted to capital and cannot be exchanged for something profitable outside very niche local circles where people know and trust one another. Also, such properties cannot be used as collateral for a loan or as share against investment.
More commonly, we are talking about things like those country homes Nigerians refer to when they talk about “going to the village” — something they rarely do given that festive periods and funerals are the only time they actually get to do such. And even at that, they spend only a few days there. Most of the time, such properties just collect dirt and rot over the years without any formal title and, hence, zero economic value.
PwC based their findings on a population figure of 180 million, and 36 million households of which 95 percent have no title on their assets. Taking a cue from that, unlocking USD 900 Bn worth of currently dormant real estate assets will expand the size of the economy from USD 445 Bn (according to IMF) to USD 1,345 Bn! And that’s not all. As a by-product, such an effort would also fix the country’s debilitating housing shortage of over 17 million units.
The bulk of the houses in Nigeria have no title or contestable title and are basically useless as collateral when trying to finance economic activities. In effect, billions of capital are left idling about as such capital remains under-utilized or not utilized at all.
By putting together a framework that makes it possible for owners of such assets to use their property as collateral to access credit without much fuss could go a long way towards unlocking dead capital in Nigeria.
Nigerian financial institutions mostly accept verified real estate before dishing out loans. Because of this, the advantage is only with owners of properties that are well accounted for. And this means that owners of properties whose asset have no title basically have nothing as they can hardly access credit or make their property work for them in some way.
Private homes and other forms of landed assets represents one of the major sources of capital for businesses in more advanced climes. Developed countries have given themselves a head start by getting the hang of transforming their assets into wealth, and this they have done by representing assets with undisputable titles.
Citing the United States as an example, all private and state-owned assets are titled and put in the record at the time of creation. They are also quantified such that they can be used as collateral to raise funds in times of need from, first, the primary market and then a mortgage instrument which allows it to be sold and resold in the secondary market. There’s a lot of money involved when all that is put together.
Nigeria’s current Land Use Act of 1978, which is built on ownership rights, has not done much to unify land ownership across all parts of the country. The bulk of property owners, especially in the rural areas, are either oblivious of the law which demands them to have titles on their landed assets. or are just completely indifferent about it.
More so, the law demands the consent of State governors before a land with a customary or statutory right of occupancy can be mortgaged, subleased or transferred. This, amongst other bottlenecks, gives the locals a mountain to climb, making it rather difficult to effectively transform dormant assets to tangible wealth. And to think of all the good that can come through if we could find a way to get out of this straitjacket.
A Nigerian real estate investment company Windsor, is partnering with UK’s foremost property developer, Berkeley Group plc to launch the latest North London development – Clarendon N8 in Abuja and Lagos.
In a statement, the Group Managing Director, Windsor Real Estate Mr. Richard Vedelago, said one of the six brands under the Berkeley Group, St. William, is spearheading the Clarendon development, which is to become a new city village as part of a major new regeneration scheme in North London.
According to him, Clarendon offers residents the opportunity to invest in an up and coming area of London, sitting between Hornsey, Wood Green and the expansive Alexandra Palace.
Furthermore, Wood Green has been identified as an area of growth over the next five to ten years, with Haringey Council unveiling plans to create a new town centre, which will attract £3.5bn of investment.
Vedelago added that the project on completion will deliver over 1,700 with one, two and three-bedroom homes, incorporating a new five acre public park, together with a series of landscaped spaces and courtyards.
Not every real estate agent has their clients’ best interests in mind. There are some bad apples in the industry that come across as a vocal minority much of the time.
Luckily, consumers today have the internet: a wealth of information, knowledge, and resources. It is easier than ever to see through slimy and dishonest sales tactics.
Today, honest agents are rewarded for putting their clients first. Here are five slimy sales tactics you should avoid, and some recommended alternatives:
Key Takeaways A perfect sales pitch in real estate often involves more listening than talking Respect your clients’ boundaries; don’t push their budget or insult their tastes Communicate honestly when answering questions and making commitments Source: Realvolve Excerpt 1) Pushing them to make an offer before they’re ready.
In a competitive real estate market, you have to move fast if you’re serious about a listing. This is where some agents might be tempted to push their clients to make an offer they aren’t ready to make.
Do this instead: Inform your clients that this listing won’t last long, but also stress the importance of only making an offer on a home they LOVE.
2) Talking more than listening.
We’ve all experienced the dreaded Sales Pitch—a sales rep yammering on and on about why we need THIS product NOW! In real estate, this translates to the agent telling the buyer what they want…instead of listening.
Don’t do all the talking.
Do this instead: Learn about your client’s wants and needs so you can connect them with the perfect home. It’s not about you, and what you want them to buy. It’s about helping them find their dream home.Here’s a great blog post that might help!
3) Disregarding their budget.
When my husband was apartment hunting (way back in the day, before we were married), he asked the leasing agent for the cheapest unit they had.
The leasing agent’s reply: “Oh, you don’t want the one-bedroom. The layout is weird. You walk through the door, and the living room is RIGHT THERE.” Um, okay.
It was annoying, and even though my husband did end up living there (he was a recent college grad with no money, so he didn’t have many options), he did stay in the one-bedroom, and he did tell everyone what a crappy experience it was.
Don’t try to stretch your buyer’s budget just so you can get more commission.
Do this instead: Focus on saving them money. They’ll love you for it, and they’ll reward you with repeat and referral business.
4) Insulting them.
If they have their heart set on a galley kitchen, don’t try to push a different property on them by laughing and saying, “Really? A galley kitchen? When you could have this gorgeous open plan?” Don’t act like they’re stupid for wanting something that doesn’t have as high a resale value or isn’t as “stylish.” Don’t insult prospects’ tastes, opinions, or budgets.
Do this instead: Ask them WHY they want the galley kitchen, and LISTEN to their reasons. Then, if you feel they truly might like an open plan, tell them about the benefits of that layout, but remain objective and informative. Let them make their own decision.
5) Dodging their questions.
Let’s say your buyer client asks, “Has this house ever had water damage?” The deceptive agent will answer, “Look at these beautiful baseboards! Absolutely no evidence of water damage!”
But that’s clearly dodging the question.
Say this instead:“That’s a good question. I can understand why you might be worried about that since this is in a flood zone. I’ll find out and let you know.”
The growing threat of wire fraud scams targeting real estate transactions is prompting the Utah Division of Real Estate to launch a statewide campaign in warning the public. A real estate email scam is trying to dupe unsuspecting buyers out of their down payment right before settlement.
The Utah Division of Real Estate has produced a public service announcement video that is airing on local television stations as well as a statewide billboard campaign through the end of August.
The email scam—affecting transactions across the country—targets real estate agents’ and title companies’ email accounts. Scammers learn when transactions are scheduled and, usually within 24 hours of a transaction closing, they’ll use the email account to send new wiring instructions to the buyer, seller, title, or escrow agent, lender, real estate agent, or broker. The new wiring instruction will have the funds directed to a bank account outside of the country. After the funds are transferred, they are usually quickly dispersed to multiple banks and quickly become untraceable and unrecoverable.
More than $149 million was lost by consumers nationwide in 2018 from this type of email real estate fraud, according to a Federal Bureau of Investigation report.
“All parties in a real estate transaction should be very wary of any last-minute changes over email,” says Jonathan Stewart, director of the Utah Division of Real Estate. “Once criminals gain access to your email account, they can make anything sound legitimate. We hope by educating consumers about this statewide email scam, we can prevent Utahns from becoming victims.”
Nigerians are getting smarter; thanks to technology, which is shaping the way people live, communicate, work, play, interact and transact business in Nigeria. Although there are still some sectors that are yet to catch up with technological advancements, many have however evolved with technology resulting in ease of operations and better customer service.
The real estate industry is one of such sectors that have grown at an exceptional rate. The birth of online property platforms in Africa’s most populous nation is making transactions among developers, property owners, prospective buyers, and potential tenants easier, compared to the cumbersome processes witnessed a few years ago.
At one of the West Africa Property Investment Summits (WAPI), industry players were of the opinion that the deployment of technology would make Nigeria’s real estate sector more investable, increase liquidity and drive greater home ownership.
“Think back to the 80s and 90s, if you were going to purchase a property, you would spend many days trying to find a decent agent who will charge you high fees to take you from property to property in only a few locations -meaning he was limited,” Yemi Johnson, the Chief Operating Office of Hotels.ng, said.
Statistics have shown that 7 out of 10 Nigerians feel that house hunting is painful, as it usually starts with calling friends or walking long distances with a road side agent who, more often than not, does have direct access to landlord, thereby making one pay multiple ‘agent’ fees.
“With my mobile phone, I was able to connect with a landlord online and in few days I got an apartment without having to meet up with any agent and paying for any extra charges,” Arua Nnamdi told BusinessDay.
According to Nnamdi Chineme, CEO of Nigeria Property Centre, an online platform that advertises real estate properties, his experience in renting a flat in Nigeria in 2008 and the UK in 2009 was the reason he decided to set up his company. He said it took about six months to find a flat in Lagos while in the UK he found one in just a week. The difference, he added, was down to the use of technology.
“Historically, in Nigeria, the speed of finding a property to rent or buy was mostly dependent on the estate agents the person knew and the network of those estate agents. Today, with the use of technology in the form of Property Portals, people can find a property as much as ten times faster,” Chineme explained.
Technology based (online) property platforms like Propertypro.ng (formerly ToLet.ng), Hotels.ng, myPadi.ng, Nigeria Property Centre, Lamudi which has now rebranded to Jumia Houses, Real Estate Market, estate intel, etc have brought technology to bear on real estate transactions, making listing, leases and sales a lot easier
“The adoption of Proptech is increasingly becoming a boon for the real estate sector in Nigeria,” Abdulhakeem Sadiq, chief executive officer of ZAMA, said in a statement.
“Now, a student could seamlessly find and rent an accommodation in no time whenever and wherever he/she may be as we provide critical information such as photographs, reviews & ratings, pricing, etc about available spaces for rent,” Joel Amawhe ,CEO of myPadi.ng said.
As it happens in other sectors of the economy, technology has penetrated the real estate sector and has disrupted the status quo, contracting jobs and creating new opportunities, especially for the millennial.
Checks by BusinessDay revealed that even though technology has positively impacted the property industry in Nigeria, it has also caused disruption for traditional players in the industry. Going forward, real estate agents, developers, landlords and investors who are not open to embrace technology or become innovative over time will lag in the growth of the sector, industry experts have said.
“I have registered with three different online platforms, two of which I paid money for subscription, and since the time I uploaded my vacant properties on the sites, I get more than 10 calls a day from people who want to rent apartments. My fellow agents have been begging me to link them to the online platforms so they can be getting clients like myself , but I am still thinking about it whether or not I will link them,” jerry Adenekan, a real estate agent in Unilag axis told BusinessDay by phone.
BusinessDay findings revealed that the online market place in Nigeria is growing at a pace higher than even the country’s economy, and the real estate sector is among other industries who are directly impacted by the revolution.
The recent development has given room for the existence of new tech start-ups in a country where housing deficit is above 17 million units fuelled by the ever growing population.
A recent report by Global System for Mobile Communications Association (GSMA) revealed that Nigeria was second African country with highest technology hub after South Africa with Lagos taking the first position among the cities with highest tech hub in the continent.
The Protech industry in Nigeria is however constrained by the not too favourable network service (in terms of connectivity), power failure (energy to power the system) and cost (of obtaining data). These challenges influence and determine the effective use of the internet for real estate transactions in Nigeria, as compiled from BusinessDay survey.
Analysts familiar with the sector said the government does not in any way regulate the Protech industry- different medium and the online platforms where Nigerians search for properties, as such poses may be used by some fraudulent individuals.
“The internet and technology generally no doubt remains a major tool to change narratives of real estate players but there exist challenges hindering a wider use mostly due to scepticism of using online platforms, low internet penetration in remote areas and more,” Amawhe said.
Going forward, analysts expect to see more use of technology in the real estate space especially with virtual reality and drones for property viewings.
Real estate development firm, Brains and Hammers Limited, says it is working with the cooperative society of major International Oil Companies, particularly Shell and ExxonMobil to provide 117 housing units across three hectares of land in Eti Osa Local Government Area of Lagos State.
The property, named CoopEast Resort Estate, is expected to be fully built and ready for occupation in two years, starting with a ground breaking event which took place on Saturday.
The Director of Sales, Brains and Hammers, Mr Omo Osobase, said it would be the first time the company would be working with a cooperative.
He said, “It is one of the plausible ways to solve or reduce the 18 million housing deficit in Nigeria. That is why we have decided to work in tandem with the vision of the cooperative to provide affordable and decent housing for their members.
“It is a win-win for all the parties involved in this transaction – the cooperative, the cooperators and us. We are very open to working with cooperatives and members of the public generally. It is a partnership that is very promising and we want to use this medium to reach other cooperatives. We are very hopeful that this will lead to a new era of advancement in housing infrastructure across Nigeria.”
Osobase explained that the housing estate would be made of four types of accommodation such as three-bedroom ensuite with boys quarters; four-bedroom ensuite with boys quarters and four-bedroom ensuite semi-detached.
“The last category is nicknamed ‘the King’s House’, featuring five bedrooms, a study, penthouse, boys quarters and a guest house,” he said.
The Chairman, Brains and Hammers, Mr Adebola Sheidu, said, the management was happy to have people repose the kind of trust they had in banks in the company.
According to him, the company has a portfolio of over 2,000 completed residential homes across Nigeria and ongoing work in over 3,000 more.
The President, Shell Cooperative, Chief Hyginus Onuegbu, said the project had been oversubscribed and would cost N7.8bn in its phase 1, while phase 2 would bring the total cost of the project to N15bn.
He indicated that it was the first signature project for the cooperative in partnership with ExxonMobil, while the cooperative would be extending its total investment portfolio in real estate in Lagos within the last five years to N50bn.
He said the cooperatives wanted to be part of the Lagos economic growth story.
The President, ExxonMobil Cooperative Multipurpose Society, Mr Olusoga Sofolahan, said there was the need to create value for money to members, hence the investment.
The Nigeria Soverign Investment Agency (NSIA) is determined to explore investment opportunities in the country and beyond to ensure that they benefit from its mandate. With investments spread across oil and gas, agriculture, power, among others, NSIA appears set to guarantee returns on investments for its subscribers. In this interview with reporters, NSIA’s Managing Director/CEO Uche Orji talks of the prospects and challenges of the Authority, saying while the agency is keen on investing, it is weary of making wrong investment decisions. Group Business Editor SIMEON EBULU was there.
Can you take us through last year’s operations of the NSIA?
We had a successful 2018 by some methods, but I think we could have done better in certain aspects. It was our sixth straight year of profitability, but it was the first year when we invested aggressively in things like the infrastructure fund and we have started to see some of the benefits of the infrastructure fund. That is important because Infrastructure Fund takes time before to yield returns. So, you are building the Lagos-Ibadan Expressway and the Second Niger Bridge, it would take a while before it starts yielding returns. As we start to make aggressive investments in infrastructure, you are going to see less capital available for us to invest in markets. So, it is important that we replenish that through further contributions, to maintain the pace of profitability in NSIA. Having said that, 2018 was our six straight year of profit. If you take out forex translation gains, we made profit of $87 million (or N28.45 billion), using an exchange rate of N325/$1 for 2018. The shift towards infrastructure and direct investments in Nigeria means it will take longer for returns to start incubating. But if you include forex translations, 2017-2018, went from $22 billion to $46 billion. So, generally, it was a positive year. By the end of the year, Assets Under Management was about $1.9 billion.
In addition, we also had third party funds like the Presidential Infrastructure Development Fund (PIDF)- a fund created by the President with $650 million. It is not part of our assets. That fund is what we are using to drive the Lagos-Ibadan Expressway, Second Niger Bridge, Abuja-Kano highway and soon, the East-West Road and the Mambilla Power. So, that is exclusive of the N617 billion that we have. In 2018, the returns break down were as follows: We made 11.5 per cent in our Stabilisation Fund, the Future Generation Fund about 3.3 per cent, because the global market was down a lot in 2018 and it affected returns; and the Infrastructure Fund was up 13.8 per cent. For Infrastructure Fund, the 13.8 per cent is actually the investments we are making in markets, with the cash, not the actual infrastructure, because those ones have not started yielding returns yet.
So, the three funds that we run are the Stabilisation Fund, the Future Generation Fund and the Infrastructure Fund. We have commenced construction on our three healthcare projects. Lagos University Teaching Hospital (LUTH) is completed and operational, for Kano and Umuahia, the construction has been done and we are hiring people soon.
What was the performance of the Future Generation Fund (FGF) in 2018 and possibly since inception?
For the FGF, last year we did 13 per cent and the year before it was 11.5 per cent. That is the growth rate of the FGF. But I can’t give you the annualised performance over the past five years. Not as aggressive as I would like it to be; I will explain why. We have a very conservative assets allocation strategy. If you look at our FGF, we only put 25 per cent in public equities. Our peers like the Norwegian Sovereign Fund put 65 per cent in public equities. So, if you want to be aggressive to make money, you put a lot more funds in public equities. Having said that, because of the volatility last year for example, we had a very bad year because the market was down and they ended up in dollar terms losing more because of their aggressive strategy. My biggest problem with the NSIA when we started was that I just couldn’t take the risk of losing money. So, we were a bit more conservative. If you lost money within the first two years of your existence, the National Assembly would raise some issues and may even tell you to give them back the money; so we were a bit more careful. But I think as we get more comfortable, we try to enhance our investment strategy and, hopefully by then, we would have built up enough means of returns and if we had a bad year, we can explain to Nigerians that we had a bad year. If you remember last year, the S & P 500 was done by an additional five per cent. It is not something I am very proud of and I wish we could have done better.
Is the Presidential Fertiliser Initiative (PFI) a social programme?
Fertiliser started as subsidy to support the government, with a view to not losing money and, if possible, to make money. Subsidies in fertilisers before the PFI started was as high as N60 billion a year. In the last two years, the subsidy has come down to N8.6 billion for two years. So, we have roughly N4.3 billion a year, from N60 billion a year and there were no shortages. Now, if you do that and it translates to money that eventually comes to the NSIA, it is value for us. Secondly, it is a programme that has a timeline. At a point, it is going to stop. But the real value addition here is that we have gone from importing 100 per cent fully blended fertiliser to importing only 35 per cent of the materials, while 65 per cent is domestic. Blending plants that were dead or moribund are up and running, from four that were operational when we started, to 22 now, all hiring people. So, that has supported the economy and I am hoping that we would be in a position where we can earn some fees from the work that was done.
Just think about the fact that it used to be N60 billion of subsidy, but it is about N4 billion. Even with the N60 billion, there were shortages in fertiliser, but today, local manufacturing has gone even higher. And today, the foreign exchange requirement has gone down by about $150 million yearly. These are all value to the country.
How can more funds be committed to the Sovereign Wealth Fund (SWF?
What worries me is that we need to get money into the fund. It is extremely important to us because if you end up investing all our infrastructure funds, which tends to takes about five years to earn a real return, you might run out of capital and you have your margins squeezed. That is because the cost of running infrastructure is very high. Recently, we started hiring for both Umuahia and Kano. Both places would hire at least 40 people; the LUTH will also hire about 40 people. These are costs and it would still take time before they start earning revenue. The Norway story is one that I like to tell all the time. The reason is because in one of my earliest jobs in 1998, the team I worked for was one of those that managed the Norwegian SWF’s assets. They started in 1993 with $10 billion and to see them now at over $1 trillion speaks to the power of consistent contributions. In 2013, it was reported that the Norwegians were putting in $1 billion a week into that fund. So, it doesn’t really matter how much you start with, what matters is how consistent you are. So, I think if there is one thing we need to do as a people and if we need to be serious about this, there must be consistent contribution. But those who have watched us closely would have seen us move from being fought by the governors; being fought by various others, to now be working well together. We are working well with the governors and the National Assembly. I am hoping that the NSIA has become something that they have all come to accept that it is necessary, it is important and should be funded. I think the bigger question we have is whether we have enough revenue as a country to be able to fund an institution like this. I am hoping that we do if oil price continues to go up and we continue to invest in the oil sector and get our production up; get the right type of production, because all those factors are very important.
For your infrastructure fund, beyond what government is doing are you looking at partnering private sector firms to get more funds to invest?
There are three pillars of our strategy for infrastructure. The first is, we invest our funds directly; the second is, the co-investment strategy; and there is a lot going on there. An example is the co-investment fund we set up with UFF and Old Mutual and it started with $200 million. For that, our full commitment would be not more than $50 million. They would bring their money while we bring other people’s money. The same thing was what happened with InfraCredit, where we put $25 million and brought in other people’s money to make it about $200 million. So, we continue to have co-investment as a strategy. If you look at the PIDF, there is government money, there is NSIA money and there is the third party fund we are going to raise. It is a combination of debt and equity to complete the PIDF project, the Second Niger Bridge and the Lagos-Ibadan expressway. So, we have a strategy to raise funds from other people to co-invest with us in our projects. Now, it is not so easy to develop this co-investment strategy.
If you remember we announced one for real estate, which hasn’t happened. Soon after we announced that fund, the forex crisis in Nigeria started, when we went from N196/$ to N306/$ and at a point even fell much lower than that. So, that affects that fund’s take-off. So, we are balancing the risk of convincing people that Nigeria is investible. So far, we have had two successes and one failure and I am hoping that we learn from the successes and build on the failure to do more of this. So, the strategy we have set up is that we would have other people co-invest with us. For instance, the three healthcare projects we have done, we put our own money. As I speak, I am very confident because we have another pipeline of about 11 more projects in healthcare, we have had commitments totalling over $200 million of people that want to invest in us. So, we can’t solve all of these by ourselves. The strategy we have is that for every $1 we invest in infrastructure, we attract $4 from external parties. But for the NSIA to do that successfully, the NSIA needs to be consistent in its performance and Nigerians, including the National Assembly need to have confidence in the NSIA. I think we are on the way to doing that and we continue to work to build that confidence.
One of the most consistent supporters who have been on the standby to invest in the Second Niger Bridge is the Islamic Development Bank. Same time, we are engaged with the EU Commission, the DFID, and all of these people. So, we have built a significant platform and level of interest and support from various people that makes us very comfortable and happy. We did make an investment in gas, in conjunction with the IFC and Seven Energy to do gas infrastructure and help them get Calabar to operate. So, power in that area has improved significantly. That investment also fell on hard times. It fell on hard times because as we speak, not one bill has been paid for. So, there are funding issues in the power sector that needs to be addressed fundamentally. We have invested in renewable energy and solar. Mambilla would start, at the moment it is a $5.7 billion project. The due diligence required is going to take a lot of time and we are actively doing the due diligence. But don’t forget that Mambilla is primarily a project of the Ministry of Power; we are there as financing partners of the project, but for us to invest in it we have to be very comfortable that we would get our returns.
We have invested in gas-to-power, renewables, solar and hydro, but there is still a fundamental issue in the power sector which we are all aware of, that needs to be addressed if we are going to attract more investments into that sector. If we actually aggregate all the power generating sources in this country, put them in a proper distribution metrics, you will have enough power. So, the real challenge is in getting transmission and distribution to work effectively in this country and getting other things working.
Are you involved in gas capturing projects?
We are involved in gas capturing; we are at very advanced stages of due diligence on a gas flare capturing project. From my last count, there are more than 300 major gas flare sites in Nigeria. For instance, those from Rivers State, at night if you drive towards Yenegoa, the night light are lit with flaring gas. These things have been flaring for decades. The economic waste is incredible. So, the project we are about to do, which we would probably announce before the end of this year, is one we are working with other partners and we are taking one of the largest onshore gas flare sites and turning it into LPG capture. What is fascinating about the project is that the LPG and the power sales would give you about 19 per cent internal rate of return (IRR). But there is a big element involved, which is carbon credit. You can actually go to Switzerland and sell the carbon credit and we are glad to do that.
Why is the NSIA not investing in petroleum refinery projects?
Refining is an area of interest for us. We have looked at investing in NNPC or the rehabilitation; it (the Federal Government) hasn’t moved for that, so we are waiting. We looked at modular refineries; we did a lot of work on that and the truth is that we have not done any investment for a number of reasons. So, you will see us in refining because it is an area of interest.
What is your outlook for 2019?
2019 started off very volatile with trade wars as the single most important challenge that we have. It is important to us because our FGF largely invests outside the country. So, when you see movements in the Dow Jones or S &P 500, they tend to affect the performance of this fund. We expect that even though we have seen a rebound in our performance because the global markets have risen, it would remain a very volatile 2019, for as long as the US uses tariff to drive global trade, you are going to see this affect global markets. So, for the rest of the year, I anticipate that the market remains very volatile as long as President Donald Trump continues to tweet and drive foreign policy. I still struggle to understand the correlation between tariff and immigration. However, we are optimistic that our asset allocation strategy will withstand downside risks and optimise market gains. Within the last 12 months, we committed and deployed over N100 billion across the priority three road projects under the PIDF. We have also commenced due diligence on the Mambilla Power Project. We are within the target project milestone on all these projects. Throughout 2019, we shall continue to focus on executing our infrastructure investment strategy in our core focus areas of power, toll roads, agriculture, healthcare and most recently gas industrialisation.
In 2006, architect David Fisher proposed an idea for a sustainable rotating tower in Dubai. However, it was just an idea; there were many hindrances that prevented it from becoming reality. It seems, though, that the dream is finally coming true, with the announcement of an opening date for the project in 2020.
David Fisher, founder of Dynamic Architecture Group, designed the 80-storey skyscraper, extending 420m above ground, such that each floor can rotate 360 degrees in both directions while being held firmly to a concrete core. The rotation will provide the residents of the tower with a 360-panoramic view of Dubai.
Fisher’s idea for the Rotating Tower was inspired by the Olympic Tower in New York. He explained on his firm’s website: “I noticed that from a certain spot you could see the East River and the Hudson River, both sides of Manhattan. That is when I thought to myself: ‘Why don’t we rotate the entire floor? That way, everybody can see both the East River and the Hudson River, as well as Saint Patrick’s Cathedral!’”
The floors of the Rotating Tower will be fabricated and assembled in a factory, then they will be transported to the site and attached to the concrete core. The pre-fabricated units will be made of steel, aluminum, and carbon fiber material. The tower is, also, planned to be self-powered, where solar panels mounted to the terraces and wind turbines placed between every two floors will be generating the needed energy to operate the building.
The residents of this extraordinary tower will enjoy a set of high-tech features, which will include rotation by voice command at the desired speed and direction as well as a special elevator allowing residents to lift their cars and park them next to their apartments. However, these advantages will come at a very high cost which can, possibly, amount to $40 million. Although the tower’s opening date has been announced, Dynamic Architecture has not given a date for the beginning of construction yet.
Nigeria, Africa’s largest economy —with its gross domestic product (GDP) of $530 billion, growth expectations hinged at 2.3% in 2019, and a long-term average growth rate of 3.5% —still holds between $300 billion to $900 billion worth of dead capital in residential real estate and agricultural land alone.
Experts have long emphasised on the need to explore the untapped potentials in a bid to grow the economy. This is especially in respect to the volatile crude oil prices in the world oil market which has posed a challenge.
What is Dead Capital? “Dead capital“, according to the Peruvian economist and development scholar Hernando de Soto who coined the concept in 2001, are “assets that cannot be converted to economic capital”.
According to the economist, capital, which is the resource used to increase productivity for wealth generation in an economy, is the most essential component of societal advancement and thus, deserves the utmost priority when developing solutions for advancing countries.
Analysis from the report: The residential and agricultural real estate sector, according to the report estimates by PwC, is one of the major forms of dead capital. With over 40 million households in a total country population of 200 million, The report reveals that a typical Nigerian house is over capacity with an occupancy rate of seven persons in a room.
Furthermore, the report revealed that approximately 95% of Nigerian household dwellings have no title or a contestable title.
Despite various developmental plans, Nigeria continues to wrestle with rising poverty and unemployment levels, coupled with the epileptic manufacturing and industrial base. This is despite the fact that economic development could have been made possible by harnessing capital from areas that are often overlooked by people.
Why dead capital? Some of the factors responsible for the dead capital in Nigeria’s residential and agricultural real estate segments include, but not limited to the following:
The lack of credit access by small businesses and the prevalence of dead assets.
The state of Nigeria’s housing and property markets.
The high cost of land.
The high cost of securing and registering a secure land title.
More so, the land tenure system which is still being practiced in the communal and informal sector has made it quite a stressful process for anyone to own and register a land legally.
What can Nigeria do to bring dead capital life? According to the report, Nigeria is underperforming and one of the ways to end the underperformance is to unlock dead capital. This could be done through the following ways:
Structural Reforms: The conversion of dead capital to live capital through structural reforms would help in the conversion of most of the capital in the informal economy (which is currently valued at 65% of GDP) into the formal economy.
The development of electronic asset registries which are backed by blockchain technology could position the residential and agricultural real estate in Nigeria, therefore, unlocking the dead capital needed for the nation’s growth and development.
Systemised Trust Creation: The creation of trust in the system and increased participation in the segment will bring about capital conversion in this economic class through fiscal receipts into the formal economy.
In order to circumvent the above challenges, the country needs to invest in establishing proper and seamless land administration, as well as implement policies that will improve land accessibility. This, as industry sources believe, would also increase capital for infrastructure in the sector whilst stimulating economic activity.