Real Estate Investor Magazine South Africa December/ January 2018/2019 | Page 44

AFRICA
ADVERTORIAL
Snapshot of Nigeria
Commercial sector
I
s the slowdown in the pace of Nigeria’s economic recovery
a turning point in the general economic trend that took off
in 2017, or rather a blip in the trend?
Broll Property Intel’s Nigeria Snapshot Q3:2018 gives
an overview of the country’s current economic standing and
the state of its retail, office and industrial markets. Despite
the Nigerian economy sustaining five consecutive quarters of
positive growth (which effectively pulled the country out of a
recession), economists are concerned about recent shifts in the
economy’s general progress.
Although Nigeria’s economy grew by 1.5% in the second
quarter of 2018, the GDP growth has declined from levels
recorded in Q1:2018 attributable to the country’s dependence
on oil revenues to drive growth, with no real improvements in
employment and aggregate demand.
Year-on-year (y-o-y) inflation has declined to 11.28% as at
September 2018, from the 15.91% the previous year, but has
picked up from 11.14% recorded in July 2018. The Central
Bank of Nigeria (CBN) decided to maintain the Monetary
Policy Rate (MPR) at 14% to enable the economy to withstand
any further consumer price level increases.
Foreign exchange reserve levels have also increased in the
past year due to the CBN’s aggressive forex policy. However,
as in the case of slowing GDP growth levels, reserves have
declined in the past few months. Nonetheless, reserves are
up 13% year-to-date (y-t-d) and 34% y-o-y. With well over
$9billion (y-t-d) in intervention in key forex market segments,
dollar liquidity has kept Naira values relatively constant.
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DECEMBER 2018/JANUARY 2019 SA Real Estate Investor Magazine
NAFEX, parallel market and the official market rates all closed
Q3:2018 at N363.92/US$, N361/US$ and N306.35/US$
respectively, despite the fact that emerging market currencies
are falling. The stock market is a better illustration of investor
sentiment about the economy, with the market closing Q3:2018
at 32,766 index points, 14.5% lower y-t-d.
When looking at Nigeria’s retail market, renewed signs of
weakness in the wider economy have made investors increasingly
cautious in their investment decisions. Persistent trends include
contracted purchasing power, high tenant turnover rates, high
rental and operational costs and an oversupply of mall space.
Landlords continue to offer financial incentives in order to
drive up mall occupancies, while some malls have operated
under tenant-friendly exchange rates (close to official market
rates), others now operate under rates close to secondary market
(parallel market) rates.
This is likely to have a negative impact on existing and
prospective tenants in regards to rental obligations. Currently,
average asking rental prices for 50m² - 200m² of prime retail
space hover around US$30 – US$70/m²/month in the core
markets of Abuja and Lagos.
A relative improvement in office market dynamics has been
evident due to reduced risk aversion by investors. The market
remains a tenants’ market with landlords having to offer
favourable leasing terms to drive occupancy levels. There’s a
notable rise in demand for more turnkey office options by blue-
chip and large corporates to mitigate initial capital outlay of
which fit-out and furniture costs constitute a significant portion.