Changes in oil prices and the devaluation of the Naira have had a significant impact on the Nigerian economy. With a 70 percent dependency on crude oil for external revenue, the drop in world oil prices is now affecting the Nigerian business space. The question is, how is the fall in the country's main source of income going to impact the real estate industry in Nigeria?
The majority of real estate projects in Nigeria are government-funded, which could mean that the devaluation of the Naira results in less available funding for property development. In my opinion, commercial hubs and larger cities like Lagos, Abuja and Port Harcourt are less likely to suffer, as they have more diversified economies. However, we may see that the development of new properties across Nigeria slows down.
The problem now, for both foreign and domestic real estate investors, is how long this currency devaluation will last. It is currently too early to tell whether the low oil prices are here to stay, or if they will increase again in 12 months. This will determine how the real estate industry is affected in the long-term. However, if low oil prices become a long-term consideration, we may see some much needed pragmatism entering into the real estate sector in terms of prices.
The slide in the value of the Naira means that foreign investors are now able to purchase more than they could previously afford. Furthermore, the costs of foreign components for construction have gone up, which is impacting local investors. As the value of the dollar increases, more Nigerian construction companies will turn to locally-sourced products, to keep property prices as stable as possible. This will result in a positive shift for the Nigerian economy.