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Currency Risk issues and real estate investment in Nigeria

It’s the elephant in the room when discussing investment in real estate by Nigerians in diaspora. It’s all very well to talk about capital appreciation in Naira but if your investment was in United States Dollars or British pounds, then the conversion may not be as favourable. In some cases, okay, in many cases, it may well be in deficit.

So, when I spoke to the distinguished audience at the Nigerian UK Property Show, held on Saturday, August 12, 2023, at the De Vere Grand Connaught Rooms in London, I had to address the issue full on. Below are my slides which, no surprises, showed that except for Magodo Phase 1 and Lekki GRA, all locations that were reviewed showed a deficit when converted to the prevailing forex rate (parallel market rates).

One of the speakers, the inimitable Kunle Barry Osilaja, the Head of Ecobank Capital, Nigeria and the Group Head of Real Estate for Ecobank Transnational Inc. (ETI), argued that any investor who converts forex to Naira, should view his investment in strictly Naira terms as converting prices, rents etc into dollars or pounds at the prevailing rate will results in ‘high blood pressure’.

An interesting take. However, I believe that if an investment is made in ‘hard’ currency, returns and valuations should be in the same currency. So, how do we achieve that? Well, as can be seen from the Lekki Phase 1 and Magodo figures, it is achievable. One must factor the currency risk and time horizon into the factors being considered when making the investment.

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