In the last few years Nigeria’s real estate market has expanded rapidly, continuing a decade-long upward trend fuelled by rising per capita incomes, steadily increasing foreign direct investment (FDI), fast urbanisation and strong corporate demand. According to a January 2015 report by CBO Capital, the sector was valued at N6.4trn ($39bn) and growing at 10% a year. Even though local and foreign developers have carried out a large number of projects in recent years, in most segments demand has been outpacing delivery. As a result, the country is far undersupplied in a handful of key areas, including high-quality office space, affordable housing and formal retail.

Even so, many local developers have reported sustained high returns in more traditional segments like high-end residential and hospitality – though these are likely to be tempered in the short term by external factors such as lower oil prices and foreign exchange risk. “There are sizeable challenges to overcome,” Michael Chu’di Ejekam, Lagos real estate director at Actis, a global private equity firm, told Reuters recently. “But in many ways Nigeria represents the perfect storm for real estate investment: huge population, rapid urbanisation and a growing middle class.”


The industry faces a number of pressing challenges. Nigeria’s property sector is widely regarded as “high-risk, high-return”. Its market is one of the most opaque in the world, ranking 96th out of 97 nations surveyed in the 2012 Global Real Estate Transparency Index devised by JLL, a US-based real estate consultancy. Its regulatory environment is complex and outdated, and the bureaucratic costs associated with building, transferring and registering a piece of property are widely regarded as exorbitant. Despite recent initiatives aimed at developing the formal housing market, most Nigerians still cannot afford to buy a house, especially in Lagos and other fast-growing urban areas, hence much of the populace lives in self-built informal housing. A lack of reliable, up-to-date market data also poses a major challenge for domestic developers.

Despite these deterrents, Nigeria’s strong fundamentals and the low level of supply in most segments of real estate bode well for future expansion. Recent performance has been strong. In the third quarter of 2013 – the most recent data that were available – the sector grew by 11% year-on-year, according to the National Bureau of Statistics (NBS). Some also see scope for growth in property management services. “We estimate that the market for facilities management in Nigeria could be as much as $1.2bn,” MKO Balogun, managing director and CEO of Global Property and Facilities International, told OBG. “A majority of this growth can come from government buildings, 60-70% of which are not maintained by a third party.”


The real estate industry is regulated by a variety of ministries and official entities. The Federal Ministry of Lands, Housing and Urban Development (FMLH) has a mandate to provide housing for all Nigerians. Established in 2010 as part of a government reshuffle aimed at streamlining real estate oversight, the newly formed FMLH was put in charge of a variety of other pre-existing authorities and parastatals, including the Federal Mortgage Bank of Nigeria (FMBN), a financial resource for Nigerians buying property, and the Federal Housing Authority (FHA), which plans, enacts and runs a variety of housing-related initiatives, with a special focus on affordable housing. The FMLH also runs a host of other units, including departments providing architectural services, surveying, engineering, urban development, planning and research.

In 2012 the FMLH launched two major initiatives: the National Housing Policy (NHP) and the National Urban Development Policy (NUDP). The former’s stated aim is to “ensure that all Nigerians own or have access to decent, safe and sanitary housing in [a] healthy environment with infrastructural services at affordable cost, with secure tenure”. The NHP comprises a number of new housing projects, which are overseen by either the FMLH, the FHA or private developers. Under the NUDP, the ministry is working to “promote a dynamic system of urban settlements, which fosters sustainable economic growth, promotes efficient urban and regional planning and development, as well as ensure improved standard of living and well-being of Nigerians”.

As of early 2014 the FMLH was also involved in other initiatives, including reform of Nigeria’s land laws, which are widely considered convoluted and out of date, and a review of the National Building Code, which was drafted in 2006 but has yet to be formally adopted (see Construction analysis).

A number of state entities are also involved in the real estate sector in various ways. Many state authorities own and operate their own property development firms, for example, such as the Lagos State Development and Property Corporation. In some areas, state land bureaux and environmental authorities wield considerable power over real estate development.

Business Environment

Despite the FMLH’s ongoing efforts at reform, Nigeria is widely regarded as a challenging operating environment for developers. In the World Bank’s 2014 “Doing Business” report, which studies business regulations around the world, the country ranked 147th out of 189 countries, down from 138th in 2013. Nigeria also ranked poorly on a handful of specific metrics: 151st for ease of obtaining construction permits, down from 146th in 2013; and 185th for property registration and electricity access, the latter being a major concern for makers of construction materials as well as building owners and managers. According to the report, registering property in Nigeria takes 77 days and costs 20.8% of the property’s value, compared with averages of 59 days and 9% in subSaharan Africa, and 24 days and 4.4% in the OECD.

Conversely, Nigeria ranked 13th in the world by ease of getting credit, down slightly from 11th in 2013, though it is important to note that the “Doing Business” report was compiled solely from research carried out in Lagos, the country’s commercial capital and largest city. Many rural areas are underserved in terms of formal financial institutions and thus lack access to finance. Also, the report does not account for the cost of credit, which is prohibitively high throughout the country.

The bureaucratic costs associated with holding and transferring land in Nigeria are also seen as a hindrance to real estate development. Most land transactions are governed by the 1978 Land Use Act, under which most of the country’s land was nationalised (see analysis). The lack of a national building code is another major challenge, particularly in the construction industry.

Informal Housing

While the real estate sector has grown substantially in recent years, most Nigerians live in informal structures. Some 70-80% of Nigeria’s nearly 170m people live in unplanned settlements, and the overwhelming majority of its houses are self-built, according to CBO Capital, a Lagos-based investment firm. In urban areas, a large portion of the population live in slums – 70% in Lagos – and a preponderance of city-dwellers rent their homes, which typically costs 30-40% of their annual income, according to the UN. In general, the costs of buying and maintaining formal housing are well out of reach for most Nigerians.

For a country of its size, Nigeria’s stock of formal property is small. Residential, office, retail and hospitality space is located almost exclusively in urban areas, especially the three key markets of Lagos, Abuja and Port Harcourt. Lagos, with a population estimated at 17m-21m depending on the source, is among the largest cities in Africa and by far the largest in Nigeria. Home to a majority of the country’s formal real estate, the city is considered Nigeria’s primary destination for property investment and new developments. Over the past decade, however, Abuja – the political capital since 1991 – has attracted a steadily growing amount of property investment. As the seat of the federal government, Abuja has benefitted from state investment projects in recent years. For its part, Port Harcourt, the capital of Rivers State in the Niger Delta region, is a major centre for the oil and gas industry, which accounts for much of its property investment.

Residential Housing

The high-end luxury residential segment has long been a key revenue generator for developers in Nigeria. Prime developments are clustered in a handful of neighbourhoods, including Banana Island, Ikoyi, Victoria Island and Lekki Phase 1 in Lagos; Maitama, Asokoro and Jabi in Abuja; and GRA Phase 2 in Port Harcourt. Most of these areas command housing prices that rank among the highest in Africa and considerably higher than in many Western markets. As of early 2013, the annual cost of renting an apartment in Ikoyi was $50,000-100,000 a year, while sales prices started at N100m ($610,000), according to MCO Real Estate, a Lagos-based property firm. Due to the high costs of owning, leasing and managing a building – not to mention the tendency of Nigeria’s legal system to favour tenants over landlords – most leases require two years’ worth of rent to be paid up-front.

While demand for luxury rentals has remained relatively strong in recent years – driven largely by the booming oil and gas, financial and technology sectors – the high-end residential sales market has lagged slightly due to global macroeconomic uncertainty. Since late 2012, some developers – citing long lead times for selling prime apartments in popular areas – have pivoted towards the mid-range market, where high-quality apartments in well-located areas can fetch sales prices of N15m-N170m ($91,500-1m), according to MCO. “Demand is flattening in markets like Victoria Island and Ikoyi,” Gbenga Olaniyan, executive chairman of Estate Links, a local property consultancy, told OBG. “The place we expect to see growth in the residential segment include Lekki, Ikeja and Maryland, where flats go for around N300,000-N1.5m ($1830-9150).”

Affordable Housing

So far, the issue of affordable housing in Nigeria has largely fallen to the government, though private developers increasingly see this segment as a major potential source of revenues. The demand for low-cost housing is enormous – 15m20m units as of early 2013, according to government estimates, and set to rise with population growth in coming years. Most Nigerians cannot afford formal housing: some 61% of the population lived on less than $1 per day at the end of 2012, according to the NBS.

The country’s mortgage market is also small, costly and underdeveloped. By the end of 2011 – the most recent year for which data were available – the ratio of outstanding mortgages to GDP was 0.6% in Nigeria, compared to about 50% in Europe. Mortgages are both expensive, with interest rates ranging from 18-30%, and short term, with tenors of one to six years, putting them further out of reach for most Nigerians.

Given the scale of demand, improving access to affordable housing has become a priority for the authorities. In early 2014 the federal government set up the Nigeria Mortgage Refinance Company (NMRC), which aims to lower the cost of mortgages by buying up packages of existing loans and providing guarantees to commercial lenders. Working alongside the NMRC, the FMBN also provides low-cost, state-financed mortgages through the National Housing Fund (NHF), which pools mandatory donations from public and private sector employees. Since its introduction in 2010, the NHF has seen average monthly collections rise by 174%. In the 3.5 years to May 2014, the FMBN reported extending N23.8bn ($145.2m) in new mortgages.

The FMBN is in the midst of efforts to recapitalise, with its three shareholders – the federal government, the Central Bank of Nigeria and the Nigerian Social Insurance Trust Fund – all committing to increase their contributions. The bank is also in the process of securing additional financing from foreign institutions, including the Industrial and Commercial Bank of China and Globus Financial, a US-based firm (see analysis). To make housing more affordable, some think the state could do more than offer mortgages directly. “The government should focus on making the land registration process more transparent and less time-consuming,” Olufemi Oyinsan, head of commercial broking at Broll Nigeria, a major property investment and management firm, told OBG. “Efforts should also be made to boost accessibility to private sector financing.”


Nigeria is increasingly considered one of Africa’s leading destinations for retail property investors. Strong fundamentals – a rapidly growing population and rising per capita income levels – have boosted spending power across a wide swathe of the populace, fuelling growing demand for consumer products. “Mall tourism, which involves going to the mall for leisure purposes and has been popular in Europe and the US for years, is starting to catch on in Nigeria,” said Olaniyan.

Lagos’s retail market, the largest in Nigeria and one of the largest in Africa, is broadly underserved in terms of formal space, with just one mall per 1.7m inhabitants as of the third quarter of 2013, compared with one per 49,000 in Johannesburg, according to MCO. The retail segment has only become a growth area in the past 5-10 years, so most of the Western-style shopping malls in Lagos and other metro areas are less than a decade old. “There are currently 6-10 new malls in the pipeline,” Lola Sowunmi, retail leasing manager at Broll Nigeria, told OBG. “Most of these are coming up in Lagos, but some are also under construction elsewhere in the country, albeit on a smaller scale.”

Nigeria’s first international-standard mall, the Palms Shopping Mall, opened in Lagos in late 2005, owned by Persianas Group, a Nigeria-UK joint venture. In December 2011 a second major retail project, Ikeja City Mall, opened in Lagos – financed by Actis, RMB Westport (a subsidiary of a South African bank) and local conglomerate Paragon Holdings – achieving full occupancy by mid-2013. Other malls that have recently opened or are expected to soon include, in Abuja, Capital Mall and the Grand Towers Abuja Mall, and, in Port Harcourt, the Silverbird Mall, the River Jewel Mall and the Artee Mall.

Many of these have reported high demand from both tenants and consumers. In the early 2000s only a handful of foreign consumer brands were sold in Nigeria. Since the Palms and Ikeja City projects were completed, however, the country has seen an influx of new retailers and foreign products. Supermarket brands such as South Africa’s Shoprite chain and Game, a subsidiary of Wal-Mart, have proved popular as anchor tenants, while high-street fashion and lifestyle brands have snapped up retail space across the country.


Nigeria’s growing reputation as a major player in Africa and gateway to the sub-Saharan region have fuelled strong demand for grade-A office space in recent years. According to Broll Nigeria, less than 100,000 sq metres of prime office space was available in the country as of end-2013, nearly all of it occupied. The supply-demand gap has pushed prices up in recent years: as of early 2014 rents for grade-A space in prime areas like Victoria Island and Ikoyi were among the world’s highest. In early 2014, prime net office rents hit a range of N130,000-160,000 ($793-976) per sq metre in Lagos, according to Broll, compared with N72,000 ($439) per sq metre in Abuja.

These high rates are widely expected to drop in the coming years, given the massive amount of new office space currently in the pipeline. By the end of 2016, Broll reckons, Nigeria will have about 275,000 sq metres of office space, more than double the current figure. This new supply is set to outpace demand, raising concerns of precipitously falling rents in the coming years. “I think there is still demand for around 100,000 sq metres of grade-A space,” said Olaniyan. “After that it unclear whether or not uptake will keep up with supply.”


As global interest in Nigeria rises, the hospitality segment has drawn the eyes of developers in recent years. A cluster of new hotels have gone up in Lagos, Abuja and Port Harcourt over the past decade, yet by most accounts the country is still undersupplied in this area. As of early 2013 Nigeria had around 30,000 hotel rooms, according to CBO Capital. As supply has increased over the past five years, occupancy rates have dropped somewhat, according to W Hospitality Group, a Lagos-based consultancy. Nonetheless, as of late 2013 hotels in Lagos posted an average occupancy rate of 67%, considerably higher than most European cities. According to W Hospitality research, in 2013 Nigeria had the largest hotel pipeline in Africa, with nearly 7000 new rooms set to open in the coming years.


The industrial property segment has also been a key focus among local developers in recent years. In a bid to tap into the huge domestic market, a handful of global drugs manufacturers and makers of fast-moving consumer goods have recently made investments in Nigeria, benefitting local property developers. “The local industrial sector has a lot of potential, said Oyinsan. “However, it remains largely unorganised and opaque in terms of real estate development. With prospective investment in the coming years, this sector could experience rapid growth as well.”


Despite a range of pressing challenges, Nigeria’s real estate sector is set to continue expanding in future, albeit at a slower pace than over the past decade. A burgeoning middle class is expected to fuel demand for new retail and – given the chance – residential developments. Ensuring that these people have access to affordable mortgages remains a key government priority, which bodes well for future expansion in the middle- and low-end housing segment.

In the short to medium term, external factors may temper this growth somewhat, as the end of the US’s bond-buying programme and a possible interest rate hike by its central bank begin to draw some foreign capital out of Nigeria, thereby exerting downward pressure on the value of the naira. Government projects could also decelerate as lower oil prices squeeze state revenues, some 70% of which come from hydrocarbons.