In recent years, real estate has emerged as the “new gold” in Nigeria, becoming one of the most reliable and profitable investment options for individuals and institutions. With rapid urbanization, a growing population, and consistent demand for housing, real estate has transformed into a stable store of value, much like gold has been for centuries. Several factors contribute to this phenomenon, ranging from economic instability to increasing urban migration, creating a strong case for why real estate in Nigeria is now seen as a golden investment.
We now explore the key reasons why real estate is becoming the preferred asset class for Nigerian investors, analyzing economic conditions, long-term value retention, and the growth opportunities within the sector.
1.Protection Against Inflation
One of the major reasons real estate is seen as the “new gold” in Nigeria is its ability to protect against inflation. In times of economic instability and rising inflation, traditional currency loses value, reducing purchasing power. Over the last few decades, Nigeria has experienced recurrent bouts of high inflation, eroding the value of savings and investments held in cash or fixed-income assets.
Real estate, however, offers an inflation hedge, as property values and rental income generally rise with inflation. As the cost of building materials, labor, and land increases, property prices also tend to increase, which protects investors from losing money in real terms. Furthermore, in periods of high inflation, rents often rise, offering property owners additional income that adjusts with market conditions.
For instance, between 2020 and 2022, Nigeria’s inflation rate surged beyond 16%, leading to price increases across all sectors. During this time, real estate assets in key urban areas like Lagos and Abuja appreciated significantly, offering investors better returns compared to traditional savings or low-risk investments.
2.Steady and Growing Demand for Housing
Nigeria has a housing deficit of over 20 million units, driven by rapid urbanization and population growth. As more people migrate from rural to urban areas seeking better job opportunities, the demand for housing in cities like Lagos, Abuja, and Port Harcourt continues to rise. This demand-supply gap makes real estate a lucrative and high-potential investment.
The government and private sector have been unable to keep up with the growing need for affordable housing, leading to consistent appreciation in property values. While this may seem challenging for buyers, for investors, it represents a significant opportunity to grow their wealth over time. Rental properties, in particular, are in high demand, as many individuals and families cannot afford to purchase homes outright and opt to rent instead.
As an example, Lagos, Nigeria’s commercial hub, has seen property prices increase by an average of 15% annually in prime areas like Lekki, Victoria Island, and Ikeja. This trend is expected to continue as the population expands, making real estate in these locations a solid long-term investment.
3.Store of Value in a Volatile Economy
In a volatile economy like Nigeria’s, where exchange rates fluctuate and economic policies shift frequently, investors are constantly seeking assets that can preserve their wealth. Real estate, much like gold, has proven to be a reliable store of value in such an environment.
The naira has depreciated significantly against the U.S. dollar over the years, and the Central Bank of Nigeria’s policies on currency controls and exchange rates have only added to the volatility. Amidst this instability, real estate offers an attractive alternative to holding cash. Land and buildings are tangible assets that retain intrinsic value regardless of currency fluctuations, making them ideal for investors who want to safeguard their wealth.
Unlike stocks, bonds, or mutual funds, real estate is not as susceptible to daily market volatility. Once a property is purchased, its value is more likely to remain stable or appreciate over time, even when the economy faces downturns. This characteristic makes real estate a more attractive option compared to traditional financial assets, which are often subject to significant fluctuations in value.
4.Long-Term Wealth Creation
Real estate in Nigeria offers substantial long-term wealth creation opportunities. Land, in particular, has a history of appreciating significantly in value over time. Investors who purchase land in developing areas often see the value of their property multiply as infrastructure develops and the area becomes more populated.
For instance, land in the outskirts of Lagos, such as Ibeju-Lekki and Epe, has appreciated significantly over the past decade. As government projects like the Lekki Free Trade Zone, the Dangote Refinery, and the proposed Lekki Deep Sea Port come to fruition, these areas have transformed into investment hotspots, offering investors substantial returns.
Additionally, developing rental properties or commercial real estate provides continuous cash flow while also benefiting from the asset’s appreciation. As cities expand and more businesses seek office space, demand for commercial properties also increases, providing high returns for investors who position themselves early in growing markets.
5.Scarcity of Land
Land, unlike many other investment assets, is a finite resource. As the population grows and cities expand, the availability of land in desirable locations diminishes. This scarcity of land naturally drives up its price, making it an even more valuable asset. Just as gold is considered valuable due to its limited supply, so too is real estate—particularly land—in Nigeria.
In prime areas like Ikoyi, Victoria Island, and Banana Island in Lagos, or Asokoro and Maitama in Abuja, the availability of land is increasingly limited, leading to soaring property prices. For investors, this scarcity guarantees that their property holdings will appreciate over time as demand continues to outstrip supply.
6.Diversification of Investment Portfolio
Investors looking to diversify their portfolios often turn to real estate to balance the risks associated with other asset classes such as stocks, bonds, or foreign exchange. In Nigeria, real estate provides a non-correlated asset class, meaning its value does not typically move in the same direction as the stock market or currency fluctuations.
This diversification is especially important for investors who want to minimize their exposure to economic volatility. Real estate offers a relatively safe investment vehicle that can generate returns through both capital appreciation and rental income, ensuring a more balanced portfolio.
7.Favorable Government Policies
In recent years, the Nigerian government has introduced various policies to encourage investment in the real estate sector. Initiatives like the Family Homes Fund and National Housing Program aim to address the housing deficit while providing opportunities for private investors to participate in affordable housing schemes.
In addition, the government’s focus on infrastructure development, such as road construction, railways, and electricity supply, is making real estate investment more attractive in previously underdeveloped areas. This infrastructure development reduces the risks associated with investing in growing cities, leading to greater returns for investors.
Real estate has rightfully earned its reputation as the “new gold” in Nigeria due to its ability to provide long-term value, generate consistent returns, and protect investors against economic instability and inflation. With growing demand for housing, increasing land scarcity, and favorable government policies, real estate presents a lucrative and reliable investment opportunity.
For Nigerians looking to build and preserve wealth, real estate offers a golden opportunity to safeguard their financial future in a volatile economic environment.