Confidence in the economy and its markets is a critical driver of economic, financial fluctuations and of the entire business sectors. When confidence increases, investors and consumers want to spend more on goods, durables and invest at prevailing prices. When confidence decreases, consumer spendings and investment risk-taking show a declining trend.
Attracting foreign Investments (especially from Nigerians in the Diaspora) is very key if the FG Economic Recovery and Growth Plan (ERGP) which unveils a roadmap for Nigeria’s economic recovery, growth, and sustainable development, is truly going to result in positive outcomes; and this begins when the confidence level and news about the future is good.
Recently, Dr. Okechukwu Enelemah, The Minister of Industry, Trade & Investment and Prof. Pat Utomi made a key reference to the Confidence Factor and how a positive Confidence Factor Index will create an enabling business environment and positively impact the of ease and transparency on attracting investment into the country.
Furthermore, the 800% over subscription of the Euro bond and the recently announced changes in Nigeria’s Immigration policy, Real Estate Developers can draw up 3 key insights:
1. Attractive Returns: High-Value Pricing attracts all investors in a down market. The Eurobond was arguably oversubscribed due to its aggressive pricing. Where there’s low investor confidence, the reward has to be made more attractive.
2. Ease of Doing Business: Lowering the acquisition/investment barrier through Flexible Pricing and lower deposits to attract commitment and quicker decisions.
3. Transaction Integrity and the Confidence Factor: Real estate being high-cost transaction benefits from ensuring transaction integrity. Historical Track record and Excellent Documentation processing, answer questions upfront and clearly without hidden costs and ambiguity.
The Confidence Factor is a big issue in both attracting investors to the Nigerian economy and also attracting real estate buyers especially those not resident in Nigeria to the market. Raising Nigeria’s Confidence Factor Index is an important leading indicator for investors given its ability to predict the gross domestic product (“GDP”) growth performance of an economy and also the effectiveness of the monetary policy in combatting low unemployment and inflation.
Going foward, we expect that the real estate sector will outperform other investment classes as the Confidence Level of foreign investors increase especially the Nigerians in the Diaspora. According to a report by Global Knowledge Partnership on Migration and Development, remittances into Nigeria totaled $20.8 billion in 2015 and grew by 40.57% to $35 billion in December 2016.
This is a leading Indicator that fosters the possibility of a broad economic turnaround, including resumed growth in real estate contribution to GDP as a result of increase patronage from diaspora first-time residential real estate buyers. Other sectors of the real estate value chain especially the Retail and Premium Real Estate space, will experience a positive impact on the revenues and transactions closed over time are highly correlated with the economic performance and consumer spending patterns.