Nigeria’s index case of Covid-19 arrived in Italian packaging on February 28, 2020. On 24th March, Lagos State declared a lockdown after 30 cases in the city and 46 cases nationwide. A national lockdown followed on 30th March. And so the story continues… 2020 needs to calm down. The lockdown has been eased in many parts of the country, but it is uncertain when economic activities will resume. According to the International Monetary Fund (IMF), the global economy will shrink by 3% this year. It described this decline as the worst since the Great Depression. Oops.
Relax, though. We come with good news. This post centres on two investment opportunities you can exploit during this period. The following options are not entirely immune to present economic challenges, but they are doing better than others. Stay with us!
Real Estate
What’s up? The Nigerian Economic Report shows that Nigeria’s real estate sector is the third largest contributor to its GDP. Yet, the World Bank estimates that the country has a 17 million housing deficit. Coupled with the steady growth in the country’s population, these reveal investment potential. Investing in real estate, especially in commercial parts of the country, attracts high returns. According to Reuters, a successful investment can earn returns as high as 30-35 percent!
There are many options available to the real estate investor. You may consider property development. You may consider renting, as statistics reveal that 87% of Nigerians live in rented apartments. You may just own land. After all, owning land is a hands-off investment. Oh, you may also consider land flipping – buying in areas that are developing and selling for profit months/years later.
What’s fun? REITs. Real Estate Investment Trusts allow you to make real estate investments without actually acquiring a property. It is a collective investment scheme – different investors pool funds to buy property. The portfolio is managed by a professional. REITs are regulated by the Securities and Exchange Commission and traded on the Nigerian Stock Exchange, just like shares.
What’s new? Taxes. In July, there was outcry when the Federal Inland Revenue Service (FIRS) imposed a 6% stamp duty on all tenancy and lease agreements. The Chairman (of the FIRS) later clarified that this rate only applies to agreements that exceed 21 years. Where the tenancy is yearly or less than seven years, the rate would be 0.78%. In tenancy from seven years to 21 years, the applicable rate would be 3%.
Agriculture
What’s up? Nigeria is largely an agrarian economy. According to the National Investment Promotion Commission (NIPC), the agricultural sector contributes 25% to the national GDP and accounts for 40% of the labor force. The sector’s growth has averaged 4% over the last 5 years. Therefore, agriculture has proven to be a profitable investment. Reliable too. No matter what, Nigerians will eat. Last year, 57% of the Nigerians’ total spending was on food!
What’s new? The national accounts show that the agriculture sector grew by 2.2% in the first quarter of the year. However, restrictions on movement have predictably slowed farming – impeding farmers’ access to markets and the distribution of products. The threat this poses is rise in costs (and food price inflation). However, agriculture benefits from numerous interventions by the federal government. The CBN consistently improves farmers’ access to credit. In August, the Federal Government launched an intervention scheme called the Agric for Food and Job Plan. It is designed to create about 5 million jobs in the sector and add about 10 million metric tonnes of food. Loans are given to farmers at 0% interest rates.
What’s fun? Agriculture requires continuous involvement. If you are not interested in direct farming however, you can consider crowdfarming. Digital crowdfarming allows several persons to invest in smallholder farms for a particular farm cycle. The investors share in profits (usually an ROI of between 15 – 30%). The process happens online so no physical interaction is required. However, you are advised to confirm the legitimacy of the platform you choose, as well as its insurance cover!
Well, that is all we have time for in this episode. Look at us. Out here caring about you and your money. We hope this article was informative and useful. Stay with us for more content!