Nigeria Recession bits hard: Eko Atlantic City project stalled…
With inert cranes, deserted construction sites and empty buildings, Lagos is suffering a hangover from a construction binge as Nigeria wrestles to overcome a recession.
Look no further than Eko Atlantic, billed as the largest real estate project in Africa, where once frenetic construction has slowed to a snail’s pace.
Dubbed the “Dubai of Africa”, the so-called city within a city is being built over 10km² on tonnes of sand dredged from the Atlantic Ocean off the coast.
Just a year ago, it was a symbol of the promise of Lagos, when Nigeria was still the continent’s number one economy. But today it is mostly an expanse of sand, interrupted by two lonely ultramodern skyscrapers and a couple of roads lined with young palm trees.
The island is expected to house nearly 500,000 people and see 300,000 others visit daily when it is finished in the next 15 to 20 years.
“The business continues but there is no point in going too fast in the context of a general slowdown,” said Pierre Edde, development director at South Energyx, a subsidiary of the Chagoury group of developers. The first phase of the billion-dollar project is under way, with the construction of a dam to follow.
Edde said some 80% of the plots had already been bought but investors were “waiting for positive signals to get started” on building construction.
Falling global oil prices and repeated attacks on crude infrastructure in Nigeria’s south severely hit the country’s economy in 2016, hammering the naira against the dollar.
Nigeria, which gets more than 70% of its revenue from oil, is suffering from a shortage of foreign exchange, hitting imports and overseas investment.
“Perhaps the greatest constraint for businesses operating in Nigeria at the moment has been the inability to access foreign currency, notably for the importation of goods, and repatriation of profits,” said Roddy Barclay, an analyst at the Africa Practice research firm, in a November report.
The extent of the construction freeze is difficult to assess in the absence of official figures.
No bank wants to lend money, rent revenues no longer make it possible to repay construction costs, and there is no return on investment
But Dapo Abe, who heads an engineering consulting firm in Lagos, estimates that 60% of major projects — public and private — are shut down.
“No bank wants to lend money, rent revenues no longer make it possible to repay construction costs, and there is no return on investment,” he said.
Now the real estate market is left in an ironic situation: landlords of upmarket office blocks and apartments are struggling to find occupants in the wealthy suburbs of Lagos.
Yet at the same time, there is not enough housing stock for the city’s estimated 20-million-strong population.
According to the Federal Mortgage Bank of Nigeria, 16-million people need a house in Lagos. In the past, Nigeria’s booming growth attracted real estate developers who scrambled to build high-rise apartments and modern office blocks catered to the executive class in the country’s economic hub.
Rich Nigerians and expatriates flocked to the neighbourhoods of Victoria Island and Ikoyi — two islands of wealth separated from poorer Lagosians living on the mainland by an 11km bridge.
Yet today many of those buildings have “to rent” spray-painted in a red scrawl on the outside walls in a desperate bid to attract tenants.”Companies have reduced their activities and many expatriates have left,” said Ade Kunle, a real estate agent. It is unclear when they — and the construction projects — will come back.
“The Nigerian banking sector will remain under pressure in 2017 and as a result, will look to limit higher-risk lending, such as that to construction projects”, said Richard Marshall, an analyst at BMI Research, a market research firm.
It was unlikely the economy would whet the “appetite” of foreign investors over the next two years, he said.
In Eko Atlantic, a project with a longer horizon, the attitude is more optimistic. “The potential remains immense,” said Edde. “Despite the crisis, there is still a lot of money. Nigeria is the land of miracles.”