Kehinde Ayodeji-Finnih, the Chief Executive Officer (CEO) of KFAO Corporates Limited, has revealed in a chat with the press that the depreciation of the naira is having a negative impact on the real estate sector. She said that for stakeholders in the industry who were hit hard by the 2016 recession (which caused a 6.86 percent decline in 2016 compared with the 2.11 percent growth in 2015), the post-recession fragile convalescing period was dealt a further blow by the COVID-19 pandemic.
Again, the sector is confronting another monster post-Covid – the free fall of the naira and the accompanying inflation. The rapid depreciation in the value of our naira has continued to have a telling impact in all sectors of Nigeria’s economy from aviation to manufacturing and everything in-between. The real estate sector is also not spared. The area that this situation has affected stakeholders is in sourcing the materials used. The bulk of input materials used in the sector are imported.
The cost of building materials has skyrocketed in response.
In the last 12 months, the naira has gone from less than N400 to the dollar to N700 to the dollar at the parallel market. Between late October and early November 2022, the naira even fell to N800 against the dollar. The rate of the fall in naira resulted into a spike in prices. Naturally, it means that the end product is increasingly being priced out of reach of many potential buyers. In simpler words, because the naira is falling significantly against the dollar, stakeholders in the industry will have to pay more naira to buy the same goods pegged at the same dollar price.
Also, the present forex scarcity has affected the cost of building materials as a spike has been recorded over the past few months due to the Nigerian construction industry being heavily dependent on importation of raw materials and equipment for construction. In other words, in addition to the free fall of the naira, buyers also have difficulties in sourcing forex for the payment of these raw materials and equipment. More demand by this industry has also contributed to the increase in price. Unfortunately, as the cost of purchasing these goods spiked, property prices have correspondingly increased, while the average income of people have not increased with the rising unemployment.
Naira redesign has negative impacts on economic activity.
While periodic currency redesigns are normal and the naira does appear to be due for it, since the naira notes have not been redesigned for two decades, the timing of and short transition period for this demonetization may have negative impacts on economic activity, in particular for the poorest households. At present, households and firms already face elevated financial pressures from prolonged high inflation recently compounded by external food and fuel price shocks, and the severe floods, and phasing out existing naira notes over a short time period may add to their challenges.
The CEO also spoke about the effect of the global energy-related carbon emissions of residential and commercial buildings, which amount to 40 percent of emissions. She said that the implication of this is evident in the climate. She said that the climate is an important factor of influence in the success of the industry. “However, we are paying attention to the fact that one of human’s basic needs, which is shelter (commercial and residential), contributes a whopping 40 percent to the emission of carbon which is detrimental to our environment,” she said.
Green buildings can solve the housing deficit challenge in Nigeria.
According to her, green building technology uses advanced technologies to develop buildings with minimal impact on the environment in all the lifecycle stages: from design, construction, operation, maintenance, and renovation, to demolition. It has economic benefits, such as significant economic savings by improving employee productivity, increasing benefits from improvements in health and safety, and providing savings from energy, maintenance, and operational costs. It also has social and environmental benefits. Nonetheless, the common challenges were and still are a lack of understanding and awareness about the economic benefits and opportunities of green buildings. Insufficient government support, inaccessible legislation, and the perception that green buildings are expensive are also still great challenges.
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Naira depreciation affecting real estate. – KFAO CEO discusses its negative impact on the sector, among other issues. – Express your point of view.
Inflation in general knowledge cause lots of bad effect on the human day to day activities and also the economy condition of a country and this is what happens to the real estate business.The price of goods will rise uncontrollable and this is not good for the business.
The fall of the Naira has really affected a lot of sectors in Nigeria. The real estate sector is not an exception. The lack of flow of money has reduced the rate of getting houses.
The accelerated decline in the value of naira has continued to have a significant and constantly reminding effect across all aspects of Nigeria’s economy. Government needs to do something as soon as possible.
The naira depression has even hit the economy hard making all cost of goods and material rise. Meeting a standard living in the country right now is really hard for low income earners.
This country Nigeria is facing a lot of challenges in all ramification. Inflation has affected everything in the country not only real estate but generally
The depreciation of naira and inflation are both having negative impacts on almost every sector. In the cases of real estate sector, the use of advanced technology will help deal with challenges confronting sector.
The real estate market has continued to be significantly impacted by the sharp decline in the value of the Nigerian naira. Stakeholders have been impacted by this scenario in the domain of material sourcing. Imported materials make up the majority of the sector’s input materials.
This is sad because we all know that as this naira is depreciating, it will really tell on our economical growth and that will be bad.
It is crazy that real estate will be affected too because of this naira value and that is somewhere people invest in and make a lot of money from.
The value of the naira has drastically decreased in comparison to the dollar, which makes it more difficult to purchase commodities whose prices are fixed in dollars.
Majority of the material required in construction of houses are imported. Definitely inflation and devaluation of naira would affect the real estate sector
The decline of naira impact have spread towards the real estate too as it done on other sectors too. We need effective government intervention on this before it ravage the economy further.
This depreciation of naira affecting a lot of thing in the country which affect the economy so the fall of naira also affect the real estate making things high in price
Real estate is not the only one affected by naira depreciation it affect many sector also the fall of naira cause breakdown in the economy which will affect the whole country the Inflation is too much
This scarcity of naira is definitely what is making our naira depreciation, now we use naira to buy naira. The fact that’s is affecting other part of the economy should give rise to extreme caution
Sooner or later the entire economy of Nigeria will be at a state where ut cannot be revived, it’s so sad to know that how government is not doing anything about it
The devaluation of the naira has had a profound effect on the economy, driving up the prices of virtually every product. Low-income earners are having a difficult time making ends meet right now.
The depreciation of naira affected all businesses in Nigeria not just real estate only coupled the naira redesign had major pressure on the economy. The prices of building materials were on the rise and is seriously affecting the real estate.
The naira depreciation is not just affecting Real Estate only but other businesses. Commodities prices in the market have skyrocketed due this. It has led to increase hardship in the country. If green building technology can be economical, environmental friendly it will be better for the Real Estate to embrace this technology. It is left to the real estate management to create awareness about the green buildings which is uses advanced technologies to develop buildings with minimal impact on the environment in all the lifecycle stages.