Housing delivery is a big problem in Nigeria. Based on the federal mortgage bank estimates, Nigeria has a housing deficit of 28 million housing units, and according to the federal government, it will cost 21 trillion naira to bridge this gap. That’s a lot of deficit, and a lot of money. So, how did we get here?
1. Foreign Exchange
The fluctuating Dollar to Naira rate makes everybody nervous, including real estate developers. But it is not just the Dollar; the naira has weakened against major currencies, resulting in inflation which affects housing delivery directly and indirectly. Because Nigeria imports most of its building materials, the unstable foreign exchange frustrates the efforts of developers. Building materials are becoming more expensive, making it impossible to follow through with budgets. Both developers and buyers are challenged with acquiring sufficient money to develop or buy real estate. Some developers, in a bid to cut costs, opt for substandard building materials, which can lead to faulty structures, and sometimes, building collapse.
2. Lack of Infrastructure
Nigeria has an infrastructure problem – poor road networks, poor water supply, unstable electricity supply, etcetera. As a result of this lack, the development of real estate is slower than it needs to be and can reduce a developer’s ability to deliver housing. Also, when a location lacks infrastructure, like good roads and social amenities, it reduces real estate value as people are unlikely to invest in properties in that area. Nobody wants a home in a neighborhood that is not habitable.
3. Rural-Urban Migration
Nigeria is the 6th most populous country in the world, and 63% of this population are multidimensionally poor. In search of greener pastures, many Nigerians are responding to the push of the rural areas and the pull of urban cities. Places like Lagos State and Abuja have seen so much spatial expansion over the past decade to the point where the boundary between Lagos state and Ogun state is no longer distinguishable. Rural-urban migration results in a rapid expansion of cities, which puts pressure on real estate developers to meet the population’s growing demands. Rent increases, environmental pollution worsens, and these cities lose administrative efficiency, thereby disabling adequate house planning. When these cities struggle to manage their population growth, housing delivery suffers.
4. Land use act
The 1978 Land Use Act is one of the most controversial legislations in Nigeria. Instituted by Olusegun Obasanjo during his tenure as a military ruler, this act vests all land in the territory of a State on the Governor of that State and vests the Governor with the power to grant the statutory right of occupancy to persons. In essence, all the land within a state belongs to the Governor and cannot be transacted without the approval of the Governor. One of the significant effects of this law is that acquiring a certificate of occupancy is needlessly cumbersome and expensive. This delay in land acquisition stalls real estate development and places landowners at the mercy of government officials. With many stakeholders calling for a review of this act, the federal government finally commenced the process for a review of the Land Use Act in October 2022.