Growing real estate investment, input cost increase cement price

Growing investment in real estate as an alternative asset for Nigerians looking for where to hedge their funds against inflation is a major reason for the rising price of cement, BusinessDay findings have shown.

READ ALSO: MSMEs Contribute Over 50% Of Nigeria’s GDP, 80% Employment ― FG

High input cost, product scarcity or limited supply arising from shocks in the economy and disruptions in production activities is another reason for the current hike in cement price.

Nigeria is experiencing what is clearly a galloping inflation. Its March inflation figure at 18.17 percent is an embarrassment to economic analysts. Apart from eroding the value of the local currency, this has also affected food prices and crimped household/consumer purchasing power significantly.

By its nature, real estate, unlike other investment asset classes, appreciates in value over time, virtually unaffected negatively by inflation. Rather than depreciate and lose value in inflationary periods, real estate, in the worst case scenario, remains static in value.

This explains why the rising price of cement is not deterring or stopping investment in the sector.

“The knowledge of real estate as a means of financial security has attracted more players and investors into it, thereby affecting the demand and supply of cement in the country; real estate is one sector that can flow with inflation per time, hence a lot of Nigerians are currently investing in it,” Osazee Edigin, an estate developer, confirms to BusinessDay in Benin City.

Construction activities have been upbeat in the sector since the beginning of the last quarter. Ayo Ibaru, COO, Northcourt Real Estate, also confirms to BusinessDay that increased investment in real estate contributes to the rising price of cement, citing mid-income residential buildings springing up in Lagos on both Island and Mainland.

He also cites institutional investors that are doing both residential and commercial developments such as Purple Capital, which is doing mixed use developments in Lekki and Maryland in Lagos. All these push up demand for cement and, by extension, the price of the product.

But there are other reasons for the significant increase in price that cement buyers have seen. “Yes, we have seen increased demand arising from increased construction activities in real estate sector, but that is not the real cause of the price hike.


Inflation Rate

How to invest when inflation bites

Inflation is the general rise in the prices of goods and services over time. The “inflation rate” is the rate at which the change in prices happens; this is usually expressed in percentages over time.

Alice Abegunde, a mother of three teenagers, does not understand the reason behind the constant increase in the price of rice, her children’s favourite food.

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“Every time I go to the market, they have added to the price of rice,” Abegunde, 44, a resident of Lagos State, says.

While Abegunde might not be able to connect the dot and blame the rice sellers for the rise in price, Emeka Johnson could, he knew times were going to be hard as inflations numbers kept rising and resolved to save more and spend less.

What Johnson does not know is that he is constantly losing money because the value of his money drops as inflation rises.

What is inflation?

It is the general rise in the prices of goods and services over time. The “inflation rate” is the rate at which the change in prices happens; this is usually expressed in percentages over time. For instance, if inflation goes up 10 percent than last year, it means purchases will cost 10 percent more than they did last year.

Basically, inflation reduces the value or usefulness of money; the higher inflation rises, the less your money is worth, in real terms as time goes by. Therefore, it is about your purchasing power, that is, how much your money can buy.

What causes inflation?

There are reasons why prices rise. First, when everyone suddenly develops a taste for beef, the price of beef will rise. This follows a basic law in economics that, higher demand for a product will push up its price. This is also called demand-pull inflation.

What this means is that when the demand for goods and services in the economy exceeds the economy’s ability to produce them, their short supply places upward pressure on prices and gives rise to inflation.

Another reason prices rise is that the cost of producing goods and services increases. Companies would usually respond to higher cost of production by increasing the price they sell their products; they do this to cover the extra cost they incurred while producing. This is known as cost-push inflation.

How is inflation measured in Nigeria?

Every month we hear news about new inflation rate or data but have you ever wondered how it is calculated? Nigeria uses a well-known indicator called the Consumer Price Index (CPI), which measures the average change over time in prices of goods and services consumed by people every day.

In Nigeria, the CPI is calculated by the National Bureau of Statistics (NBS) and published every month. To calculate CPI, the NBS gets people to collect prices for thousands of items that an average Nigerian consumer buys such as food, prescription drugs, rent, petrol and many others. These items are grouped into categories called baskets. Every month, the NBS calculates the price changes of each item from the previous month and aggregates them to work out the rate for the CPI basket.

Who controls inflation?



Investors: How companies can attract funding

As investors gear up to tap from opportunities in Nigeria through investments in the country’s estimated 41.5 million startups, small and medium scale companies in need of growth capital have to be investment-ready to attract funding, according to industry stakeholders.

READ ALSO: CBN Denies Placing New Restrictions On Cryptocurrency.

Discussing one of the most important aspects of business for most entrepreneurs in Nigeria and Africa – funding, trade and investment stakeholders in a recent webinar organised by the Nigerian-British Chamber of Commerce said businesses should be created based on ‘universal foundation’ or ‘sustainable foundation.’

“Integrity, strong governance and keeping proper records of the business and the ability to leverage on environment impactful initiative are very important,” Bisi Lamikanra, former partner and head of the advisory services, KPMG Nigeria said.

Small and medium-sized enterprises (SMEs) are described by analysts as the bedrock of the Nigerian economy as they account for over 95 percent of all businesses and contribute over 50 percent to the economy.

But hard hit by the double challenge of COVID-19 and slow economic growth, small businesses in Africa’s most populous nation are now more vulnerable as constraints in liquidity and cash flow, coupled with increased payment delays have resulted in endemic depletion of working capital.

With the high cost of accessing bank credit and lack of the much-required collateral, many Nigerian businesses are at the mercy of investors for funding to expand and increase the bottom line, but they also have to be ready to be attractive for investment.

“An investor-ready company just means that such a business is ready for marriage between itself and an investor. So an investor can partner with them and honour the agreement,” Okechukwu Enelamah, chairman, African Capital Alliance (ACA), and former minister of Industry, Trade, and Investment, said.

Meanwhile, companies like Flutterwave and Kuda are some of the startups that raised funding within the first three months of 2021. The former raised $170 million from a Series C fundraising while the latter secured $25 million in a Series A fundraising.


Equities Market

Equities market gains over N100bn as investors buy Zenith, GTBank, others

The record positive seen on Custom Street came as investors realise the equities market offers reentry opportunities for value hunters as prices of most counters hit record lows.

Trading on the floor of the Nigerian Exchange (NGX) Limited closed in green zone on Thursday as investors raised stakes in stocks like Zenith Bank Plc, Eterna Plc, GTBank Plc, Dangote Sugar Refinery Plc and Lasaco Plc.

READ ALSO: SMEDAN opens N5m loan application portal for SMEs

The record positive seen on Custom Street came as investors realise the equities market offers reentry opportunities for value hunters as prices of most counters hit record lows.

The All Share Index (ASI) of the Bourse stood higher by 0.54percent to close at 38,914.84 points, from 38,706.13 points recorded the preceding day.

The negative return year-to-date (YtD) stood lower at -3.37percent. This week alone, the equities market has increased by 0.69 percent, while this month it has declined by 2.22 percent.

Also, the value of listed stocks on the Bourse increased by N109billion, from the preceding day high of N20.251trillion to N20.360trillion.

Eterna Plc led the gainers league after its share price moved from N4.62 to N5.08, up by 46percent or 9.96percent.

Lasaco also advanced, from N1.2 to N1.3, up by 10kobo or 8.33 percent. Zenith Bank moved up from preceding day low of N20.5 to N22, up by N1.5 or 7.32percent.

GTBank rose from N28 to N29.8, adding N1.8 or 6.43 percent while Dangote Sugar moved from N16 to N17, up by N1 or 6.25 percent.

Unity Bank, GTBank, Zenith Bank and FBN Holdings were actively traded stocks on the floor of Nigerian Exchange (NGX) Limited. In 4,040 deals, investors exchanged 1,468,421,633 units valued at N5.853billion.


Tony Elumelu

Elumelu advocates strategic long-term investment to tackle poverty in Africa

Disturbed by the increasing rate of poverty in Africa, Tony Elumelu, founder of the Tony Elumelu Foundation (TEF), has called for a framework that will widen the circle of prosperity in the continent rather than littering it with lone star billionaires.

READ ALSO: More pain for Nigerians as inflation hits 4-yr high

Elumelu said Africa needs massive investments in infrastructure, electricity, digital technology and healthcare delivery to address the massive poverty in the continent, adding that future Bill Gates could come out of Africa if access to electricity is provided.

Speaking at the ‘World Government Summit Dialogue: Africa’s Future Post 2021’, Elumelu said the continent can see more billionaires spring up if only critical investments are made.

“The ones that are there are getting stronger climbing the league table while new ones are coming up. But we need to move the emphasis away from these so-called billionaires,” Elumelu said.

“We should be talking about how many young Africans will be impacted in the next five or 10 years’ time? Instead of us having a pyramid of few billionaires, I will prefer that we have a large base that has prosperity, happier people and people whose basic human needs are met. I think that is what will give us the sustainability and the lasting peace that we need in Africa,” he said.

Read Also: Deadline to Apply for the Tony Elumelu Foundation Entrepreneurship Programme Fast Approaching

“That will also address the insecurity that we have in Africa and stop the migration of our younger people. That will stem extremism and all the kidnappings we hear every day all around us because of poverty and hopelessness as people do not see a better future. We need to reset our mind to think in a better way to improve society and mankind,” he further said.

Elumelu noted that poverty anywhere is a threat to mankind everywhere and called for support for the development of entrepreneurship and SMEs so that the continent could address the challenge of poverty in a significant way.

“Without access to electricity, we cannot digitalise our local economies and communities where most of our people live. Also, this is significant in terms of informal businesses that drive the African economy.

“If we must empower our people out of poverty we must invest in electricity. The pandemic presents an opportunity for us to reprioritise and make sure that we invest in electricity. We must set for ourselves a timeline and the way we declared war on COVID-19, on polio is the same manner we need to declare war on poor access to electricity in Africa. For me, it is at the centre of poverty alleviation,” he said.

He also said strategic long-term investments by his business group, which he said is at the centre of his Africapitalism, is one of the ways to deal with poverty in Africa.

“That is the only way we can deal with the issue of poverty alleviation and create massive employment for our people. And that is the only way we can empower the economy.

“For us, investment in en, and we are looking at an integrated energy strategy because power cannot be dealt with in isolation. For us, the $1.1 billion investment that we made in January is to further help to achieve our vision for a prosperous Africa built on solid access to electricity for everyone. Africa at a time like this needs proper investment in power and access to healthcare for us to correct the poverty level we see on the ground,” he added.

Elumelu noted that the most significant contribution of the TEF’s entrepreneurship programme was the training it provides to young entrepreneurs on how to run prosperous businesses in Africa.


Mobile Money Business

The Rise Fund to Invest $200m in Airtel Africa’s Mobile Money Business at $2.65bn Valuation

Airtel Africa, a leading provider of telecommunications and mobile money services, with a presence in 14 countries across Africa, today announces the signing of an agreement under which The Rise Fund, the global impact investing platform of leading alternative investment firm TPG, will invest $200 million in Airtel Mobile Commerce BV (“AMC BV”), a wholly owned subsidiary of Airtel Africa plc (the “Transaction”). AMC BV is currently the holding company for several of Airtel Africa’s mobile money operations; and is now intended to own and operate the mobile money businesses across all of Airtel Africa’s fourteen operating countries.

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The Transaction values Airtel Africa’s mobile money business at $2.65 billion on a cash and debt free basis.

The Rise Fund will hold a minority stake in AMC BV upon completion of the Transaction, with Airtel Africa continuing to hold the remaining majority stake.

The Transaction is subject to customary closing conditions including necessary regulatory filings and approvals, as necessary, and the inclusion of specified mobile money business assets and contracts into AMC BV.

The Transaction is the latest step in the Group’s pursuit of strategic asset monetization and investment opportunities, and it is the aim of Airtel Africa to explore the potential listing of the mobile money business within four years.

The Group is in discussions with other potential investors in relation to possible further minority investments into Airtel Money, up to a total of 25% of the issued share capital of AMC BV.

There can be no certainty that a transaction will be concluded or as to the final terms of any transactions.

The proceeds from the Transaction will be used to reduce Group debt and invest in network and sales infrastructure in the respective operating countries.

Airtel Africa Mobile Money Services

Operating under the Airtel Money brand, Airtel Africa’s mobile money services is a leading digital mobile financial services platform catering to a large addressable market in Africa (characterised by limited access to formal financial institutions with limited banking infrastructure) and includes mobile wallet deposit and withdrawals, merchant and commercial payments, benefits transfers, loans and savings, virtual credit card and international money transfers.

Mobile money services are available across the Group’s 14 countries of operation, however in Nigeria the Group offers Airtel Money services through a partnership with a local bank and has applied for its own mobile banking licence.

It is the intention that all mobile money operations will be owned and operated by AMC BV.

In our most recent reported results for Q3, the mobile money service segment (corresponding to all the businesses that are intended to be transferred to AMC BV) delivered a strong operational performance:

  • Generated revenue of $110 million ($440 million annualised), and underlying EBITDA of $54 million ($216 million annualised) at a margin of 48.7%.
  • Year on year revenue growth for the quarter was 41.1% in constant currency, largely driven by 29% growth in the customer base to 21.5 million, and 9.7% ARPU growth.
  • Growth in transaction value was 53.0% to $12.8 billion ($51 billion annualised).

Our mobile money business benefits from strong network presence with our core telecom business through the extensive distribution platform of kiosks and mini shops as well as dedicated Airtel Money branches supplementing our extensive agent network, to facilitate customers’ assured wallet and cash.

We have a clear strategy to continue to drive sustainable long-term growth in Airtel Money with a focus on assured float availability, distribution expansion and increased usage cases for our customers.

In this year alone we have added partnerships with Mastercard, Samsung, Asante, Standard Chartered Bank, MoneyGram, Mukuru and WorldRemit to expand both the range and depth of the Airtel Money offerings and to further drive customer growth and penetration.

The profits before tax in the full year ending 31 March 2020 and the value of gross assets as of that date, attributable to the mobile money businesses were $143.4 million and $463.2 million, respectively.

Key Elements of the Transaction

  • Agreement values Airtel Africa’s mobile money business at $2.65 billion on a cash and debt free basis.
  • AMC BV, a wholly owned subsidiary of Airtel Africa, is currently the holding company for several of Airtel Africa’s mobile money operations; and is now intended to own and operate the mobile money businesses across all of Airtel Africa’s fourteen operating countries once the inclusion of the remaining mobile money operations under AMC BV is completed.
  • A newly incorporated investment vehicle of The Rise Fund will invest $200 million through a secondary purchase of shares in AMC BV from Airtel Africa. The transaction will close in two stages. $150 million will be invested at first close, once the transfer of sufficient mobile money operations and contracts into AMC BV has been completed, with $50 million to be invested at second close upon further transfers.
  • Airtel Africa aims to explore the potential listing of the mobile money business within four years. Under the terms of the Transaction, and in very limited circumstances (in the event that there is no Initial Public Offering of shares in AMC BV within four years of first close, or in the event of changes of control without TPG’s prior approval), TPG would have the option, so as to provide liquidity to them, to sell its shares in AMC BV to Airtel Africa or its affiliates at fair market value (determined by a mutually agreed merchant bank using an agreed internationally accepted valuation methodology). The option is subject to a minimum price equal to the consideration paid by The Rise Fund for its investment (less the value of all distributions and any proceeds of sale of its shares, and with no time value of money or minimum return built in) and a maximum number of shares in AMC BV such that the consideration does not exceed $400 million.

The Transaction is expected to reach first close over the next three to four months. From first close The Rise Fund will be entitled to appoint a director to the board of AMC BV and to certain customary information and minority protection rights.



Why investors flock to Ikoyi, VI despite challenges…

Despite the challenges in the Nigerian real estate market that are deeper in highbrow locations or up-market neighbourhoods, Ikoyi and Victoria Island in Lagos remain attractive destinations for investors.

READ ALSO: PMI: Business Conditions in Nigeria Show Improvement

These two locations, home for luxury real estate, have seen challenges reflected in over-supply interspersed with falling demand and widening vacancy rate, which, as at the end of 2020, was estimated at 40 percent for residential properties.

But returns on investment, especially for small size family housing units like studio, one-bedroom and two-bedroom apartments, have been good and encouraging compared to other locations.

Lay-offs, pay-cuts and economic downturn made worse by the crippling impact of COVID-19 pandemic have left consumers with shrinking wallets and low purchasing power, leading to buyers and tenants’ preference of apartment units to duplexes, maissonettes and large luxury homes.

For this reason, multi-family units, specifically apartments, top consideration for most investors in these locations. “Apartments make more economic sense to developers, more so as multiple units can be developed on a piece of land without taking up too much space,” David Mba, former manager, commercial sales at Fine & Country, explains to BusinessDay.

“Returns are higher for smaller apartment units, especially 2-bedroom, which means that demand is more for these house-types than the big-size apartments,” he states.

According to Mba, Ikoyi and Victoria Island are “promising destinations,” but the consideration has to be on smaller-unit apartments. “Any investor wanting to enter the market amid the COVID-19 pandemic should look in that direction,” he advised.

On the average, rental values in Victoria Island as at the end of 2020 stood at N1.5 million per annum for 1-bedroom apartment; N3.5 – N8.5 million for 2-bedroom; N5.5 – N15 million for 3-bedroom and N6 – N25 million for 4-bedroom apartment.

In Ikoyi, it is N4 – N5 million per annum for 1-bedroom; N6.5 million for 2-bedroom; N10 million for 3-bedroom, and N10 – N25 million for 4-bedroom apartment.

Return on investment on these apartments, according to Mbah, is quite significant. In Victoria Island, the return on the different apartment sizes stood at 2.7—3.7 percent per annum for 1-bedroom; 7—10 percent for 2-bedroom; 6.1—10 percent for 3-bedroom; 6.1—9.2 percent for 4-bedroom duplex and 3.75—6 percent for 4-bedroom terrace.

In Ikoyi, it is 9 percent for 1-bedroom; 5.4—8.6 percent for 2-bedroom; 5.3—8 percent for 3-bedroom; 4.5—8.3 percent for 4-bedroom duplex and 4.8—5-4 percent for 4-bedroom terrace.

Though most real estate investors aim for over 10 percent or 12 percent return on their investment, experts say anything above 8 percent is good.

Lekki is another Island location in Lagos where return on investment is good and encouraging. Chiedu Nweke, CEO, Periwinkle Residences Limited, argues that returns in the Lekki corridor is the highest in Lagos, but records show that Ikoyi, particularly, is still ahead.

“This is because whether you are talking about Ikoyi or Victoria Island, the story is the same that these locations remain attractive for reasons other than returns on investment,” Mba says, explaining that talking in terms of strengths, weakness, opportunities and threats (SWOT), which guide investments, opportunities are more here.


Solar Energy

SunFunder closes US$70m solar energy fund

AFRICA – Investment company SunFunder, a company specializing in solar energy, has completed the financial mobilisation for its Solar Energy Transformation (SET) fund worth US$70 million.

READ ALSO: How SMEs can scale up under the AfCFTA

The multi-investor fund has been closed thanks to an investment by Oesterreichische Entwicklungsbank AG (OeEB).

The SET Fund was launched by SunFunder with the aim of accelerating the electrification process in Africa and this financing mechanism has attracted many other investors like Swedfund which injected US$12 million in September 2020.

The fund has also received investment from American Development Finance Corporation (DFC), Calvert Impact Capital, Ceniarth, the IKEA Bank of America Foundation, Mercy Investment Services, Schmidt Family Foundation, as well as several individual investors through the Toniic Impact network.

“Off-grid solutions have played a key role in providing clean, affordable, and reliable energy, especially to rural populations. We are therefore proud to team up with SunFunder and to support this innovative fund that improves access to energy for millions of people”

“Off-grid solutions have played a key role in providing clean, affordable, and reliable energy, especially to rural populations. We are therefore proud to team up with SunFunder – an experienced and impact-conscious partner in this field and to support this innovative fund that improves access to energy for millions of people,” said Sabine Gaber, member of the OeEB Board of Directors.

In Africa, SunFunder particularly supports suppliers of off-grid solar systems, which accelerate the electrification of rural areas and provide clean energy to businesses.

In Nigeria, for example, SunFunder has invested US$4 million in Daystar Power to provide solar energy to industrial and commercial customers.

The investment company has also been involved in several fundraising initiatives, including those of solar-powered irrigation system supplier SunFunder and solar home systems supplier PEG Africa.


Investor Education

Investor Education Will Encourage Investor Participation

Investor Education Will Encourage Retail Investor Participation in Equities

Regulatory steps geared towards deepening
investor education across the nation will increase retail investors’ participation in the Nigerian equities market.

READ ALSO: Innovators Engage Investors At Fintech Webinar.

Mr. Charles Fakrogha, the Chief Operating
Officer (COO), Supra Commercial Trust Limited, said this while reviewing
the latest report on “Domestic and Foreign Portfolio Investors Activities In
Equities Trading”| published by the Nigeria Stock Exchange (NSE).

Fakrogha noted that the COVID-19 pandemic
adversely affected retail investor confidence, giving room for institutional investor
dominance of the market.

The capital market analyst said that
institutional investors had leveraged their superior resources and technology
to carry out trading activities that enabled them benefit from hidden-value
opportunities and education.

“Retail investors are expected to drive daily
market action, but their restrained attitude towards the market made them less
adaptable to the  COVID-19 pandemic”.

In the area of investments, he reiterated the
need for policymakers and regulators in Nigeria to incentivize domestic
portfolio investors in the country.

Fakrogha was happy that the tide had changed
with domestic investor transactions dominating activities for January 2021 with
about 74% of trading transactions. This was in comparison to foreign investor
transactions which accounted for about 26% of traded transactions.

The analyst stressed the need for a capital
market that thrives on transparency, investor protection, and efficiency, which
will attract more foreign direct investments (FDI) into the economy.

The equity market trader advised that key
market operators and regulators should leverage technology and strengthen

Investor Education Will Encourage Retail Investor Participation in Equities



Innovators Engage Investors At Fintech Webinar.

Innovators Engage Investors At Fintech Nigeria StartUp Funding Webinar

The Fintech Association of Nigeria (FintechNGR) recently held its monthly webinar themed, “StartUp Funding Webinar:

READ ALSO: MSMEs: Deepening access to capital…

Innovators meet Investors, Who part with a Deal?” The association sought to educate participants on how to move from having an idea to moderating execution and obtaining funding.

FintechNGR members noted that startups play a major role in the development of an economy; however, the odds against startup success are usually higher, as they attempt to survive in very tough business environments. Statistics show that 31.5% of startups fail in their first year (Investopedia, 2020), as part of its mission of driving Fintech growth, FintechNGR partnered with a few organizations to include a startup pitch in its webinar in February 2021.

The webinar explored the varying challenges that accompany fundraising, navigating grey areas with VCs, out-of-the-box techniques to getting startup capital, legal issues associated with funding, and also live pitches with real investors.

Participants also got to learn some of the different regulatory frameworks applicable to certain industries that they need to pay attention to as startups as well as available programs and funding rounds available from partner organizations.

Also, startups were allowed to interact with investors, receive feedback on their ideas, and started investment conversations that could lead to funding. Phone POS, Palate Hub, The Bells Global, Crediometer, and a few others were some of the startups that participated in the 5-minute pitch session with the investors.

With panelists drawn from across different sectors- Adenike Sheriff, Principal, Future Africa, Mrs. Ashimi Tonbofa, Partner Tonbofa, Nsikak John, Head, Enterprise Innovation, NSE, and Dolapo Agbaje, Vice President, APIS Partners, the participants were equipped with in-depth practicable learning that could be easily put to work in their startups.