May 25, 2018

Why has Nigeria’s Real Estate Service Sector has been in recession for 9 consecutive quarters?

Dolapo Omidire

The end of Q1:2018 marked the 9th consecutive negative growth quarter for the Nigerian real estate service sector and its worst quarter in over 5 years. Why?

To begin with, the Nigerian Bureau of Statistics (NBS) tracks the performance of the sector by recording the sum of fees and commissions for services rendered through data retrieved from tax authorities (FIRS) and also through informal household surveys. For the most part, the figures indicate that the profitability levels of many real estate service firms currently trading is poor, and this may be largely driven by a slowdown in market transactions during the recession, especially in the luxury segment.

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The sector has been in the red since Q1:2016 and contracted by -9.40% in Q1:2018, worse than the -9.26% recorded in Q4:2016 at the heart of the recession. This means that the real estate service sector is the worst performing economic subsector in over two years, after a few sub-categories in the Manufacturing sector including Post and Courier Services and Motor Vehicle & Assembly.

We’d like to have a discussion in the comments:

  • Is the data representative of the performance?
  • Has it been that bad?
  • What else do you think might be driving this performance based on the methodology stated by the Nigerian Bureau of Statistics?
  • Anything else!

The construction sector, which the NBS defines as the value of work done in the construction of buildings, civil engineering and specialised construction activities with consumption including cement, metal/iron bars, wood, gravel, stone and more, noted a relatively better but still poor performance. It was in recession from Q2:2015 to Q4:2016 but swung to growth in the first quarter of 2017 as increased access to foreign currency supported a minor reduction in costs within the highly import-dependent sector. This trend, however, was not sustained as the sector slipped back into negative growth territory with -1.54% recorded in Q1:2018.

As the Nigerian economy recovers from a recession, the real estate service and construction sector are refusing to leave the negative territory.

Let’s discuss why. We’ll be in the comments!

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