General elections were conducted in Nigeria on 23 February and 9 March 2019. While the elections have come and gone, they have left a trail of reports and opinions of “unfreeness”, unfairness, vote buying and selling, intimidation by the armed forces and the Police, security issues and destruction of properties etc. Some aggrieved participants, including at the presidential level, in the elections have approached the tribunals to press their claims that the elections were not free and fair.
It must be noted that several local and international bodies commended the elections. Notably, the United Kingdom stated that “Along with our international partners, the UK believes the Nigerian people can have confidence in the result” (see Punch online, “UK Congratulates Buhari on Election Victory” February,27,2019, available on line at https://punchng.com/uk-congratulates-buhari-on-election-victory/.).
However, just like, perhaps, every human endeavor, certain perceived imperfections attracted condemnations as well.
To the European Union Election Observer Mission, there is an urgent need to restore faith in the electoral process.
More particularly, the Mission stated that it observed lack of transparency, misuse of incumbency, troubling electoral security environment, violence and intimidation of election officials, denial of observer’s access to collation centers, lack of level playing field, misuse of state offices, etc.(see European Union Election Observer Mission Nigeria 2019 General Elections, “Systemic failings and electoral security problems show need for serious reform”, available on line at https://eeas.europa.eu/sites/eeas/files/03._eu_election_observation_mission_to_nigeria_assessment_of_the_9_march_elections_11_march.final_.pdf.).
At the local level, an INEC-accredited NGO in Nigeria stated that it observed operational and logistics issues, security issues which resulted in election-based violence manifesting in the burning of election materials, death of election participants across sates in Nigeria, bomb blast in North-East on election morning, etc.
Commentators in both radio, television and the print media in Nigeria have condemned the elections, the chairmen of the two major political parties in Nigeria Adams Oshiomhole of the All Progressive Congress (APC) and Uche Secondus of the Peoples Democratic Party (PDP) have at different foras, put the failure of the 2019 general elections at the door step of the Independent National Electoral Commission ( INEC ). Leaving no one in doubt that the elections have fallen bellow expected standards nationally and internationally as stated by the observers of the election.
While this write-up is not meant to take a position or score the 2019 elections, it seeks to engage the perception about Nigeria that would have been generated by the condemnations and how the negative perception rubs off on the real estate development in Nigeria. An eternal truth is that perception remains perception, whether true or false, but some relationships and business transactions are commenced based on perceptions about one another. By extension, foreign and local investment in a country or part of the country is attracted by several factors including international perception.
We at Property Advisory Network are of the view that the business of real estate development is built on the adherence to rule of law and more particularly willingness by parties to keep to real estate development agreements freely signed without fear by either party that the agreement will not be worth more than the paper it is written on. In essence, in real estate business, predictability of the legal environment over a long period of time for long-term investments, like long leases, is key attraction.
No investor will like to enter agreement in an environment where the other party can change the goal post mid-way or use his or her connections to state power to deny the investor of his legitimate rights and entitlements arising from a property development agreement.
As can be seen, the condemning reports threw up issues of transparency, misuse of incumbency, lack of level playing field and other practices that suggest non-adherence to rule of law by stakeholders even when election peace pacts were signed and there exists electoral laws and guidelines.
In Lagos, there were reports of destruction of ballot boxes at several polling units. Behind the thugs who carried out such destruction could be certain persons up there who may own properties and or engage in real estate transactions.
One report has it that out of a list of about 500 names submitted by a federal institution to INEC as poll officials, a Senator selected those whom he deemed he could ‘work with’. It was also reported that it was caught on video that in one State in Nigeria, a party was overwhelmingly leading when the incumbent Deputy Governor seized and tore the result of the last Local Government to be declared (available on line at https://www.thisdaylive.com/index.php/2019/03/17/us-observer-group-says-election-shortcomings-orchestrated-to-benefit-incumbent-apc/.)
With specific reference to violence, some thugs were alleged to have destroyed property worth 500 Million Naira during an electioneering campaign in Gombe state.( see “Election 2019, APC destroyed property worth N500m during rally-Gov Dankwambo”, available on line at https://www.legit.ng/1222431-election-2019-apc-destroyed-property-worth-n500mn-gombe-rally-gov-dankwambo.html.)
Also, reports came that properties worth millions were destroyed in Delta State by thugs of a political party (see Owen Akenzua, “Elections: Mayhem in Delta Community as Suspected Party Thugs destroy properties worth million” Daily Post, Feb 20, 2019, available on line athttp://dailypost.ng/2019/02/20/elections-mayhem-delta-community-suspected-party-thugs-destroy-properties-worth-millions/.).
In Ebonyi State, there was a report that in one local government, over 30 houses were destroyed in a pre-2019-election violence (see Godwn Aliuna, 2019 Elections: Over 30 houses raised in Ebonyi Speaker’s Community, Daily Post, Feb. 18 2019,
The African Democratic Congress also posted that the 2019 elections were marred with wanton destruction of lives and property (see Jesusegun Alagbe, 2019 elections, and worst in Nigeria’s History-ADC
It was also in the news that INEC offices were burnt in Osun Sate. Hours before the March 9 elections, suspected hoodlums burnt the office of the Independent National Electoral Commission (INEC) in Beskpo Asutan Local Government Area of Akwa Ibom Sate (See Sahara Reporters, “INEC Office in Akwa Ibom Burnt hours before Governorship and State House of Assembly Elections”, March 8 2019, available on line at http://saharareporters.com/2019/03/08/inec-office-akwa-ibom-burnt-hours-governorship-and-state-assembly-elections.).
In Imo State, INEC’s office at Isiala Mbano was raised down by unknown persons while presidential elections results were still being collated (See Sahara Reporters, “Unknown persons burn down INEC office in Imo State during Presidential Results Collation”, available on line at http://saharareporters.com/2019/02/25/breaking-unknown-persons-burn-down-inec-office-imo-during-presidential-results-collation.)
The reports are endless. It is worthy to note that some of these INEC offices could be owned by private real estate investors who are hoping to recoup their investments overtime by long leases to INEC and perhaps other office occupants.
In the light of the above observations, this write-up engages the impact of the 2019 general elections on real estate development in Nigeria.
In simple terms, real estate means property consisting of land or buildings. Real estate development includes activities such as purchase of property, renovation and leasing of existing property, sale of developed land to buyers, developing structures on bare land, sale of developed land to buyers, the financing of these projects, etc.
It is noteworthy that real estate development is capital-intensive but also rewarding in the long run, other things being equal. The typical investor in real estate development, be it residential, commercial, industrial or bare land, has profitability at the back of his or her mind at the end of the day and any threat to such investment is to be avoided by the typical investor as much as possible.
From the investment angle, what are the factors a real estate investor looks at before investing?
Perhaps the key factor is location. For profitability in real estate investment, location would involve its closeness to present or incoming amenities or industrialization. For instance, the ongoing Dangote refinery along the Lekki axis has attracted a lot of real estate purchase and development in the axis. It is also a prominent selling point in the sale adverts of local real estate firms selling land around that axis. Another element involved in location is safety of lives and property.
With respect to long-term real estate investments, an investor is interested in having an idea of how the location would develop or shape up over the period of his or her investment.There were reports that some hoodlums attacked some traders of an ethnic extraction at their business places in Lagos for not voting in a particular pattern and further threatened them to go back to their States. We must state that this pattern of election attack is not particular to Lagos only.
We wish to state that the business places occupied by the business people suffering these attacks are real estate investment also under threat in addition to the lives of the business men and women under threat.
We must quickly state that Section 41(1) of the 1999 Constitution of the Federal Republic of Nigeria states that “Every citizen of Nigeria is entitled to move freely throughout Nigeria and to reside in any part thereof, and no citizen of Nigeria shall be expelled from Nigeria or refused entry thereby or exit therefrom.” Section 42(2) states that “[n]o citizen of Nigeria shall be subjected to any disability or deprivation merely by reason of the circumstances of his birth.”
Notwithstanding the above provision, the above election-induced ethnic based attack anywhere in Nigeria will, overtime, discourage real estate development by an investor who is not from the same ethnic extraction as the location of investment.
Another factor is the force of demand and Supply. An investor is likely to site his or her residential development in an area where people would like to inhabit to meet their need for shelter. An investor would also like to site his or her industrial property at an area where there is need for it and consumers are willing make use of same for their industrial business, etcetera.
Yet another key factor that influences real estate investment is accessibility to funding by investors from financial institutions.
Typically, real estate investors wholly or partly source their development fund from financial institutions, particularly banks. The banks consider several factors in their decisions to avail real estate investor’s high-worth credit facilities. One major factor considered is certainty of the political climate over a period of time. This is in realization of the fact that the political leadership also takes decisions that shape the financial industry in areas of appointments or economic policies including lending interest rates to mention a few.
The trend is that due to the pending Presidential election petition in Nigeria, which is expected to terminate in six months’ time, the banks are reluctant to fund capital-intensive real estate projects because of fear of policy inconsistency which may result from the decision of the presidential election petition tribunal in six months’ time. The effect is that for months to come after the election, real estate development which depends on bank facilities may suffer paucity of funds to the detriment of the development.
Additionally, self-funding investors, particularly foreign investors, are usually reluctant to release funds for execution of real estate investments until there is clarity of the state of the political climate in any country, ditto Nigeria. Consequently, this trend also stalls or slows down activities in real estate development.
Yet another factor is the legal culture of a country or locality. As stated earlier, high-level real estate developments are based on water-tight contracts between or among parties involved in order to protect all concerned and ensure return on investment. The signing of agreements is one thing while the willingness by parties to honor their obligations in the agreement is another. The unprecedented sack or suspension of the chief Justice of Nigeria Justice Walter Onnoghen by the President, Muhammadu Buhari which has been describe as brazen rascality and an unconstitutional act by Lawyers in Nigeria is an unresolved case in hand which sends a very wrong signal to the international investors that an official of the Government could take an illegal decision which may affect their contracts in real estate transactions and nothing will happen (Impunity)
We at Property Advisory Network are of the view that earlier stated observations of local and international observers on the 2019 general elections impact on these factors that influence real estate development and there is thus a need to address the issues thrown up by the reports especially as 2023 elections are four years from now.
With respect to location, it is not in doubt that an investor would not want to buy and develop a piece of land in a State or location where unknown persons would come and burn down in the name of elections and electioneering campaign. In other words, the areas that are prone to property destructions, a few of which are mentioned earlier, may experience gradual less investment in long-term real estate investment. This is especially an issue of interest to investors who may have sourced finance from banks with high interest rate and the least they can afford is to see their developments destroyed during elections.
Additionally, it is without doubt that in places experiencing election-induced violence and insecurity of life, there may be less demand for real estate for habitation or industrial use by consumers. The ripple effect is that low demand would also lead to low or zero interest in real estate investment in such areas. An industry would not purchase or lease property in a location where its industry stands the risk of attack during elections.
Thirdly, an investor will be unwilling to invest or enter into property development agreement in a location or country where the legal culture is poor. The typical investor cannot stand the risk of being faced with a government or a highly-placed individual breaching real estate development obligations in flagrant disregard for the rule of law without consequences due to party affiliations at the State or Federal level.
In view of the few highlighted impacts, we at Property Advisory Network are of the view that there is a need for all relevant stake holders in elections in Nigeria to pay attention to and address the issues that have been raised in the 2019 general elections in Nigeria, perceived or real, in the interest of the business of real estate development in which is a major contributor to Gross Domestic Product in Nigeria.