BusinessDay 06 April 2018

Friday 06 April 2018
Due to a number
of challenges
such as lack
of investment
grade real estate
stock, poor valuation standards,
lack of market understanding
and high interest
rates that support higher returns,
investment in Real Estate
Investment Trust (REITs)
market is still low, leading to
its slow growth in Nigeria.
With only three REITs
as against South Africa’s 27,
though this is huge challenge,
Nigeria presents a
huge investment opportunity
in this market in the whole
of sub-Saharan Africa (SSA),
analysts have noted.
However, individual interests,
inability of big real
estate companies to push
the market, which Gbenga
Olaniyan, CEO, Estate Links,
attributes to a cultural mindset
that needs to be changed,
are also contributing to the
slow growth of the market.
“These issues mean that
the market remains relatively
undeveloped. The three
REITs in Nigeria together
account for less than 0.5
NEWS
Lack of investment grade stock, market
understanding slow REITs market growth
… Nigeria’s only 3 REITs account for less than 0.5% of stock exchange
CHUKA UROKO
Budget: Senate queries N800m NIWA security vote
OWEDE AGBAJILEKE, Abuja
Senate on Thursday
queried the sum of
N800 million requested
for purchase of
security equipment by the
Nigeria Inland Waterways
Authority (NIWA).
The query was handed
down to NIWA acting managing
director, Danladi Ibrahim,
when he appeared
before the Senate Committee
on Marine Transport to
defend the Authority’s 2018
budget at the National Assembly
Complex, Abuja.
The committee wondered
why the Authority requested
for N800 million in the 2018
budget for purchase of security
equipment, the same
amount it received in 2017
budget for the same purpose.
It said out of the N800
million, the Authority spent
N790 million in 2017, which
percent of the entire stock
exchange, roughly a 10th of
what would be typical in developed
markets,” Thomas
Mundy, director, Research
and Strategy SSA at Jones
Lang LaSale (JLL), notes.
There have been attempts
to grow this market
as reflected in the modest
N2 billion Skye Shelter Fund
floated in 2007. Others are
Union Homes and Sun Trust
which followed with N12 billion
and N20 billion offerings
respectively. UAC Property
Development Company’s
(UPDC’s) 2013 offering of
N30 billion which declined
to market capitalisation of
N26.7 billion in May 2017 is
the largest and most successful
offering so far.
But because the market
remains shallow, it is difficult
for institutional capital to
build a meaningful position.
Mundy estimates Nigerian
pension funds investment in
REITs at less than 0.4 percent
of their total assets under
management, adding, “rather
than diversifying through
alternative asset classes, Nigeria’s
bias towards conservative
fixed income instruments
is growing.
“Compared to the Organisation
for Economic Cooperation
and Development
(OECD) average of 51 percent,
Nigeria has 85 percent
of the country’s pension fund
assets under management in
fixed income instruments.”
Unlike Nigeria, in the developed
economies of the
world, especially in the US
where REITs started in 1960,
the market has grown by almost
150 percent, while the
market capitalisation of non-
US REITs has more than doubled.
Oscar Onyema, CEO,
Nigerian Stock Exchange
(NSE), says the two fastestgrowing
markets in the last
five years are Australia and
Japan, both of which have
now overtaken France and
the UK to be the second- and
third-largest global REITs
markets, respectively.
Globally, there has been
a significant increase in the
market capitalisation, which
an Ernest & Young report
puts at approximately $1.7
trillion, up from $734 billion
in 2010. But in Africa, the
market has not done so well,
though not without encouraging
story.
Kachikwu confirms FG’s annual payment of N1.3trn
‘under recovery’ on petroleum imports
HARRISON EDEH, Abuja
Minister of State
for Petroleum
Resources, Emmanuel
Ibeh
Kachikwu, said on Thursday
that the Federal Government’s
current annual payment
of ‘under recovery’ on
petroleum import stood at
N1.3 trillion annually.
Although the National
Assembly has questioned
the rationale behind the ‘under
recovery’ payment while
describing it as subsidy for
petroleum sector, Kachikwu
said the under payment
is over 90 percent of the appropriated
fund.
Chairman of the committee,
Ahmed Sani Yerima,
observed that the Authority
failed to provide details
and specifications of how it
planned to spend the money
it requested for approval.
Yerima said, “You said
you want to do something;
the same amount last year,
the same amount this year.
There are no details, no explanations,
and no form of
specification whatsoever.
This is unacceptable.”
A member of the committee,
Mohammed Hassan,
suggested that Ibrahim and
his team be asked to go back
and do the right thing.
Another member of the
committee, Chukwuka Utazi,
frowned at the poor preparation
of the budget document.
Utazi said, “Budget preparation
is a professional job. It
was done by the Nigeria
National Petroleum Corporation
(NNPC) to ensure
price stability in the market
space, since the corporation
was the sole importer of the
product currently.
Kachikwu gave the information
on Thursday while
fielding questions from
newsmen on: “Workshop on
harmonisation of Liquefied
Petroleum Gas (LPG), regulatory
requirements,” while
stating that the Federal
Government was discussing
with the organised private
sector in ensuring enough
infrastructure to improve
is a public document. Anybody
who looks at what you
have prepared will not know
your intention. It is only
what you have presented
that will be considered, not
your intention. If you don’t
know how to do it you bring
in consultants. If you go to
other West African countries,
things are done properly.
When you come to Nigeria,
things change. It is unacceptable.”
Responding, Ibrahim
told the committee that the
security equipment was not
meant for one place alone,
adding that the 2017 approval
was the first time the
Authority was receiving fund
for capital projects.
Not satisfied with the explanation,
Yerima ordered
the Authority to furnish the
committee with necessary
details about every item in its
budget at a subsequent day.
gas availability.
Kachikwu said as a
means of addressing infrastructure
gap, the government
would soon launch an
infrastructure rebirth map
to attract more investments
into both the upstream and
downstream sectors.
He said, “Government is
hoping to launch an infrastructure
rebirth map, which
would open up tariff in
terms of policy that will enable
people go into investing
into the critical infrastructure
that we need to open
up the upstream and down
stream sector.
C002D5556
BUSINESS DAY
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