Investments in Nigeria can succeed despite Boko Haram threat

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Property Investments in Nigeria can succeed despite Boko Haram threat. Boko Haram translates as 'Western education is a sin'. Property Investments in Nigeria can succeed despite Boko Haram threat. Boko Haram translates as 'Western education is a sin'.

While terrorism has not yet had a severe effect on real estate in Nigeria, Africa’s largest economy, there are concerns that security needs to be heightened to prevent any future serious damage to the sector.

Africa Property has learned that the militia group, Boko Haram’s, activity has tended to attack state owned or operated and not private buildings in Nigeria. This has cost the government hundreds of millions to billions of Nigerian Naira and US dollars. It has also cost some private companies which develop offices for government institutions in Nigeria. However, these companies are redeveloping the damaged buildings quickly. Further, most damage has not destroyed buildings outright.

Boko Haram’s attacks in Nigeria are regular which has concerned some investors. However, they are not over-panicked yet. 

Investors appreciate that Nigeria is a large country with massive and young population. As such one relatively small terrorist organisation like Boko Haram would struggle to affect all of the provinces of Nigeria. Boko currently operates in the North of Nigeria, far from the commercial city of Lagos.

Resilient Africa, a company established by Resilient Properties and Standard Bank, is building its malls away from Boko Haram affected areas. The company owns Delta Mall in Delta State. It is building four other malls. There is the possibility of course that Boko Haram could move closer to the company’s operations but the Nigerian government has implemented high level security at building sites. 

Resilient Africa’s head Des De Beer says Nigeria is exciting but that it will take time to roll out commercial property projects in the country. He also said it would take time before more property companies from other countries invest in Nigeria.

Analysts feel Nigeria a large and growing economy which will bring dollar denominated returns to investors. 

“I like their African strategy. South Africa property groups are not really in Africa especially not in Nigeria, but Resilient has committed to being so and their track record of success in South Africa bodes well for Nigeria. They will get dollar-denominated returns from the properties in Nigeria, something which works for them," said Investec analyst Peter Clark.

Stanlib’s head of listed property funds, Keillen Ndlovu says Africa has a long term investment frontier 

“We like the Africa story. It is a long term play but now is the best time to buy assets in Africa. The rest of Africa story is now starting to gather some pace within the listed space joining in, look at Growthpoint Properties launching its Africa arm, then there is SA Corporate in Zambia now, Hyprop in Ghana and Zambia and Resilient Africa in Nigeria. It’s great to see deals being done by listed property funds. We like that companies are investing carefully on the continent,” he said.

A number of companies not in the property sector have said they are concerned their shops could be attacked. This is while property developers can pace their developments for longer periods. They can build for a while and then stop before starting again. Large supermarkets and other shops need continuous trade to operate efficiently.

A number of Nigerian run businesses have said they feel threatened by offshore companies coming in to the country, especially those from Asia.

It is much “riskier” as an indigenous investor to manufacture in Nigeria than it is “to fight Boko Haram”, according to Eric Umeofia, chief executive Officer at Erisco Foods Limited, a tomato manufacturing firm has said in recent interviews.

“It is riskier than going to fight Boko Haram in Maiduguri to be an indigenous manufacturer here. Because your government agencies work against you as they support foreigners to the detriment of their people,” Mr Umeofia told Vanguard news service in an interview.

While Nigeria’s manufacturing sector has been taunted by global investment firm Renaissance Capital as the leading economic driver, local investors such as Umeofia are having a difficult time growing their business, while foreign manufactures from China and other Asian countries are taking advantage of tax breaks to get a foothold into the market. The idea is that property companies should build more industrial property in Nigeria.

Nigerian President Muhammadu Buhari said the war on Boko Haram is being won. On new year's day, he said Boko Haram terrorists were no longer as feared. Nigerians were retreating back to their neighbourhoods.

"We have technically won the war. We set the deadline to do so by December 31 and we have achieved our goal," he said.

A bigger concern for Nigeria is that the oil price has been under pressure globally for a few months.

Nigeria is a major exporter of oil and needs the funds from it to develop its real estate sector more aggressively. There are three main structural reasons for the state of Nigeria's property market: property registration is expensive, housing construction is handicapped by high costs, and few can access mortgage finance. Nevertheless, Nigeria has potential. Commercial centre, Lagos has some of the most highly-priced real estate in Africa, at around US$1,000 to US$1,200 per square metre.

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