Nigeria: Overview
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- GDP Per Capita
- GDP/Cap Growth 1 yr
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Housing boom, in spite of everything
After declaring independence from Britain in 1960, Nigeria plunged into a series of civil wars and then military rule after 1966. The oil boom in the 1970s gave the government a chance to go on a spending spree which included the overly expensive transfer of the capital from Lagos to Abuja.
When the world recession kicked in the 1980s, oil princes plunged, pulling down Nigeria. This led to a cycle of massive debt, soaring inflation, large-scale unemployment and massive corruption.
The country’s real GDP per capita is still below its 1970 level. Last year's real GDP growth was 3.9%, low compared to 16% inflation rate and 2.3% population growth rate. Seventy-seven percent of the population lives below the poverty line.
Despite this, there's a housing boom, even though there have been high levels of construction during the past few years in Lagos and Abuja, and the supply of expatriate housing has greatly increased.
Mobile phone companies are investing, creating temporary demand. Nigeria’s natural gas potential is being opened up, bringing in foreign experts. Increasingly, wealthy overseas Nigerians are repatriating money to buy in Lagos.
Most foreign companies in Nigeria, like Shell, sub-let housing from Nigerian-owned management companies, mostly on Victoria Island and Ikoyi, although Chevron has built its own estate in Victoria, near Lekki, with hundreds of houses just like in U.S. suburbia. Foreigners almost always live in apartments or estates (gated subdivisions) because of serious security and electric power issues.
The profitability of housing is drawing many developers into a construction boom. For instance every plot has been sold at Banana Island, a new development on reclaimed land near Ikoyi, though barely a house has been built yet.
Nigeria allows any company or non-resident to buy land rights for a maximum of 99 years for the purpose of their activity, as long as the purchase is declared to the government beforehand.
RENTAL YIELDS
Housing boom, in spite of everything
Lagos has some of the most highly-priced real estate in Africa, at around US$1,000 to US$1,200 per square metre (sq. m).
The recent increase in housing supply has squeezed rents, while prices are holding their ground. Rental yields for apartments in Ikoyi and Victoria Island in Lagos are around 3% to 5.3%. Yields are generally higher in Abuja than in Lagos due to less supply; at 6% to 8%. Beach estates have rental yields that range from 7% to 8 %.
TAXES AND COSTS
Rental income tax is high
Effective Tax Rate on Rental Income |
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| Monthly Income | US$1,500 | US$6,000 | US$12,000 |
| Tax Rate | 10% | 10% | 10% |
| Click here to see a worked example | |||
Source:
Disclaimer |
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Rental Income: For non-residents, gross rental income earned from leasing out real property is taxed at a final withholding rate of 10%.
Capital Gains: Capital Gains tax is levied at a rate of 10% on the gains realized from the disposal of real property.
Inheritance: Estates (inheritance) are taxed as ordinary income and thus are subject to the progressive income tax rates.
Residents: Residents are taxed on their worldwide income.
BUYING GUIDE
Very high costs, corruption-prone system
The total roundtrip transaction cost is around 17.75% to 33.5%. This includes several permits, fees and charges.
The biggest cost is the 8%-20% consent fee paid to the state government. This seems to be a screening mechanism for collecting bribes. There is also a registration fee of 6%, paid by the buyer.
LANDLORD AND TENANT
Strongly pro-landlord rental market
Nigerian rental market practice is extremely favorable to the landlord.
Rent: Rents are freely determined; the Rent Control Law of Lagos is not implemented. Rents are paid well in advance, for two to three years.
Tenant Eviction: Because the court system is cumbersome and expensive, most landlords prefer to evict tenants using an assortment of tricks, phony legal cases, intimidation, locking out tenants or physically throwing them out of the unit.
ECONOMIC GROWTH
Chaos, poverty and oil
Nigeria returned to democratic rule in 1999 with an elected president and parliament under President Olesegun Obansajo. He was reelected in 2003 and is set to step down in 2007 after efforts to revise the constitution to allow him to run for a third term failed.
Nigeria's development prospects are hampered by constant threats of religious and ethnic violence, inferior and antiquated power and transportation infrastructure, and massive corruption and mismanagement in the government.
"Due to debt forgiveness and high oil prices, Nigeria was able to reduce its debt burden to zero in 2006. However, access to oil is also one of the causes of ethnic tension. In 2006, militants in the Niger Delta attacked pipelines and other oil facilities and kidnapped foreign oil workers. The mainly Christian Delta is the center of oil production but it is one of the poorest regions in Nigeria.
The rebels demanded more control over the region's oil wealth. More than 100 people were killed when religious violence flared in mainly-Muslim towns in the north and in the southern city of Onitsha.
RESIDENTIAL PROPERTY AROUND THE WORLD
Asia & Pacific
Bubble fears prompt foreign ownership limits in China
America & Caribbean
The slowdown of the U.S. housing market
Middle East and Africa
Bahrain is open to foreigners and sizzling hot
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| RESIDENTIAL PROPERTY FACTS | |
| Price (sq.m): $1,200 For a 100 sq. m. property, usually an apartment. | Rental Yield: 5.30% For a 100 sq. m. property, usually an apartment. |
| Rent/month: $530 For a 100 sq. m. property. | Income Tax: 10.00% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income. |
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Roundtrip Cost:
23.8%
The total cost of buying and then reselling an apartment. Includes: * all transaction taxes and charges: * lawyers' and notaries' fees * agents' fees Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000. |
Cap Gains Tax: 7.5% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation. |
| Landlord & Tenant Law: Strongly Pro-Landlord Rating is based on a detailed study of each country’s law and practice. | |
APRIL 2008
- Nigeria: Housing Project - Malaysian Investors Arrive - All Africa.com
FEBRUARY 2008
- How maintenance can curb collapse - Daily Independent
- Property tax in Lagos to go up - Business Day
JUNE 2007
MARCH 2007
- Nigerian interest rate seen dropping - Reuters-South Africa
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