It is no longer news that the Nigerian economy is greatly challenged. Analyses by experts with regard to the various sectors of the economy have brought to the fore the reality of the economic uncertainties facing Nigerians, whether in the organized private sector or the informal sector. With the increase in consumer price index from 12.7 per cent in March to 13.7 per cent in April, it is projected that consumer inflation will rise further following the upward adjustment of the price of petrol by about 59.7 per cent. Furthermore, growth in the real sector is lacklustre; the capital market has been unstable coupled with pressure on the naira for devaluation (which is very likely). The summary of these negative trends is that the Nigerian economy sliding into recession and needs urgent solution. Recession is a term used by economists to describe an economy that has witnessed two quarterly negative growth patterns consecutively. Worried by the present economic state of the nation, the senate recently summoned the Minister of Finance and the Central Bank Governor to appear and brief the upper chambers on the monetary and fiscal policies adopted to salvage the current economic situation.
In order to surmount these economic problems associated with a receding economy, policy analysts, commentators and experts have proposed several options. One major area that has been neglected is the role of real estate and the construction sector to provide the needed boost for the economy to bounce back. It has been revealed from studies at both the local market and other developed economies that real estate is the only asset class that provides hedges against inflation, appreciates in value (both income and capital growth) despite the state of the economy and has been found to yield a very substantial revenue to public authorities all over the world among other several benefits. It is worthy of note that real estate encompasses every aspect of the built environment including infrastructure which is critical for businesses and society to thrive adequately and is globally recognized as a major source of employment and economic growth.
Housing investment focused policy has been recognized as one of the strategies that can stimulate the economy and contribute significantly to the growth of GDP as revealed in the economies of Hong Kong, China and the U.S. to mention just a few. For instance in China real estate investment contribution to GDP grew from 4 per cent in 1997 to 15 per cent in 2014. In the U. S., real estate is integral to the economy and home ownership is part of the American Dream. In terms of contribution to GDP, real estate construction contributed about $990 billion to the U.S. economy. From data released by the National Bureau of Statistics, the real estate services sector and construction contributed 6.46% and 3.99% respectively to Nigeria’s GDP in the first quarter of 2016.
Thus, adopting the concept of real estate smart growth strategies will certainly provide the needed catalysts for economic activities. In addition, governments at both federal and local levels should collaborate with the private sector to build and vitalize manufacturing zones or nodes along the major federal roads. Apart from the obvious benefits of encouraging the expansion of cities which are the engine of growth, there are also other value components created along the chain. In this regards, the recent signing of Memorandum of Understanding between Lagos State Government and the consortium of investors for the financing and construction of the N844 billion, 38 kilometres, 4th mainland bridge via BOT arrangement and the unveiling of the planned $70 million regeneration of Oshodi project that will see to the development of the Oshodi transport interchange are salutary infrastructural developments with capacities to expand the frontiers of the Lagos City and catalyse economic activities with high social returns. The 30 years old third Mainland Bridge has been reported as one of the critical developments that accentuated the phenomenal growth of Lagos to a mega polis with an estimated population of 21 million. This justifies the strategic importance of this new 4th mainland bridge.
While commending the allocation of N44.50 billion in the assented 2016 Federal budget for the construction of 7,068 housing units in the six geopolitical zones, it is noteworthy that government really has no business directly building houses because it does not have the resources to do that. It should be left with the private sector. The only imperative now for real estate to effectively catalyse the economy is for the government to vitalize the housing finance industry, remove land related legal impediments and create an enabling environment that encourages investors to invest in mass housing programmes. Otherwise, no sustainable result will be achieved.
FRANCIS OKPALEKE
