By Lukman Shobowale
After months of rigorous political campaigns, the presidential election has finally been laid to rest. Former Governor of Lagos State, Asiwaju Bola Ahmed Tinubu has been declared Nigeria’s President-elect.
While there is contention in some quarters on the credibility and fidelity of the process that produced the outcome, it is safe to say that until otherwise, Nigeria must begin to look forward to a Tinubu Presidency from May 29.
There are already high expectations especially on the capacity of the forthcoming government to manage the multi-faceted challenges that currently beset Africa’s largest economy. My quick note is that the public must manage their expectations. As former Governor of New York, Mario Cuomo famously observed, politicians campaign in poetry, but govern in prose.
The period between the election and the actual transition is one of the most critical periods in the life of any government. The period provides opportunity for policy planning, setting key priorities for the next government, identifying low hanging fruits and the issues that require urgency.
The period is also critical because it affords citizens the opportunity to contribute their ideas, set an agenda and suggest key performance indicators for the government. The public engagement around this time is expected to provide policy insight and shape the policies, positioning, and ideological leanings of government.
One of the most significant priorities is the real estate and housing sector. The sector can be considered from both the challenges of housing and the ability of the real estate sector to sustain the economy, especially at a time when the contribution of oil continues to decline.
On housing, the challenges of the sector are already quite clear. As the International Human Rights commission (IHRC) recently revealed, more than 28 million Nigerians lack access to decent and affordable housing. In its 2019 report, the Central Bank of Nigeria (CBN) confirmed that only 10% of Nigerians who desire to own a home can afford it.
In the United States, comparatively, it is 72% while 78% in the United Kingdom. With 10% home ownership in Nigeria, the estimate is grossly inadequate for the size of our economy. This is far lower than countries in other emerging markets, such as Turkey (58%), and Indonesia (84%).
The combination of a rising population with 2.5% annual growth has contributed to this deficit. Nigeria’s urban population is projected to be growing at 4.3%. The urban population has increased significantly from 15% at Independence to 50% in 2021 and it is expected to double by 2037.
This situation has culminated in the progressive housing demand in locations such as Lagos, Kano and Ibadan. The challenge is also exacerbated by a lack of access to mortgage and consumer credit, low incentives and concession to private investors, housing price-to-income ratio, rent-to-income ratio, high cost of land and building materials occasioned by inflation, infrastructure deficit and the bureaucracy in the land conveyance process occasioned by the land use Act.
Based on its empirical studies, the Federal Mortgage Bank of Nigeria (FMBN) estimates that N21 trillion will be required to close the housing gap, at an average of 1 million housing units annually. Currently, Nigeria only manages to add a paltry 100, 000 housing units annually, mostly through private effort.
While the housing sub-sector does not offer so much to cheer, the real estate sector generally has maintained a strong performance following the impact of COVID-19. Already, Experts have predicted that Nigeria’s real estate sector will expand by 5.2% in 2023, projecting a 6.5% contribution to GDP. In a few years, the contribution of the sector is expected to rise to the levels of the United States and China.
In his action plan, Renewed Hope 2023: Agenda for a Better Nigeria, Tinubu highlight a few thoughts on housing, especially on mortgage and consumer credit and the need to revise the land use act to streamline the land conveyance process, not so much was said about the ability of the real estate sector to contribute to the economy, especially as the revenue from the oil sector continues to decline.
On the housing front, in addition to some of the earlier policy commitments, a Tinubu presidency must note that the housing sector must be on the front burner, because according to his manifesto “Home ownership is a source of prosperity, social stability and individual pride, a vibrant residential construction industry is essential to a healthy modern economy.”
Therefore, in addition to its emphasis on mortgage and optimising the Land Use Act, a Tinubu presidency must boost private sector participation through incentives such as tax concessions, and provide infrastructure that can support investment in the sector.
On the prospects of the real estate sector, Nigeria’s revenue to GDP currently stands at 8%, below the African average of 18%, making government revenue one of the most inadequate globally. The real estate sector has great potential to sustain the economy in the long term. Significant investment and enabling business reforms in the sector can help the government to increase its revenue from the sector, through land-based taxes, improved tax revenue and widen the tax net.
A Tinubu Presidency must maximise the potential of the sector to deliver sustained prosperity; provide jobs; address poverty; redistribute wealth and enhance government revenue. Significant investment in the sector, in addition to enabling business environment reforms can accelerate the sector and its contribution to the growth of the economy and GDP.
As the next government prepares to take the reins in a few months, closing the housing gap and maximising the real estate sector must form an important priority of the government, both as a means to deliver prosperity and as a key for driving sustainable economic growth.
*Shobowale, Co-Founder of Dukiya Investments, writes from Lagos
