If there was ever any lingering doubt that Nigerian growth was a blip on the world stage, it is long gone. The Nigerian economy is a powerful force that is here to stay, and business leaders and investors worldwide are taking note. Currently Africa’s largest economy, Nigeria is on track to become one of the world’s leading economies in the next 15 years. Nigerians everywhere can share pride in the meteoric development of our country.
There is always work to be done, however, to turn that bright future into reality. A new report from the McKinsey Global Institute details how our country can fulfill its economic promise and make economic growth increasingly inclusive so that more and more Nigerians can benefit from the new and growing opportunities. The key? Real estate.
Our country is perfectly poised for an explosion of growth in the real estate sector for a few simple reasons. First, Nigeria is experiencing rapid urbanization, with just about 50% of the population currently living in cities. Second, the population is young, and only getting younger. The growing middle class and the increasing consumption that goes along with it all mean that the Nigerian real estate sector has huge potential to boost GDP and create millions of jobs for Nigerians.
Indeed, the real estate sector is already growing rapidly at a rate of 8.7 percent — faster than the growth of the average GDP and far outpacing Nigeria’s own GDP growth. In a 2015 report from PricewaterhouseCoopers, Nigeria’s real estate investment is expected to rise by 49 percent, from $9.16 billion last year to $13.65 billion this year. While the economy has experienced a dip in the months following this report, the overall trend of Nigerian real estate remains promising.
Despite the impressive recent growth, however, there is still massive room for expansion in Nigeria’s real estate sector. Currently, as of Q1 2016, real estate makes up 7.41 percent of our GDP, significantly less than many other developed countries such as 22 percent in South Africa, 61 percent in the USA, and more than 70 percent in UK and France.
Last month I published a blog that detailed how the housing deficit and huge growth potential of the real estate sector represents a $300 billion potential market opportunity for investors and developers. The cheap price of land compared to competing emerging cities is a strong incentive for investors to get involved now.
The opportunities do not stop there, however, but are passed along to the public through job creation. Estimates from the United States show that building an average single family house creates almost 3 new jobs, or enough to keep three people employed full time for an entire year. Similarly, a study of the Irish economy revealed that every 1 unit of public investment put into new housing generates a return of 3.5 units in new economic output.
Growth of real estate creates jobs for construction workers, of course, but it also employs people to manufacture, sell, and transport the building materials, as well as professionals who provide services to the home buyers, such as architects and real estate agents. On top of the jobs directly funded by the creation of housing, various taxes also bring in government revenue which can be directed towards programs to further increase employment.
There are many other benefits that are harder to measure, such as making decent, affordable housing available to our citizens. Real estate also serves as an investment for families who are then in a better position to contribute to the economy or even upgrade their home later on. Even once houses have already been built and sold, they continue to add to the economy. One new job is created by every two sales of existing homes.
To truly capitalize on the huge economic potential of Nigerian real estate, we will need to rethink basic accommodations and housing for all citizens, as well as invest in ambitious, high quality projects like Eko Atlantic, currently under construction along the coast of Lagos.
It is clear that Nigeria needs a real estate revolution. Filling the current housing gap of 20 million homes would not only provide housing for our people but also create almost 60 million new direct jobs, and countless more indirect jobs. It might sound too good to be true, but with the right policies, incentives, and mortgage solutions to put homeownership within reach for more Nigerians, a housing revolution and these spectacular benefits are within reach.
A strong real estate sector provides a crucial platform for transformative economic growth in Nigeria. This golden opportunity can help rocket Nigeria to its full potential, triggering development and job creation at all levels and helping Nigerians from all walks of life to thrive.