A Looming Crisis in the Real Estate Sector
The already dire housing situation in Nigeria is facing a new and devastating setback. The N21 trillion housing deficit is now under fresh threat as Pension Fund Administrators (PFAs) have drastically cut their investments in the real estate sector by a staggering 91.6% over the past five years.
A recent Financial Vanguard investigation uncovered a growing disinterest in real estate investments among PFAs, largely due to arbitrary revocations of Certificates of Occupancy (CoO) by state governments, stringent regulatory requirements, the naira’s depreciation, and macroeconomic instability.
Experts warn that these factors have not only discouraged large-scale institutional investments but have also stifled the development of Real Estate Investment Trusts (REITs)—a key vehicle through which PFAs traditionally injected funds into the real estate sector.
Nigeria constructs approximately 600,000 fewer homes than required annually, exacerbating an already severe 20-million-unit housing deficit. Vice President Kashim Shettima recently estimated that the country requires at least N21 trillion to bridge this housing gap.
REITs were introduced in 2007 by the Securities and Exchange Commission (SEC) to provide a structured investment framework for institutional investors like PFAs. These trusts enable investors to participate in the real estate market without the burden of direct management, leveraging pooled capital for large-scale developments.
Initially, the introduction of REITs sparked optimism. Data from the Pension Fund Operators Association of Nigeria (PenOp) shows that PFA investments in REITs surged by 968% from N22.4 billion in 2019 to N239.28 billion in 2020. However, this positive trajectory collapsed between 2020 and 2024, leading to a dramatic downturn:
2021: PFA investment in REITs dropped 35.8% to N153.52 billion.
2022: A more severe decline of 90.8% brought investments down to N14.14 billion.
2023: A slight rebound saw investments climb 48.8% to N21.94 billion.
2024: The recovery was short-lived, as investments declined again by 4.7% to N20.06 billion.
Why Are PFAs Abandoning Real Estate?
Experts attribute this decline to a confluence of economic and regulatory hurdles:
✅ Regulatory Bottlenecks – SEC’s stringent approval process for REITs has made it difficult for institutions to secure investment approvals.
✅ Arbitrary Land Revocations – The widespread revocation of CoOs by state governments has created an environment of uncertainty, scaring off long-term investors.
✅ Naira Depreciation & Inflation – The worsening economic climate, coupled with the naira’s free fall, has eroded investor confidence and purchasing power.
✅ Vacant Properties Crisis – Many prime real estate locations now have a surplus of vacant office and residential spaces, making real estate investments less attractive.
✅ Shift to Infrastructure Investment – In the face of these challenges, many institutions are diverting funds from REITs to infrastructure and power projects, which are seen as more stable and profitable in the current climate.
Obinna Lewis-Asonye, a Micro Pension Manager at Stanbic IBTC Pensions, believes the uncertainty in the real estate sector is a key reason why many institutions have avoided launching new REITs.
> “Many companies did not get institutional approvals from the SEC, while others are shifting focus to infrastructure and power projects due to the unpredictable nature of residential mortgage investments. The revocation of Certificates of Occupancy has made residential real estate highly risky.”
Urban planner and environmentalist Michael Simire links the drop in REIT investments to naira devaluation and economic hardship, which have left little disposable income available for large-scale real estate projects.
If you visit major cities, you’ll notice an alarming number of vacant properties—office spaces, residential buildings, and commercial hubs sitting empty. This reflects the declining purchasing power of Nigerians and the general slowdown in the real estate sector.”
Chief Meckson Innocent Okoro, Principal Partner at M.I Okoro and Associates, attributes the slowdown to Nigeria’s high exchange rates and rising construction costs.
> “A property that cost N30 million five years ago now costs N90 million, stretching the payback period for investors from five years to over 15 years. This extended recovery time discourages investors from committing to the sector.”
To reignite interest in REITs and address the housing deficit, Ivor Takor, Director of the Centre for Pension Rights Advocacy, suggests that the government must:
✅ Implement Housing Finance Reforms – Establish a structured housing finance system that ensures continuous access to funds.
✅ Lower Interest Rates on Mortgages – Make housing loans more affordable through subsidized mortgage programs.
✅ Introduce Tax Incentives – Provide tax reliefs and subsidies for real estate investors and developers.
✅ Simplify Land Ownership Process – Reduce bureaucratic red tape surrounding land acquisition and property development.
As Nigeria’s housing crisis deepens, urgent reforms are required to restore investor confidence and revive the real estate sector. Without bold action, the country risks widening its already critical housing gap, pushing homeownership further out of reach for millions of Nigerians.
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