Nigeria’s Real Estate Investment Trusts (REITs) market remains far behind those of other countries, despite its enormous potential and a rapidly growing housing demand.
According to BusinessDay, “the REITs market in Nigeria remains surprisingly underdeveloped, even though it sits on strong potential for growth.” With a population exceeding 200 million and a housing deficit of around 28 million units, experts believe the country should have a thriving REIT market that attracts both local and international investors.
However, the sector continues to face major hurdles. “In Nigeria, the returns on REITs have remained discouraging,” the report noted. While REITs are designed to offer investors stable income through dividends, the performance of Nigerian REITs has been largely unimpressive compared to global standards.
Globally, the REIT industry is worth about $4 trillion, with nearly 85 percent concentrated in just five countries. In Africa, South Africa leads the way with a market capitalisation of around $8.5 billion. Nigeria’s REIT market is valued at approximately $600 million, while Kenya’s stands at about $300 million.
In terms of yield, Nigerian REITs offer around 7 percent, compared to 15 percent in South Africa and 9 percent in Kenya. These figures underscore the need for reforms that would make the sector more competitive and profitable.
Industry analysts have pointed to several reasons for the slow growth. Tax regulations remain a major issue, as double taxation continues to affect REITs.They are taxed both at the trust level and again at the investor level. The report also noted that overlapping regulations among the Securities and Exchange Commission (SEC), Federal Inland Revenue Service (FIRS), and Nigerian Exchange Limited (NGX) create compliance bottlenecks for operators.
Liquidity is another problem. The Nigerian REIT market has only a few listed trusts, resulting in low trading volumes and limited investor participation. In addition, economic challenges such as high inflation, currency depreciation, and interest rates above 20 percent discourage investment in REITs, as many investors prefer government securities for safety.
Despite these setbacks, there are glimpses of progress. The UPDC REIT, for example, recovered from a loss of N4.48 billion in 2021 to a net income of N3.8 billion in 2023. This shows that with proper reforms and investor confidence, the sector could achieve significant growth.
Experts agree that for Nigeria’s REIT market to flourish, the government and regulators must address tax issues, streamline oversight, and promote policies that attract both institutional and retail investors.
“Until regulatory, structural and macroeconomic hurdles are addressed, Nigeria’s REIT market is likely to remain far behind its peers,”
