In many African countries, there seems to be an imbalance in the spread of growth seen in commercial cities compared to the rest of the country. By this, we mean in terms of GDP across all sectors and industries. Looking critically into the real estate market there’s an obvious gap that keeps widening even further. For instance, the performance of the real estate market in Cairo, Nairobi, Cape Town and Kigali, far outstrips what you will find in other states in Egypt, Kenya, South Africa and Rwanda respectively, and the list goes on.
This is understandable, and even in Nigeria, there is a much bigger and more obvious disparity. Except for Abuja, of course, the playground of the country’s big wigs (expatriates, diplomats and high-net-worth individuals), and Port Harcourt, the country’s oil hub, no state’s real estate market can boast of anything close to what Lagos does. This is interesting because even in other African countries, especially South Africa and Egypt, the gap is not as wide as what you will find in Nigeria. For example, there is still a close match in real estate market performance in Capetown, Pretoria, Bloemfontein, Limpopo, Mpumalanga and a few other provinces across South Africa.
While Lagos is definitely getting a number of things right, the uneven allocation of key national resources puts the state in a very advantageous position over others. A number of factors explain this tilt:
Lagos’ economic prowess makes it a difficult match
Lagos is home to Nigeria’s Financial Services Sector, a major hub for the Capital and Money Market housing 97% of Commercial Banks’ Head Offices and over 200 financial institutions operating within the state. Lagos is referred to as the commercial nerve of Nigeria. The state also boasts of 29 Industrial Estates and 4 Central Business Districts, attracting over 70% of Nigeria’s industrial investment. It is also home to the nation’s chief ports including the Apapa and Tin Can Island ports that receive up to 70% of total national cargo freight.
In terms of entertainment, aviation, and even financial performance, Lagos also leads the rest of the country. Over 50% of Nigeria’s Public Telecommunications operators (PTO/GSM) are residents in Lagos, and this city also has the busiest international/regional aviation hub in the country. For context, the Murtala Mohammed International Airport, Ikeja attracts over 70.61% of international and 58.30 % of domestic traffic, and Lagos’ Internally Generated Revenue accounts for over 60% of the State’s annual budget, no state in the country does anything close to this.
Of course, real estate market performance draws so much from what is happening with the overall economy. Lagos, in particular, has been able to thrive in real estate, largely because other sectors of the State’s economy are working, at least, better than the rest of the country. In the real sense of it, Lagos is not only big in the context of Nigeria. The City is also one of the largest economies in Africa. But there’s more to why Lagos keeps leading the rest of the country in real estate performance. Let’s get a little deeper.
Lagos occupies only 0.13% of Nigeria’s 923.768 square kilometre land area but houses more than 10% of the country’s population. This seemingly small city’s GDP is reportedly more than 30% of the country’s GDP. However, in terms of real estate performance, some key factors put its real estate market in a more advantaged position. One of those is the quantum of its budget that goes into infrastructure.
In terms of budget, Lagos spends more on infrastructure than any other state in the country
Infrastructural development to a large extent influences the real estate market and is one of the biggest value drivers across all real estate subsectors. People who are looking to buy properties either for owner occupation or for investment need to be certain that there is access road to the property, electricity connection, water supply, and good schools for their kids. In terms of what goes into infrastructure projects, Lagos spends over 18% of its annual budget building roads, bridges, and everything that makes life conducive for its residents. Compared to the rest of the country, this is over 152% more than the percentage spend for other states in 2022 and 122% more than the percentage spend on the national infrastructure budget.
Investors need returns, and like every other investment, people who are deploying capital in Nigeria’s real estate market, will only do so in States where there is economic traction, and Lagos happens to be that state in Nigeria. As the real estate market in Lagos reaches its peak, there is a dire need for real estate markets in other states need to grow much more. So, what is the Way forward?
Closing thoughts
We need to open up other cities for growth. Nigeria needs new models of development and infrastructure allocation. The presence of infrastructure and the overall economic impetus of a region is the fuel needed for real estate to thrive. To achieve this in other states in Nigeria, we need to democratize the allocation of core resources. By doing so, we are helping Nigeria’s second-tier cities to reach their full potential, and once this is achieved, economic opportunities will be extended throughout the nation, and the real estate market in other states can begin to see more traction.
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