Wealthy mansions abound in Nigeria, while the poor go without housing
Last Updated: July 24, 2014
Corruption reigns from the presidency downwards. US$20 billions of revenue disappeared over 18 months from the Nigerian National Petroleum Corp., according to ex-central bank governor Lamido Sanuisi. The northeast is in thrall to the Islamist terror organization Boko Haram. The police are abusive, violent, and corrupt. Power cuts are frequent, the roads ill-maintained. The press is under threat. The president systematically impeaches opposition governors. The south periodically wonders whether it should separate from the chaotic north.
Colonized by the British, Nigeria gained its independence in 1960. The country’s oil industry boomed in the 1970s, making Nigeria Africa's largest oil exporter. But with the world recession of the 1980s oil prices plunged, leading to a cycle of massive debt, soaring inflation, and large-scale unemployment. The oil price is now surging again, but little trickles down to the masses.
61% of Nigerians lived on less than a dollar a day in 2010, up from 52% in 2004, according to the most recent poverty survey by the Nigerian National Bureau of Statistics (NBS).
That's partly why, despite being the largest economy in Africa, Nigeria’s housing and construction sector only accounts for only 3.1% of GDP, according to Finance Minister Ngozi Okonjo-Iweala.
Housing construction is about 100,000 units per year for a country of over 170 million – the largest population in Africa. According to the World Bank, the country has a housing deficit of about 17 million units and needs about 700,000 additional units each year for the next 20 years.
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.
Nigerians are turning to rented accommodation
The Lagos Island market has experienced continuous rises in average asking prices over the last three years, with surging demand for luxury houses, particularly from investors and high-income individuals. The Lagos mainland, on the other hand, exhibited marginally decreasing prices in 2013.
Asking rents have been rising. After a lackluster year in 2011 asking rents in both the Lagos markets bounced back in 2012 with double-digit growths.
While asking rents are much higher on the Lagos Island, rental yields are generally higher in the mainland due to the surging prices in the island market. Yields are moderate at 4.3% for the Lagos Mainland and 3.64% for the Lagos Island.
Rental income tax is low
Rental Income: For nonresidents, gross rental income earned from leasing out real property is taxed at a final withholding rate of 10%.
Capital Gains: Capital Gains tax is levied at a rate of 10% on the gains realized from the disposal of real property. Property acquisition costs and incidental costs in transferring property ownership (i.e. stamp duty, professional costs, and advertising) are deductible.
Inheritance: There are no inheritance taxes in Nigeria.
Residents: Residents are taxed on their worldwide income at progressive rates, from 7% to 24%.
Very high costs, corruption-prone system
The total roundtrip transaction cost is around 27.60% to 31.275%. This includes several permits, fees and charges.
The biggest cost is the 8% consent fee paid to the state government. This seems to be a screening mechanism for collecting bribes. There is also a registration fee of 3%, paid by the buyer.
Strongly pro-landlord rental market
Nigerian rental market practice is extremely favorable to the landlord.
Rent: Rents are freely determined; the Rent Control Law of Lagos is not implemented. Rents are paid well in advance, for two to three years.
Tenant Eviction: Because the court system is cumbersome and expensive, most landlords prefer to evict tenants using an assortment of tricks, phony legal cases, intimidation, locking out tenants or physically throwing them out of the unit.
Nigeria is Africa’s biggest economy after rebasingNigeria’s economy is now the largest in Africa after it “rebased” its gross domestic product (GDP) to N80.3 trillion (USD509.9 billion). That compares with South Africa’s GDP of USD370.3 billion at the end of 2013. GDP growth stood at 7.3 in 2013, after growth 6.8% in 2012, 4.6% in 2011, 7.8% in 2010, and 7.3% average growth 2003-2010.
While the revised figure makes Nigeria the 26th biggest economy in the world, the country lags behind in terms of income per capita, with USD2,688 for each citizen. On a per-capita basis, South Africa’s GDP is three times higher than Nigeria’s.