At the Annual Investment Meeting in Dubai, United Arab Emirates, President Muhammadu Buhari, on 8 April 2019, met with groups of investors, wooing them to come to Nigeria and invest.
Among them was Lulu Group which operates a chain of supermarkets and shopping malls in the Middle East and Asia.
In connection to real estate business, in the meeting was the Rotana Hotel Chain interested in the hospitality sector in Nigeria. The Nakheel properties and limitless Group, reported to be one of the world’s leading developers, is interested in the real estate sector and so is Dubai Investments.
However, the more fundamental question is how safe and secure enough is the Nigerian real estate investment climate to attract these investors and more?
We at Property Advisory Network examine Nigeria’s current security challenges and how they impact real estate development across Nigeria.
The level of insecurity in different parts of Nigeria has left bad taste in the mouth of the nation’s development journey and, more specifically, has negative effects on real estate development in Nigeria.
Amidst these security challenges is the persistent housing deficit Nigeria currently experiences. We are of the view that with the perpetuation of these challenges, this housing deficit may worsen as real estate investment will drop due to the security challenges.
With respect to Northern Nigeria, the Chairman of the Northern Elders’ Forum,Professor Ango Abdulahi, in an address to news men on 14 April 2019, summed up the situation of Northern Nigeria when he stated that today, the North lives under horrendous Boko Haram threats, banditry, kidnappings, armed robbery, marauding youth gangs, herders and farmers mini-wars.
While we note that under former president Shehu Shagari, the Mataisine sect terrorized Northern Nigeria, it has taken a very damaging dimension under the Boko Haram Sect since its commencement in 2009.
A World Bank 2016 report states that since commencement of the Boko Haram Scourge in 2009, in the 27 local government districts that make up Bornu State, fighting between Boko Haram and the Nigerian military destroyed or damaged the following: 956,453 (nearly 30 per cent) out of 3,232,308 private houses; 5,335 classrooms and school buildings in 512 primary, 38 secondary and two tertiary institutions; 1,205 municipal, local government or ministry buildings; 76 police stations;
Also, the Permanent Secretary of the ministry of Reconstruction, Rehabilitation and Resettlement in Bornu State was quoted to have stated in 2017 that in the past six years, Boko Haram has destroyed properties worth One Trillion Naira,
He further stated that the insurgents have razed down 986, 453 residential homes; 5,335 classrooms, 201 health facilities, 1, 630 water facilities and 726 power distribution stations and transformers, 800 public structures such as offices, prisons, police posts and other structures.
Banditry is another threat that has resurged in the north. Their modus operandi is to carry out armed attack on residents in their villages or travellers along the road and cart away their belongings. In the course of this attack, victims can be killed or kidnapped for ransom. This leaves villagers and travellers in constant fear of attack, thereby leading to the abandonment of residential properties in the areas of attack. Zamfara State is now said to be at the mercy of armed bandits. It is in the public domain that about a month ago, armed bandits invaded Kawaye Community in Anka Local Government Area of Bornu State and destroyed properties worth millions of Naira. Also in parts of Katsina State, the bandits are said to destroy lives and property at will while kidnapping is ravaging other parts of the State.
Yet another insecurity threat in the north is the Fulani herdsmen attack across Benue State, Adamawa State, Kaduna, Sokoto and Plateau to mention few. Typically, this group also attacks residents, break into their homes, take lives and set houses ablaze among other atrocities they commit.
Ethno-religious wars are not left out of the mix. In a news report in the public domain, published last year, it was stated that for nearly forty years, Kaduna Sate has been caught up in ethno-religious crisis between Southern and Northern Kaduna which has resulted in loss of life, limb and property worth millions of Naira.
It is not in doubt that shelter is one of man’s basic needs. We at Property Advisory Network are of the view that a common denominator of the above attacks is attack on houses or real estate in general. Real estate is one of the most, if not the most, valued assets around the world. Following this is the dream of virtually every right-thinking person to acquire property over the course of time. This mindset and desire fuels the natural demand for housing and the follow-up opportunity for investors to meet these demands and make humongous profit. It thus appears that for the perpetrators of these heinous crimes, destruction of property is a way to leave a huge negative impact on their victims, hence the recurrent attack on houses, buildings and real estate in general.
In the South-West, there is a resurgent rise in kidnap for ransom in Lagos, Ekiti, Ondo, Oyo and Osun. Just in a space of a two weeks or less, a man was reported to have had to wrestle his family members from kidnappers along the Lekki-Ekpe axis in Lagos and the Acting Director of Lagos State Fire Service was kidnapped alongside six others at Ikorodu.
There is also the recurrent issue of commuters boarding vehicles which, unknown to them, are occupied by armed robbers and ritual killers who obtain personal properties from these commuters including their phones, clothing, etcetera. This trend is colloquially known as “one chance” in Nigeria. These groups are known to operate around certain areas which change from time to time. Worst of all is that some commuters eventually lose their lives to ritual killing in these situations.
Cultism and Cult-clashes are also major security issues in south-west especially, Lagos State. In the public domain is the popular “Bado” cult group that terrorized residents of Ikorodu for some time until same was brought under control by stakeholders. However, some investors and home seekers will never dream of going near Ikorodu for fear of a resurgence of this threat. Just on Sunday, 7 April 219, it was in the public domain that there was a cult clash around Abraham Adesaya, along Lekki-Ajah Expressway in which rival cult members were beheaded and or maimed for life. The town of Oworoshoki in Lagos is also just recovering from the menace of cult groups who attack each other in broad day light with guns and machetes and loot houses and shops of residents.
The Fulani herdsmen have also carried out their nefarious attacks of killing and destruction of farmlands in parts of Ekiti, Oyo and Osun. Armed robbery and mysterious deaths suspected to be ritual-related are also not left out. It was in the news that on 9 April 219, armed robbers attacked a bank in Ondo State where seven persons were killed and sums of money were carted away by the robbers.
It was also in the news in January 2019 that armed robbers attacked a bank in Osun State.
In the south-south region of Nigeria, there is the recurrent issue of militancy which the Nigerian government continues to manage. Also on the list are proliferation of arms, illegal oil bunkering, armed robbery, political violence, cultism, pipeline vandalism kidnappings, etc.
In the South-East, there exist threats such as armed robbery, kidnapping, the proliferation of arms, communal crisis, cultism, herdsmen-farmers clashes and the continuous activities of MOSSOB and IPOB.
On the above background, we shall now examine how these itemized insecurities impact or implicate real estate development in Nigeria.
Firstly, areas prone to security attacks from Boko Haram, Fulani herders, bandits, cultism, regular ethno-religious crisis and other insecurity challenges in Nigeria will witness serious decrease as a residence choice for home seekers. Reason is that safety of dwelling environment remains a key consideration when home seekers are making decisions on purchase or leasing of dwelling places. No home seeker will rent or purchase a piece of property in an area where the earlier-mentioned atrocities are rampant for fear being burgled or their homes invaded and killed. In addition, the luxury of moving around the environment to sort out daily needs is also key.
When a home-seeker fears that his or her desire and need to move freely within the neighborhood will be hampered by constant curfew, ethno-religious crisis, cult clash, kidnapping, etc, he or she will be unwilling to settle within such neighborhood.To drive the message home, no person will like to rent or buy an apartment in Bornu which is the den of Boko Haram, or rent or buy at the other areas mentioned in the earlier part of this write-up in connection with insecurity challenges. Another effect of this is the abandonment of property and gradual dilapidation of same.
Meanwhile, we must state that in effect, due to lack of safety in certain areas, there is likely to pressure on existing properties in areas perceived to be safe by people fleeing from unsafe areas. The result is that there will be a hike in the cost of purchasing or leasing properties in these “safe” areas and developers and or property owners will make more profit. However, the downside is that the pressure may result in sporadic construction of unsafe and unhygienic structures which may eventually collapse or lead to break-out of epidemics; an experience not befitting of ideal real estate development.
From the commercial angle, business owners will be unwilling to buy or lease property to carry out their businesses in areas prone to looting by bandits, cultistism, kidnapping, robbery, etc for fear of the safety of their investments
The ripple effect of the above trend is a decrease in demand for existing residential and commercial property within the areas concerned and loss of investment for the developers who have spent personal and borrowed funds for such developments. This trend will surely put some real estate developers out of business except they are able to manage the situation properly.
From the developer’s angle, no real estate investor will invest funds in areas prone to insecurity when he or she is aware that there will be no patronage and the structure put up can be burnt or destroyed in few minutes of a raid by Fulani herders, ethnic bigots, cultists or bomb blast from Boko Haram or grenade from armed robbers.
Furthermore, financial institutions are not likely to grant investors credit facilities to put up commercial structures in some parts of Nigeria where safety of the investment is an issue or where the project is not viable because of envisaged zero demand for such bankrolled structures when put up.
We at Property Advisory Network are aware that the foreign investors being wooed by President Muhamadu Buhari will eventually carry out their pre-investment study of the Nigerian environment and the safety of their investment on the background of the above insecurities may be a predominant factor in their investment decisions. Hence the need by the Federal Government and all stakeholders to come together and tackle these insecurity challenges.
We urge that in the interest of real estate development, the underlying causes of these insecurity challenges should be addressed overtime.