Nigeria is one of the MINT economies, and while its economy was affected by the international financial crisis, the effect was minimal, and the effect on the property market even smaller. In fact, according to CIA World Factbook figures Nigerian GDP grew by 7% in 2009, 8.7% in 2010 and 6.9% in 2011.
This is because, unlike the markets covered so far in this series Nigeria is an emerging market that has really only just begun to emerge. For example, Turkey is an emerging market with a GDP (purchasing power parity) of $1.053 trillion and GDP per capita of $14,600, compared to Nigeria's 414.5 billion and $2,600 respectively. But Nigeria is also a nation rich in oil reserves and now that it has begun to emerge it is easy to foresee a great deal of growth in its future.
At its current stage of development the Nigerian economy's main exposure to the international financial crisis was a brief drop in foreign direct investment and volatility in the price of oil. The property market was even less affected because only the relatively wealthy have been able to buy property in Nigeria, as these people stayed relatively wealthy during the impact of the financial crisis, there was no panic selling of property and so no violent reaction in prices or transactions.
Now, during the patchy global property recovery the Nigerian property market has a great deal of potential for growth. However, it also has a lot of potential for corruption. In fact, you could say that Nigeria is at a crossroads; it can either focus on the foreigners and build high end properties, which will ultimately lead to a violent boom bust cycle and a whole host of other problems, or it can focus on building sufficient social housing for the growing numbers of people now finding gainful employment and bettering their lives.
During the boom years we saw prices of Nigeria property escalate rapidly, with reports of prices growing by around 300% between 2004 and 2008. This was as a result of foreign investment and would have undoubtedly led to a bubble had the financial crisis not stepped in. While as I said Nigerian prices didn't crash, foreign investors did step away to a great extent, and have since had the chance to step back with wiser eyes and calmer heads.
Nigeria's future holds massive infrastructure improvements, growing employment, growing wages and to a certain extent westernisation. We are talking increasing communications, computer ownership, mobile phone ownership, internet usage, access to credit and of course to growing demand for better accommodation to buy and rent.
Currently opportunities to invest in Nigeria through things like funds and other disconnected methods are non-existent; there are no funds specifically focussed on Nigeria or the MINT countries, you have to choose a fund focussed on Africa, or a fund focussed on emerging markets. The former will invest across the entire African continent and the latter will probably still focus its investments on the BRIC economies. However, new funds are springing up all the time so keep your eyes peeled.
Alternatively if you have or can raise sufficient capital to invest directly, either by buying a property to renovate, buying land to build on, or investing in a developer then you could be quids in over the coming years. However, you have to be careful. By its nature, a market so early in its development cycle is pre-regulation to a certain extent; there is a lot of fraud and also plots and properties with questionable ownership that could be reclaimed by the government. But as long as you employ the strict due diligence we explain in many articles and guides on this site this risk can be minimised.
- Friday 23 March 2012