Buying real estate in Nigeria?

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Is it a good time to buy a property in Nigeria in 2024?

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property market Nigeria

Everything you need to know is included in our Nigeria Property Pack

Are you considering buying real estate in the land of Nollywood? Are you pondering if it's the right time to make a move?

People hold diverse opinions regarding market timing. Your Nigerian colleague might suggest that now is a perfect time to invest in property, whereas your spouse, who is originally from Lagos, might have a different view and recommend waiting for more stability.

At TheAfricanvestor, when we create articles or update our pack of documents related to the real estate market in Nigeria, we use verifiable facts and concrete data, not just subjective opinions.

We have carefully studied official reports and statistics from government websites, and we now have a trustworthy database with important information. Here's what we discovered, which can help you decide if it's a good idea to purchase real estate in Nigeria.

Enjoy your reading!

How is the property market in Nigeria these days?

Nigeria is, today, not a stable country


Stability should be the first thing you look at when you want to invest in real estate because it promotes property ownership, rental demand, and sustainable growth. It is an information you need as a foreigner looking to buy a property in Nigeria.

Regrettably, Nigeria is currently in an unstable state. The last Fragile State Index reported for this country is 97.2, which puts it in the bottom 20 globally.

Nigeria is not a stable country due to a long history of political instability, corruption, and religious and ethnic tension. This has caused economic hardship, insecurity, and widespread poverty, all of which have contributed to an unstable environment.

First check is not great. Let's review more data.

Nigeria is poised for strong growth


Second thing to do before investing in Real Estate: evaluate the country's economic performance.

As projected by the IMF, Nigeria will, in 2023, grow by 3.2%, which indicates the country is heaidng in the right direction. Regarding 2024, the consensus estimate is 3%.

Besides that, the economy will keep growing since Nigeria's economy is expected to increase by 13.8% during the next 5 years, resulting in an average GDP growth rate of 2.8%.

The expected sustainable growth rate in Nigeria provides a positive outlook for real estate investment, as it is an indication of a strong and growing economy that is likely to result in increased demand for real estate. This, in turn, can lead to higher returns on investment for those who invest in the Nigerian real estate market.

Nonetheless, there are other indicators to watch.Nigeria gdp growth

Nigerian business owners used to be really confident, now it's the contrary


While the GDP forecast is a valuable indicator, it is derived from external sources and may not fully reflect the local sentiment in Nigeria. Thankfully, in Nigeria there is an official metric that is consistently updated. We're lucky because this isn't true for every country.

The Business Consumer Index (BCI) is a metric derived from surveys and assessments of business leaders, indicating their confidence in the current and future economic conditions.

The Global Economy's data indicates that the Business Confidence Index is currently -15 for Nigeria. It's a score that can be qualified as "concerning".

A year ago, things were really different. Business operators were super confident and the score climbed to 29.

A lack of confidence among local businesses in Nigeria can result in a stagnant property market with limited investment and development. Buyers may find fewer available properties and potentially face challenges in finding quality real estate options.

Nigeria's population is growing but getting poorer


It's vital to take population growth and GDP per capita into account before purchasing real estate because:

  • a growing population means more people needing homes
  • a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)

In Nigeria, the average GDP per capita has changed by -2.5% over the last 5 years. It's an alarming number. However, the Nigerian population is growing (+4% in 5 years).

You'll get the best rental yields in Nigeria


To determine the profitability of a property investment, look at the expected rental yields.

It represents the annual rental income generated by a property divided by its purchase price or market value. For instance, if a property in Nigeria is purchased for 10,000,000 NGN and generates 600,000 NGN in annual rental income, the rental yield would be 6%.

According to Numbeo, rental properties in Nigeria offer gross rental yields ranging from 14.3% and 17.0%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Nigeria.

These values are exceptional.

Nigeria rental yields

Everything you need to know is included in our Nigeria Property Pack

In Nigeria, inflation is anticipated to be exploding


In two words, inflation is when prices go up.

It's when your customary plate of jollof rice costs 1,500 Nigerian naira instead of 1,200 Nigerian naira a couple of years ago.

If you're contemplating investing in a property, high inflation can bring you several benefits:

  • Property values tend to increase over time, leading to potential capital appreciation.
  • Inflation can result in higher rental rates, thereby boosting cash flow from the property.
  • Inflation reduces the real value of debt, making mortgage payments more affordable.
  • Real estate can act as a hedge against inflation, preserving the value of the investment.
  • Diversifying into real estate provides stability during inflationary periods.
  • Tax advantages, such as depreciation deductions, can help offset the impact of inflation.

In accordance with IMF projections, over the next 5 years, Nigeria will have an inflation rate of 79.9%, which gives us an average yearly increase of 16.0%.

This data is suggesting that Nigeria is likely to witness substantial inflation. In light of this, it may be a strategic move to invest in property now.

Nigeria's currency is currently very low


If you're a foreign investor, you might find this relevant.

The Nigerian Naira (NGN) is greatly devalued: the currency is currently 40-44% over the past five years.

As a foreign investor, buying a property in Nigeria can be a great opportunity to take advantage of the low currency. It can also be a great investment opportunity since the currency is expected to appreciate in the future. However, it is important to research the local market and understand the risks associated with investing in a foreign currency.

Is it a good time to buy real estate in Nigeria then?

Time to conclude !

Considering the present conditions, 2024 might not be the most opportune moment for property investment in Nigeria due to a range of factors that raise concerns. Despite some favorable signals, prudence is advised. While the anticipated strong growth might be promising, it's important to recognize that economic expansion doesn't always equate to a stable and thriving property market. Other critical aspects, such as political stability and regulatory environment, play a crucial role in determining the viability of real estate investments.

While the prospect of the best rental yields might be enticing, it's imperative to consider the broader investment landscape. High rental yields alone might not compensate for risks associated with economic instability, uncertain property laws, and other potential challenges that could affect real estate investments in Nigeria.

The projection of exploding inflation can have adverse implications for property investment. Rapidly increasing inflation can erode the purchasing power of potential property buyers, making properties less affordable. This can lead to market uncertainties and negatively impact property value appreciation.

Furthermore, the current very low value of Nigeria's currency could add complexity to property transactions and financing. Currency fluctuations might introduce additional risks and uncertainties for both local and foreign investors, potentially impacting the overall returns on investment.

When combined with the less stable country conditions, the reversal in business confidence among Nigerian business owners, and the population's deteriorating financial situation, the unfavorable signals collectively create a challenging landscape for property investment in Nigeria in 2024.

We wish this article has been of help!. If you need to know more, you can check our our pack of documents related to the real estate market in Nigeria.

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.

Buying real estate in Nigeria can be risky

An increasing number of foreign investors are showing interest in Nigeria. However, 90% of them will make mistakes. Avoid the pitfalls with our comprehensive guide.

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