Nigeria’s market capitalisation of REITs listed on the floor of the Nigerian Stock Exchange (NSE) currently stands at about N40 billion. According to a document obtained from the NSE, the African REITs market is presently valued at $29 billion and is available in four countries Ghana, Nigeria, South Africa and Kenya.
There are only 32 REITs in Africa with South Africa being the largest REIT market having 27 REITs and Nigeria second with three REITs listed. In 2015, an estimated $265 million worth of transactions were concluded in Kenya, Nigeria and Ghana, a big improvement to the $65 million seen in all three markets during 2012. This indicates an increasing market as a larger number of investors are beginning to take increased interest and participation in the Real Estate Investment sector. The Chief Executive Officer, NSE, Mr. Oscar Onyema, said that the African real estate markets were well positioned for a long-term growth phase, given the significant supply deficit across the continent. He noted: “In Nigeria, the Real Estate Sector has recorded steady and consistent growth over the last decade.” PwC in its report titled, ‘Real Estate: Building the Future of Africa,’ also predicted that Nigeria’s real estate investment will rise by about 49 per cent, from $9.16 billion to $13.65 billion in 2016. It attributed this to a growing middle class driving demand for residential property development and indirectly, retail, industrial and commercial real estate development.
“We believe that this growth can be accelerated by deploying capital market tools such as REITs, listing of real estate companies, and creation of real estate ETFs to unlock capital in the sector,” he said. Onyema noted that since 2007 when the Securities and Exchange Commission (SEC) introduced the framework for the establishment of REITs, the Nigerian investing public has been given an opportunity to invest in a diversified portfolio of choice real estate assets. “Whilst the Nigerian market may not be as developed as other emerging markets such as Mexico, South Africa and Singapore, this asset class has definitely come to stay,” he said.
Onyema noted that in spite of the challenging economic headwinds in Nigeria and other commodity based economics, the capital market (including the NSE) remains one of the main vehicles to promote sustainable economic development and wealth creation. He reiterated the Exchange’s strategic initiative to promote and create the enabling environment for sustainable development of Real Estate Investment Trusts (REITs) in Nigeria and sub-Saharan Africa. He said: “ To create a more transparent, liquid and accessible market structure in line with global best practices for REITs, we recently notified the capital market ecosystem and other stakeholders of the proposed changes in our market regarding the reporting and valuation of Real Estate Investment Trusts (REITs); and other collective investment schemes listed on the NSE. The proposed changes, which will be implemented over the next three quarters of 2017 are aimed at promoting transparency, disclosure, visibility and liquidity of listed REITs and Closed End Funds in our market.