Recent preliminary results from Nigeria’s ongoing GDP and Consumer Price Index (CPI) rebasing have revealed a significant shift in the country’s economic structure. The real estate sector has now surpassed oil and gas, emerging as the third-largest contributor to Nigeria’s Gross Domestic Product (GDP). This development underscores the growing importance of real estate in Nigeria’s economy despite various economic challenges.
A Changing Economic Landscape
Historically, agriculture has been Nigeria’s dominant economic sector, contributing over 20 percent to GDP and comprising subsectors such as crop production, livestock, forestry, and fishing. However, the ongoing GDP rebasing has reclassified crop production separately from agriculture, positioning it as the second-largest sector in Nigeria’s economy.
Currently, crop production and trade hold the top two positions, while the real estate sector now ranks third. This shift reflects broader economic transformations driven by urbanization, increasing housing demand, and investments in real estate development.
The Role of Telecommunications and Trade
One of the major changes in the rebased GDP structure is the emergence of telecommunications as an independent sector, which now ranks fourth in size. Previously grouped under information and communication, telecommunications has contributed significantly to Nigeria’s GDP, driven by rising mobile penetration, internet usage, and digital transformation.
Trade, another crucial sector, contributed 14.78 percent to GDP in Q3 2024, securing its position as the second-largest sector in the country. The importance of trade highlights Nigeria’s consumer-driven economy, with growing retail and wholesale activities supporting economic expansion.
Crude Petroleum and Natural Gas Decline
Traditionally the backbone of Nigeria’s economy, the oil and gas sector has now slipped to the fifth position. This decline reflects ongoing challenges in the sector, including fluctuating global oil prices, regulatory uncertainties, and a gradual shift toward economic diversification.
Other key sectors in the rebased GDP structure include:
- Construction (sixth place)
- Food, beverages, and tobacco (seventh place)
Interestingly, public administration has been excluded from the top seven economic sectors, further indicating structural changes in Nigeria’s economic landscape.
Real Estate Growth and Economic Impact
In nominal terms, Nigeria’s real estate sector recorded a remarkable 46.52 percent growth rate in Q3 2024, significantly higher than the 2023 growth rate for the same period. Despite a slight decline compared to the previous quarter, the sector contributed 5.43 percent to real GDP in Q3 2024, slightly lower than the 5.58 percent recorded in Q3 2023.
Key Factors Driving Real Estate Growth
- Urbanization and Population Growth
- Nigeria’s rapid urban expansion has driven demand for residential and commercial properties.
- Cities like Lagos, Abuja, and Port Harcourt have seen increased real estate investments.
- Housing Deficit and Demand
- Experts estimate Nigeria’s housing deficit at approximately 28 million units.
- An estimated 700,000 new homes are needed annually to address this shortage.
- Luxury Real Estate Boom
- The demand for luxury apartments and high-end properties in urban centers is rising.
- Developers are focusing on gated communities, high-rise apartments, and smart homes.
Projected Growth of Nigeria’s Real Estate Market
According to Statista projections, Nigeria’s real estate market could reach a value of $2.61 trillion by 2025. The residential segment is expected to dominate, with a projected market value of $2.25 trillion.
Between 2025 and 2029, the sector is expected to grow at a compound annual growth rate (CAGR) of 6.91 percent, reaching $3.41 trillion by 2029. This impressive growth trajectory highlights real estate’s potential as a key economic driver.
On a global scale, the United States is projected to lead the real estate sector, with an estimated market value of $136.6 trillion by 2025.
The Significance of GDP and CPI Rebasing
To ensure a more accurate reflection of Nigeria’s economic realities, the National Bureau of Statistics (NBS) initiated the GDP and CPI rebasing exercise last year. The United Nations Statistical Commission recommends rebasing every five years, with Nigeria’s last rebasing occurring in 2014. That exercise resulted in an 89 percent GDP increase, solidifying Nigeria’s position as Africa’s largest economy.
Key Changes in the 2024 Rebasing
- New Base Year: 2019
- The previous base year (2010) has been replaced with 2019.
- This allows for a more accurate representation of current economic activities.
- Inclusion of Emerging Industries
- The rebasing incorporates new economic areas, including:
- The digital economy
- Modular refineries
- Pension fund administration
- National health insurance
- Mining
- The rebasing incorporates new economic areas, including:
- Impact on Key Economic Indicators
- The rebasing could lead to adjustments in major economic indicators, such as:
- Debt-to-GDP ratio: The previous 18.5 percent ratio (as of September 2019) could decline with an expanded GDP.
- Per capita income: A larger GDP size may improve Nigeria’s per capita income.
- The rebasing could lead to adjustments in major economic indicators, such as:
Expert Insights on GDP Rebasing
Moses Waniko, Technical Assistant to the Statistician-General, highlighted the importance of the rebasing exercise at a recent Nigerian Economic Summit Group workshop in collaboration with the NBS.
According to Waniko:
- The rebasing provides a more accurate economic structure, improving policy formulation and economic planning.
- Economic indicators like tax-to-GDP ratios will see adjustments to reflect the true size of Nigeria’s economy.
- The rebasing enhances Nigeria’s ability to attract foreign investment by offering more reliable economic data.
Conclusion
The ongoing rebasing of Nigeria’s GDP and CPI has unveiled a remarkable economic shift, with the real estate sector surpassing oil and gas to become the third-largest contributor to GDP. Despite economic challenges, the sector’s robust growth, driven by urbanization, housing demand, and luxury real estate expansion, positions it as a critical component of Nigeria’s economic future.
As Nigeria continues diversifying beyond oil and gas, the real estate sector’s significant contribution to economic development underscores its potential for sustained long-term growth. With the projected expansion of the industry and its ability to bridge Nigeria’s housing deficit, the sector remains a key player in shaping the nation’s economic landscape in the coming years.