With African countries witnessing increased Foreign Direct Investment (FDIs) into their real estate industry, a new report by Estate Intel, revealed that Nigeria trails behind Botswana and Morocco in FDIs because of soaring inflation, weakened naira, and high cost of production.
Essentially, it highlighted that Nigeria’s Naira recorded the highest rate of depreciation in 2023, with an 83 per cent decline in the official rate. It said investors are wary of committing funds to Nigeria’s real estate due to the persisting inflation rate impacting building materials prices, as well as high default rate in property transactions.
Interestingly, Nigeria was also ranked as the third due to heightened currency changes (83.66 per cent YTD), high inflation rate (28.92 per cent) as of last December and high construction costs estimated at $1,700 per square metre,” it noted.
The report added: “Notably, Botswana and Morocco ranked at the top of the real estate market attractiveness ranking. Relative currency stability, low inflation rates, and lower construction costs have underpinned this.”
It further underscores the potential impact of currency performance on leasing activity in the commercial real estate sector and financing for greenfield investments. The depreciation of local currencies is expected to elevate the cost of financing real estate projects on the continent, potentially leading to a limited development pipeline in most markets.
Source: The Guardian
