Real estate and construction enterprises in the country were able to acquire loans totaling N21.89 trillion in four years.
According to The Punch, a review of the National Bureau of Statistics’ GDP report for the period between 2019 and 2022 revealed that the sector also contributed N93.14 trillion to Nigeria’s GDP during that time.
The construction business acquired even more spectacular credit facilities totaling N13.77 trillion, while the real estate sector obtained loans worth N8.22 trillion, according to the Central Bank of Nigeria’s Sectoral Analysis of Deposit Money Banks’ Credit.
Recall that in May of this year, the central bank lifted the benchmark interest rate from 11.5 percent to 18.5 percent.
Nigeria’s interest rate increased by roughly 8% between May 2022 and May this year.
However, according to CBN data, real estate companies increased their borrowing from N15.16 trillion to N21.89 trillion between January 2019 and December 2022, a rise of 44.4%.
Further investigation revealed that the businesses borrowed N18.26 trillion in 2020 and N20.861 trillion in 2021.
The executive secretary of the Association of Housing Corporations of Nigeria, Toye Eniola, reacted by stating that increased loan interest rates will impede the development of housing.
He declared, “This will undoubtedly raise loan interest rates, making it less desirable for housing development. Loans for development are necessary, but if you can only receive them at interest rates exceeding 20%, how would such a project be profitable? Going for such a thing would be suicide because newly constructed homes wouldn’t sell in a single day.
“The interest rate on commercial bank loans formerly ranged from 25% to 30%; but, with the increase in the Monetary Policy Rate, the interest rate will undoubtedly rise above 30%. And this will undoubtedly reflect an increase in the high cost of construction materials and reportedly result in many projects being abandoned.”
Infrastructure-related activities in the housing and construction industries increased by 59.6% from N18.13 trillion in 2019 to N28.94 trillion in 2022.
The industry also made N20.32 trillion in 2020 and N25.84 trillion in 2021.
Further research showed that the real estate industry’s annual growth rate in 2022 was 10.75%, greater than the -3.45% reported in 2019.
According to the research, the sector’s annual growth rate in 2022 will be 10.75%. In real terms, the sector’s overall contribution in 2022 was 5.64 percent, up from the 5.60 percent reported in 2021. In all, 3.95 percent growth was noted in 2022.
“In contrast, real GDP growth in the fourth quarter of 2019 was -3.45%, greater than the growth seen in the fourth quarter of 2018 by 0.40 percentage points but lower than Q3 2019 by -1.13 percentage points.
In the final quarter of 2019, the industry increased quarterly by 5.67%. In Q4 2019, it contributed 6.21% to real GDP.
According to the report, contributions from construction services increased from the 3.72 percent reported in 2019 to 12.72 percent in 2022.
According to the NBS, the sector expanded overall by 12.72 percent in 2022. The fourth quarter of 2022 saw construction contribute 10.16% of the nominal GDP, up from the third quarter’s contribution of 9.50% and the previous quarter’s contribution of 9.99%. In nominal terms, the sector’s overall contribution in 2022 was 9.38%.
“The real GDP share of the construction industry in 2019 was 3.72 percent. The sector’s contribution to real GDP in the fourth quarter of 2019 was 3.44 percent, up from 3.01 percent in the third quarter but down from 3.48 percent in the same quarter of 2018.”
