Emphasis on affordable housing in Nigeria’s real estate sector

Nigeria’s real estate sector experienced a challenging 2020 in line with broader economic trends, characterised by a drop in demand, movement restrictions and global supply chain disruptions associated with the Covid-19 pandemic. The health crisis resulted in various negative effects across almost all real estate segments: commercial properties saw higher vacancy rates as white-collar workers shifted to working from home; residential transactions slowed amid income uncertainty; and lockdown measures reduced footfall at retail establishments. Even so, there were some early signs of recovery at the end of the year, and warehousing benefitted from the shift to e-commerce.

Looking ahead, one segment poised for growth is affordable housing. The authorities’ prioritisation of developing such units and facilitating cheaper mortgage options should help more residents become homeowners in the coming years.


Several ministries and state entities are involved in regulating the real estate sector. The mission of the Federal Ministry of Works and Housing (FMWH) is to facilitate the provision of affordable and secure housing in both urban and rural areas, as well as ensure residential neighbourhoods are accessible via functional roads. Formulating and implementing policies on behalf of the federal government, the ministry carries out various homeownership and rental programmes. The FMWH comprises 15 departments and six units, including the Public Building Department; the Urban and Regional Development Department; and the Lands and Housing Development Department. The ministry supervises the Federal Housing Authority, which develops and manages real estate across the country; advises the government on urban and regional planning, and transport and utility networks; and offers no-income and low-income housing through funds provided by the government and external sources.

The authorities are working to strengthen the mortgage system to support homeownership rates (see analysis), and the Federal Mortgage Bank of Nigeria is central to this initiative. In addition to providing loans to low- and middle-income Nigerians to build, purchase and renovate homes through the National Housing Fund, the bank offers mortgage refinancing, mortgage purchasing and warehousing, and mortgage-backed securitisation. The Nigeria Mortgage Refinance Company, for its part, was licensed in February 2018 and provides refinancing via funds raised on the Nigerian Exchange.


Real estate accounted for 6.4% of nominal GDP at the close of 2020, down slightly from the 6.5% seen in 2019 but up from 5.2% in the second quarter of the year, according to the most recent annual “Nigerian GDP Report” published by the National Bureau of Statistics (NBS). At current basic prices, the real estate sector was valued at N8.7trn ($23.2bn) in 2020, down from N9trn ($24bn) in 2019. While the sector has seen sustained contractions – shrinking by 4.3% in 2017, 4.7% in 2018, 2.4% in 2019 and 9.2% in 2020 – real estate activity grew by 2.8% in the fourth quarter of 2020, reversing a trend of quarterly contractions since the beginning of 2019. Notably, the sector contracted by 22% in the second quarter of 2020 when the extent of the Covid-19 pandemic was realised and mitigation measures were first enacted. However, these figures not only highlight the negative effects that the pandemic and prior economic challenges have had on the market, but also its ability to navigate headwinds and recover as mobility and other pandemic-related restrictions were eased.

Office Space

Nigeria was home to 117,000 sq metres of grade-A office space at the close of 2020, with 6800 sq metres of new grade-A properties completed in the second half of the year and an additional 67,000 sq metres expected to come on-line by the end of 2023. The vacancy rate was 45% in the second half of 2020, according to property service company Broll, with major occupiers including companies involved in agriculture and fast-moving consumer goods. The Covid-19 pandemic and related office closures to stem the spread of the virus resulted in a slowdown in general office market activity in the first half of 2020, with new grade-A leases falling by 87% compared to the second half of 2019, to 2604 sq metres. This trend continued into the latter six months of 2020, which saw new leases fall by 49% compared to the first six months. Multinational companies, in particular, reduced their area of leased office space during the year.

Nevertheless, there were signs of longer-term growth amid the challenging environment. In September 2020 Facebook announced that it would establish its second office on the continent in Lagos. Expected to open by the end of 2021, the office will include engineering, sales, policy and communications teams that will provide Africa-focused products. The announcement was seen as not only a boon to Nigeria’s burgeoning technology ecosystem, but also as a signal of confidence in the country’s real estate offerings and provision of services as it moves to recover from the pandemic. That same month German ocean freight giant Hapag-Lloyd opened an office in Lagos, citing the city’s importance to global shipping routes.

Technology Village

In addition to new office space, Nigeria is developing several technology parks and special economic zones aimed at attracting companies through tailored services, a skilled workforce and other incentives. One such facility is the Abuja Technology Village (ATV) Science and Technology Park and Special Economic Zone. Since its establishment in 2016 the ATV has focused on facilitating collaboration among companies involved in research, incubation and commercialisation in the areas of ICT, biotechnology, and minerals and energy technology. The zone is working to grow from its current start-up phase to a global innovation centre known for its high-tech output.

Retail & Industrial Property

The retail real estate segment was more severely affected by the pandemic than office space over the course of 2020. Retail was one of the sectors hardest hit by lockdown measures imposed to keep the infection rate low, with disrupted consumption resulting in cash flow problems for retailers. This was exacerbated by currency depreciation, capital and import controls, and property destruction associated with nationwide protests against the police. While the first half of 2020 saw some retailers – most notably outlets selling non-essential goods such as trendy fashion and accessories – shutting their stores in malls, vacancy rates recovered from 16.3% in June to 12% in December. No new large retail spaces hit the market during the first half of 2021.

One segment that has benefitted from the pandemic, however, is warehousing and storage. After mobility restrictions were imposed, many retailers shifted to online sales, increasing demand for urban warehouses and fulfilment centres. The need for last-mile logistics is expected to remain high, as brick-and-mortar retailers continue their pre-pandemic transition to e-commerce that the health crisis expedited. Several large-scale projects were under way as of early 2021 that will help meet this demand for warehousing and packaging facilities, including the 4.5m-sq-metre Agbara Estate, the 3m-sq-metre Lekki Free Zone and the 500,000-sq-metre Agility Distribution Park.

Residential Trends

During a year when people around the world spent significantly more time at home, many Nigerians in Lagos, Abuja and Port Harcourt were stationed in one- and two-bedroom apartments. Security, reliable electricity and nearby transport connections are cited as the most important factors when choosing a home. However, the Covid-19 pandemic – which brought the trend of remote work and heightened awareness of the risks of high-rise apartment buildings with elevators and poor ventilation – saw people look to homes in the suburbs. Interest in garden-style communities that offer open spaces and lower population densities therefore rose, according to local real estate solutions firm Northcourt. “Residential estates are growing at pace in Nigeria, but this segment could benefit from further incentives and loans to encourage the private sector during a challenging context,” Uzo Onukwubiri, CEO of Sow Real Estate, told OBG.

Housing Deficit

There are about 10.7m formal residential units in Nigeria – of which 5% have a formal bank mortgage – and the estimated housing deficit is 17m units. Due to the lack of sufficient stock, an estimated 60-79% of Nigerians live in informal and often crowded settlements, leaving them particularly at risk for the spread of communicable diseases, such as Covid-19. The housing deficit is also reflected in a relatively low rate of homeownership, at 25% as of late 2018, compared to 56% in South Africa, 73% in Kenya and 84% in Indonesia. Notably, 2019 was the first year in which more than half of Nigeria’s urban households rented their homes instead of owning, according to a June 2020 report from the South Africa-based Centre for Affordable Housing Finance in Africa (CAHF).

The shortfall of available formal housing is exacerbated by high urbanisation and population growth, with Nigeria set to be the third most-populous country in the world by 2050, with the population of Lagos set to double in the intervening period, according to UN projections. Indeed, the country’s urban population is forecast to expand by 4.6m per year through to 2025, resulting in the need to build an additional 1m housing units annually. The high cost of construction materials is also a factor, as are issues surrounding land acquisition.

Affordable Options

Approximately 75% of the housing deficit is concentrated in the low-income bracket, highlighting the need to focus on building affordable units for this demographic. Around 10% of urban households have monthly incomes above $3000, a figure that allows them to afford a home worth $44,700, according to the CAHF. However, around 56% of individuals and families in urban areas earn below $1000 per month and are able to afford options of up to $5500. The cost of the least-expensive newly built home by a formal developer in Nigerian urban areas is approximately N3.1m ($8280). “The housing deficit is pushing developers to focus on sustainability and affordability,” Aliyu Aliyu, CEO of Bilaad Realty, told OBG. “Companies are adapting to the needs of an underserved population.”

Leadership at both the federal and state level are working to improve the availability of affordable housing. The Family Homes Funds (FHF) was created in 2018 to build low-cost, liveable homes, as well as provide financing options for lower-income Nigerians. FHF manages three funds: the Affordable Housing Fund, the Rental Housing Fund, and the Land and Infrastructure Development Fund. It also runs the Help to Own programme, which contributes 40% of the cost of new homes in a loan that requires no repayment for five years.

The Central Bank of Nigeria is also involved in creating opportunities for lower-income citizens to become homeowners. In November 2020 the bank announced that it would allocate N200bn ($534m) for the construction of 300,000 homes under the purview of the N2.3trn ($6.1bn) Economic Stability Plan, which was enacted in June of that year to help alleviate the economic impact of the Covid-19 pandemic. Under the programme, one-, two- and three-bedroom units starting at N1.8m ($4810) will be built for low-income families, and assistance will be provided to help recipients pay off their mortgages. The first phase of the project will focus on Osun, Ogun, Delta, Bauchi and Abuja, before expanding to Imo, Cross River, Kaduna, Borno and Yobe. In addition to alleviating the housing gap, the government estimates that the programme will create 1.5m jobs by 2025, as material manufacturers and construction and engineering professionals mobilise to help meet government targets.

Urban Limitations

Lagos is perhaps the most expensive market in Nigeria, and like in other areas, residents struggle with a lack of accessible and affordable housing. The number of formal housing units in the metropolis was estimated to be 1.5m in 2019, compared to the city’s population of 18m. Furthermore, over 60% of Lagos residents rent their homes, spending more than half of their monthly income on rent. The costs associated with purchasing land and constructing new homes are also high, and real estate agents often list properties with inflated prices. To address this, the Lagos state government created a rent-to-own programme in 2016, under which individuals pay 5% of the value of the home upfront and the balance is paid off over the course of 10 years with a low interest rate.

Meanwhile, in June 2021 Abuja officials resumed the N1trn ($2.7bn) Federal Capital Territory Land Swap scheme aimed at addressing the capital’s infrastructure deficit. Under the programme private investors establish infrastructure in an specified district, and are paid back in land.


A tentative economic recovery in the first half of 2021 as the country continues to navigate the Covid-19 pandemic has helped the real estate sector log its second consecutive quarter of growth, at 1.8% in the January-March period after expansion of 2.8% in the final months of 2020. While barriers impeding wider access to housing finance remain, efforts to increase the supply of affordable housing – which is especially important now, seeing as the pandemic constrained household budgets – are helping to make homeownership a reality for more Nigerians. The private sector can be tapped to a greater degree in pursuit of this goal, especially as actors like the central bank allocate funds for large-scale housing schemes. Opportunities abound along the entire value chain, from building materials to engineering and construction, and utilities installation. Yet the supply of residential units was negatively affected by the pandemic, as the construction sector was not considered essential during lockdown periods and halted operations.

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