Nigeria’s Real Estate Sector Surges Past Oil as Key GDP Contributor

In a landmark economic revelation, Nigeria’s real estate sector has officially surpassed crude oil and natural gas to become the third-largest contributor to the nation’s Gross Domestic Product (GDP). This significant shift, unveiled through the recent rebasing of Nigeria’s GDP figures, signals a profound reorientation of the country’s economic landscape, moving beyond its traditional reliance on commodities and highlighting the burgeoning importance of diversified sectors. The announcement, made by the Statistician General of the Federation, Mr. Semiu Adeniran, at the ongoing African International Housing Show (AIHS) in Abuja, has ignited discussions about the future trajectory of Nigeria’s growth and the immense opportunities within its housing and construction industries.

The rebased GDP figures provide a more comprehensive and accurate understanding of Nigeria’s economic activities, with the reference year updated to incorporate emerging sectors and capture recent economic dynamics. This crucial statistical adjustment has revealed that the real estate sector now accounts for a substantial 10.7% of total GDP, a significant jump from its previous contribution of 6.2%. Complementing this, the construction sector now contributes 5.2% of the total GDP. Combined, these two interconnected sectors collectively represent an impressive 15.9% of Nigeria’s GDP, up from a previous 12.4%. While a 3.5 percentage point increase might appear modest on paper, Mr. Adeniran underscored its profound value, translating to an astonishing N14.6 trillion (Nigerian Naira) increase in real terms. This monumental growth reflects the widespread expansion of housing activities, from rapid urban development to critical infrastructure projects, firmly establishing the sector’s escalating influence on national economic growth and stability.

A Shifting Economic Landscape: Beyond Oil’s Dominance

For decades, Nigeria’s economic narrative has been inextricably linked to its vast oil reserves. As Africa’s largest oil producer, the nation’s fortunes have historically ebbed and flowed with global crude prices. The petroleum sector has traditionally been the dominant force, contributing the lion’s share of government revenue and foreign exchange earnings. However, this reliance has also exposed Nigeria to the volatility of global commodity markets, leading to periods of boom and bust, and hindering the development of other vital sectors.

The recent GDP rebasing exercise, a statistical recalibration that shifts the base year for calculating national accounts, is designed to reflect the structural changes and emerging industries within an economy more accurately. Nigeria’s previous rebasing in 2014, which moved the base year from 1990 to 2010, significantly increased the size of its economy, revealing previously undercounted sectors like telecommunications, entertainment (Nollywood), and e-commerce. The current rebasing continues this trend, offering a clearer picture of the economy’s diversification and the growing contributions of non-oil sectors.

The elevation of real estate to the third-largest contributor, surpassing even the mighty crude oil and natural gas sector, is a testament to the diversification efforts and the organic growth occurring within Nigeria’s domestic economy. This shift indicates a maturing economic structure where internal demand, demographic pressures, and investment in physical infrastructure are becoming increasingly potent drivers of wealth creation. It signifies a move towards a more resilient and less commodity-dependent economic model, which is crucial for long-term sustainable development. The real estate sector, encompassing the buying, selling, and management of properties, has shown remarkable dynamism, outpacing several traditional industries not just in GDP contribution but also in employment generation, innovation, and value addition across its extensive supply chains.

The Engine of Growth: Nigeria’s Demographic Dividend and Urbanization Boom

At the heart of Nigeria’s real estate surge lies its unparalleled demographic dynamism. With a population that has already surpassed 200 million, Nigeria is Africa’s most populous nation and the seventh most populous globally. The United Nations projects that by 2050, Nigeria will ascend to become the third most populous country in the world, trailing only India and China. This exponential population growth translates directly into an escalating demand for housing and infrastructure across all segments.

Compounding this demographic pressure is the accelerating pace of urbanization. Over half of the Nigerian population is expected to reside in urban centers within the next decade. This rapid urban influx is fueled by a confluence of factors:

• Rural-to-Urban Migration: People are increasingly moving from rural areas to cities in search of better economic opportunities, education, and social amenities.
• Youth Demographics: Nigeria has a predominantly young population, with a significant youth bulge. This demographic group is more likely to migrate to urban areas for employment and lifestyle opportunities, further intensifying pressure on existing urban housing stock.
• Changing Lifestyles: Modern lifestyles, often characterized by smaller family units and a preference for urban conveniences, also contribute to the demand for diverse housing types within cities.

This rapid urbanization intensifies the pressure on existing housing stock, leading to overcrowding, the proliferation of informal settlements (slums), and soaring rental and property prices in desirable urban areas. However, this challenge simultaneously creates tremendous opportunities for new developments across the residential, commercial, and mixed-use segments. Developers and investors are increasingly recognizing the immense potential in meeting this insatiable demand, driving the expansion of the real estate and construction sectors. The growth is not just concentrated in mega-cities like Lagos and Abuja but also in emerging regional hubs and satellite towns experiencing their own mini-booms.

Bridging the Housing Gap: Demand, Opportunity, and the Rental Market

Despite the robust growth in the real estate sector, Nigeria faces a monumental housing deficit. While precise figures vary, estimates suggest a shortfall of over 20 million housing units nationally. The Statistician General’s data underscores a critical aspect of this deficit: only 38.2% of urban dwellers currently own the houses they live in, meaning over 60% of those residing in urban areas do not own their properties. This stark statistic not only highlights the urgent need for more housing units but also points to the significant and often underserved opportunities within the rental market.

Access to affordable housing, whether for ownership or rent, is a fundamental human desire and a critical development objective. This aspiration is enshrined in the Sustainable Development Goal 11 (SDG 11) of the global developmental agenda, which specifically aims to “make cities and human settlements inclusive, safe, resilient and sustainable.” A key target under SDG 11 is to ensure access for all to adequate, safe, and affordable housing and basic services, and to upgrade slums by 2030. Nigeria’s housing challenge is therefore not just a national issue but one with global implications, requiring concerted efforts to meet international development targets.

The vast majority of the housing deficit lies within the low and middle-income segments of the population. This creates a compelling case for developers to focus on affordable housing solutions, leveraging innovative construction technologies and financing models. The demand for rental properties is particularly strong among the urban working class, students, and young professionals who may not yet have the capital for homeownership. This segment represents a stable and growing market for rental housing, from single-room apartments to multi-family units.

Investment opportunities abound across the entire housing spectrum:

• Affordable Housing Developments: Projects targeting low and middle-income earners, often requiring government incentives or public-private partnerships to be viable.
• Rental Property Development: Building purpose-built rental units to cater to the large non-homeowning urban population.
• Student Accommodation: With a large and growing youth population pursuing higher education, demand for purpose-built student housing near universities is high.
• Mixed-Use Developments: Projects that combine residential, commercial, and retail spaces, catering to the “live-work-play” trend in urban centers.
• Infrastructure for New Developments: Investment in roads, water, sanitation, and electricity connections is essential to support new housing projects, especially in peri-urban areas.

Addressing the housing deficit requires a multi-pronged approach involving government policy, private sector investment, and innovative financing mechanisms to make housing truly affordable and accessible.

The Informal Sector’s Power and the Multiplier Effect

A fascinating aspect highlighted by Mr. Adeniran is the “heavy involvement of informal operators” in the real estate sector, which has contributed to its reclassification as the third-largest GDP contributor, surpassing even the formal crude oil and natural gas industry. The informal sector in Nigeria is a vast and dynamic part of the economy, encompassing a wide range of unregistered businesses and activities. In real estate, this often includes small-scale developers, local artisans, independent contractors, and informal property agents who operate outside formal regulatory frameworks and tax nets.

While the informal sector’s significant contribution underscores its vitality and job-creation capacity, it also presents challenges for accurate data collection and policy formulation. Traditional GDP accounting methods often struggle to capture the full extent of informal economic activity. The rebasing exercise, by incorporating more comprehensive data sources and methodologies, has brought this previously underestimated contribution to light, revealing the true scale of economic activity driven by grassroots efforts in housing and construction. Recognizing and formalizing parts of this sector could unlock even greater potential, improving quality, access to finance, and tax revenue.

Beyond its direct contribution to GDP, investment in housing and construction generates powerful multiplier effects across the broader economy. This means that every Naira invested in building and real estate stimulates demand and activity in numerous other sectors, creating a ripple effect of economic growth:

• Manufacturing: A boom in construction directly fuels demand for essential building materials such as cement, steel, glass, tiles, roofing materials, and electrical fittings. This, in turn, stimulates growth and job creation in the manufacturing industries that produce these goods.
• Trade and Retail: The increased production and consumption of building materials lead to higher activity in wholesale and retail trade, from large distributors to local hardware stores.
• Professional Services: The sector relies heavily on a wide array of professional services, including architects, engineers, quantity surveyors, real estate agents, lawyers (for property transactions), urban planners, and financial consultants. This creates high-value jobs and fosters a robust service economy.
• Finance: The demand for mortgages, construction loans, and other real estate financing products boosts the financial services sector, including banks, microfinance institutions, and investment firms.
• Logistics and Transportation: Moving building materials and equipment to construction sites, and later facilitating the movement of people and goods within new developments, drives demand for transportation and logistics services.
• Employment: Construction is a labor-intensive industry, employing millions of skilled and unskilled workers, including masons, carpenters, electricians, plumbers, and laborers. The multiplier effect extends to indirect jobs in supporting industries.

This extensive interconnectedness makes the real estate and construction sectors powerful engines for job creation and economic diversification, far beyond their direct GDP contributions.

Policy, Data, and the Path Forward: Re-imagining Housing for a Sustainable Future

The theme of the African International Housing Show (AIHS), “Re-imagining housing through innovation, collaboration and policy,” perfectly encapsulates the urgent need for a strategic and coordinated approach to Nigeria’s housing challenges. Mr. Adeniran’s address underscored the “significance of reliable data in this regard is not in doubt. It guides policy formulation, fosters investor confidence, and supports sustainable solutions to the housing challenges on our continent.”

Historically, data on Nigeria’s housing sector has been fragmented, often generated through general household or firm-level surveys that capture only limited information. With the increased contribution and relevance of the sector, there is now an undeniable need for more granular and sector-specific data on housing, real estate, and construction. This detailed data is crucial for:

• Informed Policy Formulation: Policymakers need precise data on housing demand, supply, affordability gaps, regional disparities, and market dynamics to design effective interventions and incentives.
• Fostering Investor Confidence: Investors, both domestic and international, require reliable and transparent data to assess market opportunities, evaluate risks, and make informed investment decisions.
• Supporting Sustainable Solutions: Data can guide the development of sustainable housing models, including green building practices, climate-resilient designs, and energy-efficient solutions, aligning with global sustainability goals.
• Maximizing Potential: Without accurate data, it is difficult to identify the most promising areas for investment, optimize resource allocation, and fully exploit the vast opportunities within the sector.

The Nigerian government has, in recent years, shown increasing commitment to addressing the housing deficit through various initiatives. While specific programs may evolve, the general thrust is towards creating an enabling environment for private sector participation, providing incentives for affordable housing development, and streamlining regulatory processes. Collaboration between government agencies, financial institutions, private developers, and international partners is paramount to achieving scale and impact. Forums like the AIHS serve as vital platforms for stakeholders to share insights, forge partnerships, and discuss innovative solutions.

Challenges remain, including issues related to land tenure and registration, access to long-term affordable finance for both developers and homebuyers, and the need for robust regulatory frameworks that encourage investment while protecting consumers. Addressing these systemic issues will be critical to sustaining the growth trajectory of the real estate sector.

Conclusion: A New Dawn for Nigeria’s Economy

The latest GDP rebasing figures represent more than just a statistical adjustment; they signify a fundamental transformation in Nigeria’s economic identity. The rise of real estate as a dominant economic force, surpassing the long-reigning oil sector, points towards a more diversified, resilient, and domestically driven economy. This shift is powered by Nigeria’s demographic strength, rapid urbanization, and the inherent demand for housing and infrastructure.

While the challenges of a massive housing deficit and the need for improved data remain, the opportunities are immense. The real estate and construction sectors are not merely growing; they are acting as powerful engines, stimulating activity across a vast array of interconnected industries and creating millions of livelihoods. The increased formal recognition of these sectors’ contributions, coupled with a renewed focus on data-driven policy and collaborative innovation, sets the stage for a new dawn in Nigeria’s economic development. The world will be watching as Nigeria leverages its demographic dividend and entrepreneurial spirit to build a more prosperous and sustainable future, brick by brick.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

1st August, 2025