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June 5, 2023
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Nigerian youth are discovering new ways of beating skyrocketing rents 

Key highlights

  • Young people in Nigeria aspire to move out of their parent’s homes and live independently, but the dream of attaining this independence is being threatened by rising rent prices in urban areas.
  • Factors contributing to rising rent include inflation, limited rental options, growing rural-urban migration, and a desire to maximize profit by owners in concert with agents.
  • Skyrocketing costs of building materials and land are the main drivers of high rent prices, making it difficult for developers to build affordable housing.

In response to rising rent prices, young people in Nigeria are adapting by finding ways to cope, such as sharing living spaces and moving to the suburbs, while also hoping that the government’s efforts to address the issue will lead to more affordable housing options in the future.

The dream of all young people is to attain freedom from their parents after completing their education and getting a job, and one way of affirming this new freedom is to move out of their parent’s house and live by themselves. It is the ultimate coming-of-age event on the path to adulthood, but this dream is being threatened by out-of-control rent.

Tolani Ojo (not her real name), after working with one of the big four audit firms in the nation for six months, decided it was time to move out of the BQ she currently occupies in her sister’s house in Magodo. The daily commute across the Third Mainland Bridge to and from Victoria Island was taking a toll on her mind and body. She discussed it with her sister, and it was agreed she could look for a place to rent on the island. Her initial excitement was dampened when at the first one-bedroom apartment she showed interest in, the rent was N2 million with a service charge of N100,000, and this was without the 10% agency and agreement fees that agents and lawyers always insist on being paid. The different rents she was seeing as she looked at different properties were over her budget, and she was at a crossroads.

Rising rent in urban areas

Tolani’s dilemma is one young people all over the nation are facing as they look to move away from their parent’s homes and start a life. In the absence or inadequacy of institutional support, more people can afford to rent than purchase houses; thus, any astronomical increase in rent is going to adversely affect them.

Factors such as inflation, limited rental options for new tenants (which means more people are chasing fewer available apartments), growing rural-urban migration, and a desire to maximize profit by owners in concert with agents are some of the factors contributing to rising rent in urban areas.

Depending on whether it’s on the mainland, the island, or the outskirts of Lagos, rent for all categories of apartments is on the rise. A two-bedroom apartment in Ikorodu is about N500,000 per year, while the same apartment in Lekki is N3.5 million. A two-bedroom apartment in Abuja’s city center costs N2.2 million, Kano N1.5 million, and Ibadan N700,000.

What the experts say about it

Nairametrics spoke to Mr. Emeke Ananenu of StructureBase Property Development Company Limited, a Real Estate Expert and Developer in Lagos. He posits that the cost of land is a major reason why rent is skyrocketing. For example, land in Lekki has gone from between N1m – N2m at the point of allocation by the Lagos State Govt. in the mid-90s to an average of around N350m for a 1000sqm plot in the same area in 2023. This rapid increase is due in part to the unavailability of new plots on the market and has led to a steady increase in rents in Lekki and surrounding areas.

“The current land tenure system also does not encourage investment in the housing sector. According to the Land Use Act, all land is vested in the State Governor who can revoke ownership of any land in the interest of overriding public interest. This creates room for abuse and has resulted in declining investments with developers wary of their land being confiscated by the government.

Building materials are another reason why rents are so high: cement, a key component of a building in Nigeria, has seen the price increase from pre-pandemic levels of N2,500 per 50kg bag to around N5,000 per 50kg bag in 2023. Nairametrics’ interactions with a major distributor for the top brands who did not want to be named revealed that logistics cost is one of the reasons the cost of cement is so high. Transport and logistics costs constitute up to 15% of the overall cost of the product. Another component concerning building cost is an iron rod. This is a purely imported component as Nigeria does not have functional steel mills, and the price is affected by the turmoil in the forex market. All these costs are passed onto the buyer or tenant at the end of the day.

Impact on new developments

Costs associated with the building have had a direct impact on new residential developments springing up in major towns in the country. In the view of Mr. Tajudeen Bello, a surveyor, and Realtor, “fewer developments are springing up in the last 2 years post-pandemic, and most of the new developments are exclusively for sale. Apartment blocks are being developed for sale, with new owners waiting to resell and in some rare instances let them out to Tenants.” This creates a problem for young people who are unable to afford to outrightly buy apartments in the absence of a structured mortgage financing option for them.

Government efforts to address the issue

The Federal Government is strengthening institutions such as the Federal Housing Authority (FH) and the Federal Mortgage Bank of Nigeria (FMBN) and encouraging the Central Bank of Nigeria to use its monetary and fiscal policies to drive growth in this key sector.

In August 2022, at the 16th Africa International Housing Show in Abuja, Vice President ‘Yemi Osibanjo while declaring open the event said, “by 2020 when along with the rest of the world Nigeria was faced with the covid-19 pandemic and the resultant impact on the economy, the government swiftly reacted with the N2.3 trillion program which includes an N200 billion National Social Housing Program aimed at delivering homes for Nigerians on a low income. That program to be implemented by the Family Homes Funds working in partnership with state governments and the private sector will create up to 300,000 homes and about 1.6 million jobs,” the Vice President said.

Many young people are moving to the suburbs to find apartments they can reasonably afford. As most of them work from home, they install inverters and create the desired level of comfort in their homes. Tolani, who we mentioned at the beginning, could not move to the suburbs because of her job, so she decided to co-share with another colleague of hers.

This is something that is becoming more common as a way of surviving the high rent in the city. Both parties can split bills and the rent while maintaining their preferred lifestyle and privacy. The hope is that in a few years, she will be able to afford a place of her own.

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