Nigeria’s housing developers have many challenges to face, including funding and skilled labor shortages. With more government support, developers can bring Nigeria the houses it needs.
TEMITOPE RUNSEWE – Managing Director, Dutum
FEMI AKINTUNDE – Managing Director Alpha Mead Group
What challenges have you encountered in your operations, particularly concerning shortages of skilled labor?
TEMITOPE RUNSEWE We are addressing the shortage of skilled labor in two ways. First, we are partnering with existing agencies and private companies that have decided to train construction talent specifically in Lagos. The Lagos State Employment Trust Fund has an arm focused on the construction industry, and it trains artisans as skilled labor. The second approach, or the medium-term plan, is setting up our own training institute. We want to train people to use for our projects and to send to other projects; ultimately, the objective is to strengthen the sector. The other challenge is that the industry has different components. On the construction side, and particularly as largely a government contractor, one of our greatest challenges is funding projects. This is a problem because it means we spend longer on projects because we do not have access to funds to execute the projects quickly and on time.
What is the idea behind your middle-income housing estate?
FEMI AKINTUNDE We need to bring innovation into the way we do things. We are looking into the development of mass housing, because conventional building methodology cannot deliver the 17-20 million housing gap that Nigeria has, according to World Bank. In real estate, housing is categorized into three levels: luxury housing, middle-income housing, and social housing. The majority of people are in social housing, where 70% of the housing gap is. Social housing is something government needs to provide, but it does not have the money or management capability to deliver quality social housing. It needs to look for a way to connect with private developers like us. Our proposition is for the government to provide social housing, but not necessarily be directly involved, as the leverage and the capacity of the private sector is needed. As the government owns the land, we buy land from the government at a commercial rate. We bring in the capital to build on the land in return for land we can use to build middle income and luxury developments that we sell at commercial rates. This swap is a simple model that will take us far because construction generates massive employment. It is the only way to overcome this housing gap.
What trends are present outside of Lagos?
TR Lagos is not representative of the rest of the country. It is like a mini country, as it runs almost without the rest of the Nigeria. In most other parts of the country, cities still need a great deal of development, but these are macroeconomic issues. We are working on a project where we need to deliver houses below NGN5 million. Outside of Lagos and Abuja, there is low economic purchasing power. In other states, if a developer wants to build houses that people can buy, they must be affordable. In some cases, the state government needs to provide the land and infrastructure within the city or estate so that the costs of construction will be lower. If they are unable to provide this, it is almost impossible to deliver houses at those prices. Other places are still struggling to properly develop their cities, so the outskirts are presently for agriculture activities. There is still great room for development in most Nigerian cities but the economy needs to grow.
What can be done by the public sector to tackle Nigeria’s infrastructure deficit?
FA The government needs to realize it does not have any business in business, apart from creating a supportive environment and providing the right regulatory framework to monitor and guide what the private sector is doing. The government should ask us how it can help us accelerate the rate of production or provide of critical infrastructure that will drive the economy. The only way is through PPPs and FDI, rather than foreign portfolio investments, which only create hot money. We need patient capital that will stay and help us develop our infrastructure and improve our economy. Managing this infrastructure is critical so that services can be delivered. This impacts the private sector because we need infrastructure to function. Therefore, if the government can find a way to provide more and serve the public better, the private sector could drive the economy.