Ubosi Eleh Report: 2023 Required Conservative Approach to Investments

Fadekemi Ajakaiye

The Ubosi Eleh Real Report, in its review of real estate activities in Nigeria in the year 2023, described the previous year as one that was not only uncertain for economic activities, but that it also required conservative approach to investments.

According to the report, “2023 was an election year. In an election year, people are skeptical, the investment environment is uncertain and many would rather hold on to their money.Real estate responds to the atmosphere as well. It was a year to be conservative.”

The Report, which debuted in 2017 and now in its eighth edition, noted that aside the election, two other factors that defined economic activities during the year were the full withdrawal of petrol subsidy following the inauguration of the Tinubu government on May 29, 2023 and the galloping devaluation of the Naira against other currencies in the world.

In the observation of the Report, the withdrawal of petrol subsidy triggered energy cost-induced inflation because transport cost increased by 30-50 percent. Similarly, it noted that the official exchange rate of the Naira increased from N457.314 in January of that year, specifically to the dollar, to over N794.53.

On the whole, the Report posited that Nigeria’s economy experienced mixed performance in 2023, characterized by a relapsed growth and persistent inflationary pressures.

In its analysis of the 2024 Budget of N28.7 trillion, infrastructure and housing had a portion of N1.32 trillion for projects across the country, representing 5 percent of the budget allocation. The Report considered this allocation grossly inadequate, moreso in the light of the depreciated Naira value.

Nevertheless, the Report was optimistic in its outlook projections for the current year 2024.

It opined that with political stability, warehousing and logistics would make significant contributions to the economy in 2024. It noted that although the hospitality sector in the Northern Region of the country was undermined by a web of security issues and challenges, there would be a better performance in 2024 in the Southern half of the country, particularly in Lagos where hospitality real estate experienced a surge in the previous year by the entry of new players to the market.

On the Retail sector, the Report is hopeful that despite a myriad of challenges, notably unreliable electricity supply, the devaluation of the Naira and insecurity amongst others, it would prosper in 2024 because as Retail outlets align with Nigerian consumers’ preferences, there would be increased purchasing as economic prosperity surges. It noted, however, that while retail outlets would maintain patronage, the diminished purchasing power of the consumers will result in a decrease in the average basket size of shoppers.

Similarly, it projected that due to the economic downturn, finding tenants for vacant spaces in massive malls would be challenging whilst in contrast, investors in modest shopping Plazas and Supermarkets smaller than 1000 square metres should anticipate substantial rewards.
It posited that notwithstanding the downturn in the general economy, population growth and the fervent desire to own property would spur a growth in the residential retail market, particularly in the major cities in the country, namely Lagos, Abuja, and Port Harcourt respectively. The Report envisaged that property prices would experience significant increases ranging from inflation and construction cost hikes.

On Office Real Estate, the Report noted that the adoption of remote working models and down sizing resulted in increased office vacancy rates. The decline in tenant demand resulted in little growth in renters or slight decline in certain sectors.

Whatever the challenges or problems, the Nigerian real estate, the Report concluded, holds so much promise in 2024 and beyond.