Economy
Investors Renew Confidence in Nigerian Real Estate Sector
By Dipo Olowookere
With Nigeria finally out of recession, there is a renewed sense of investor confidence in the Nigerian real estate sector.
An expert in the field, Mr Tom Mundy, who is the Head of Advisory for Sub-Saharan Africa at JLL, says he believes 2018 will be a year of consolidation and recovery.
Mr Mundy, who would speak at the 2017 edition of West African Property Investment Summit (WAPI) next week, commented that, “Nigeria is finally coming out of recession. Of course, there will be the usual lag between economic recovery and market recovery, but real estate, which has suffered from a sharp supply demand imbalance, widening vacancy rates and falling realised rents, looks close to bottoming. Yes, it will take time for confidence to return fully but there is sound cause to be bullish on Nigeria going forward.”
This positive take on the region is the subject of a paper Mr Mundy will publish at the West Africa Property Investment Summit slated for November 28-29, 2017 at the Eko Atlantic Hotel in Lagos.
In it, he unpacks five key drivers that support the path of improvement.
Firstly, there is increasing optimism as the economy kicks into gear. Mundy says that as the external environment improves, and the government bolsters its fiscal position, so too will sentiment for the Naira. Inflationary pressures are under control and household income outlook is reasonably robust. Add to this the recovery of the oil price and the picture is looking brighter.
Secondly, government policy making is gaining some credibility through coherent plans to support diversification and fiscal consolidation with the backing of external bodies.
Thirdly, there is evidence that the decline in rental rates in Lagos is reaching the bottom of the cycle. While the advantage still rests with the occupier in both corporate and retail markets, Mundy believes this will close through 2018 as the economy recovers.
Fourth, the legislative framework is in place for real estate pricing to mitigate the impact of a volatile economy. This is vital to support greater liquidity. It will allow for a more efficient mediation of capital between the interests of a growing class of savers and alternative asset classes that can provide annuity income, such as real estate.
Lastly, for an economy and population the size of Nigeria’s, Mundy thinks there is a structural undersupply of investment grade real estate stock. This is changing, which will provide increasing opportunities, for both local and international investors.
He says JLL’s experience of other heavily pro-cyclical markets with a close tie in to commodity exports, such as Russia, suggests that in high growth markets, large vacancy rates and volatile rental growth are necessary at the early stage of the real estate cycle.
In line with these five key drivers the WAPI Summit theme is set in the same positive tone with ‘Changing the West African Narrative.’
Mr Mundy lists pipeline projects like Wings Office Complex, Royal Gardens Mall, Eko Atlantic, Lekki City and Landmark Village that will support the institutionalisation of the market and greater liquidity over the longer term.
Of course, the region is not without challenge. The unwinding of quantitative easing (QE) will create uncertainty, the trend of rising public sector indebtedness is a risk across most of Sub-Saharan Africa, and there is considerable political uncertainty around a potential successor for President Buhari.
Obstacles aside, sentiment across the sector is certainly improving, underpinned by quantifiable progress across several areas.
By Adedapo Adesanya
The Naira opened the new trading week on a negative note on Monday at the Nigerian Autonomous Foreign Exchange Market (NAFEX) and the black market.
At the parallel market, the Nigerian currency weakened against the US Dollar by N5 to sell for N1,380/$1 compared with the preceding session’s rate of N1,375/$1, and at the GTBank FX desk, it shed N1 to trade at N1,373/$1 versus N1,372/$1.
At the official market, it lost 63 Kobo or 0.05 per cent against the Dollar during the session to close at N1,362.84/$1, in contrast to last Friday’s value of N1,362.21/$1.
However, the Nigerian Naira gained N2.30 against the Pound Sterling at the spot market yesterday, quoting at N1,821.29/£1 compared with the previous rate of N1,823.59/£1, and improved against the Euro by 23 Kobo to settle at N1,574.35/€1 versus N1,574.58/€1.
Data from the Central Bank of Nigeria (CBN) showed that interbank forex turnover increased to $92.248 million across 90 deals, from $73.565 million last Friday.
On the policy front, participants believed that the application of the fourth edition of the Foreign Exchange Manual of the central bank, which introduces updated guidelines for foreign exchange transactions and tightening compliance requirements for authorised dealers and market participants, will enhance market flexibility and ease previous restrictions.
Meanwhile, the cryptocurrency market snapped from recent declines, jolted by Strategy’s purchase of 1,550 Bitcoin for approximately $101 million, increasing its total holdings to 845,256 BTC. The company raised $181 million through common stock sales, using the proceeds to fund the bitcoin purchase and increase its cash reserves to $1 billion, pushing the price of the coin higher by 3.2 per cent to $63,731.69.
Cardano (ADA) appreciated by 8.4 per cent to $0.1738, Ethereum (ETH) rose by 5.2 per cent to $1,711.54, Solana (SOL) expanded by 5.1 per cent to $67.82, and Ripple (XRP) improved by 4.9 per cent to $1.18.
Further, Dogecoin (DOGE) jumped by 4.3 per cent to $0.0873, Binance Coin (BNB) soared by 2.7 per cent to $609.50, and TRON (TRX) increased by 0.7 per cent to $0.3274, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $0.9997 and $0.9998, respectively.
By Aduragbemi Omiyale
The federal government has been advised to consider exploring other funding sources to finance its budget deficits.
Speaking with Punch recently, the chief executive of CSA Advisory, Mr Aliyu Ilias, said the current appetite for borrowing by the government cannot be sustained because it elevates debt-servicing costs.
The economist suggested the sale of some public assets and the involvement of the private sector in infrastructure financing for economic growth.
According to him, running to the debt markets to raise funds for the government is not the best route to take, as the reliance on borrowing always leads to higher debt-servicing obligations.
“The more you borrow, the more you are also incurring more debt services,” he said, tasking the government to also capitalise on increased oil revenues stemming from ongoing geopolitical tensions in the Middle East.
“The government can actually sell off some of their assets to raise more money. The government can also, if you look at the revenue we are getting from oil, it’s getting more, especially with this war. It’s another opportunity for us to actually not borrow again,” Mr Ilias submitted.
He also pointed to ongoing tax reforms as another avenue to improve government finances and narrow the fiscal gap.
“The government can also look at tax reform. The fact is that the government does not have money. The only chance for getting more money is to address the financial deficit,” he added.
By Adedapo Adesanya
Crude oil was up by $1 on Monday as Iran and Israel said they had halted attacks on each other following an appeal from US President Donald Trump.
Brent crude futures gained $1.16 or 1.3 per cent to trade at $94.25 a barrel, while the US West Texas Intermediate (WTI) crude futures were up 76 cents or 0.8 per cent to $91.30 per barrel.
Iran’s military said Monday it halted attacks on Israel after the two countries exchanged their most intense strikes in months, further straining an already shaky ceasefire as well as the US-Israeli relationship. Iran, however, said it would resume strikes if Israel continued to hit Hezbollah in Lebanon.
Israel also halted attacks on Iran, Israeli Prime Minister Benjamin Netanyahu said, stopping short of acknowledging a ceasefire that US President Donald Trump said the countries were aiming for.
President Trump said earlier that the US blockade, which was introduced in April, would remain in place “in full force” until a final peace agreement between the two warring nations is reached.
Prices gained more than 5 per cent earlier on Monday after renewed Israeli strikes on Iran and attacks on Lebanon had reduced hopes of an imminent end to the wider war.
Market analysts noted that because of the strikes, investors were concerned that flows through the Strait of Hormuz might remain restricted for longer. Roughly a fifth of the world’s daily supply of oil and liquefied natural gas passed through the waterway before US-Israeli airstrikes at the end of February unleashed the latest escalation of the Middle Eastern conflict.
Yemen’s Iran-aligned Houthis said on Monday they would ban ships linked to Israel from the Red Sea after Israel renewed its military attacks on Iran, adding to concerns about global shipping and energy flows.
In the face of the supply crisis, a sub-group under the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) on Sunday agreed on its fourth oil output target increase in four months. The seven members decided to increase targets by 188,000 barrels per day from July, the same as the June hike, which was adjusted down from monthly increases of 206,000 barrels per day in May and April to take into account the exit of the United Arab Emirates (UAE).
On paper, the sub-group has increased its output quotas from April to June by almost 600,000 barrels per day, but in reality, the group’s production has collapsed due to export cuts by Gulf members, averaging 33.19 million barrels per day in April compared with 42.77 million barrels per day in February.
Saudi Arabia has cut its official selling prices for crude oil to Asia in July for a second month.
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