Should you invest in REITs in Nigeria?
Nowadays, REITs are one of the most popular investment instruments available on the market. Real estate investment trusts can be a great alternative to cash, bank deposits or bonds given their low risk profile and stable income. Trusts in developed countries like the United Kingdom and Australia generate annual returns around 4-5% which is reasonable given the lower long-term inflation rate in those countries. However, the situation with Nigerian REITs is very different.
The average annual return of the 3 biggest REITs in Nigeria over the past 5 years was 3.86% (in NGN) or 20.6% for the whole period. At the same time, the Nigerian Naira has lost more than 20% of its value against the USD over the same period. That is why, a Nigerian investor who invested in local REITsin 2018 performed worse than another one who simply kept his money in USD (without investing it anywhere).
Investing in real estate outside of Nigeria is a much wiser option given the poor performance of the local currency and Nigerian REITs. On one hand, you can benefit from keeping your money in a foreign currency like the US dollar, Euro, British Pound or Swiss Franc. On the other hand, you can gain from a better selection and management of investment properties. CrowdSquare can help you invest in real estate in Europe in an easy, secure and transparent way. Please, check our website for more information or get in touch with us.
List of the top REITs in Nigeria that we included in our study.
1. UPDC Real Estate Investment Trust
UPDC REIT is a Nigerian real estate trust that is listed on the stock exchange. It is the largest REIT in Nigeria by assets with a diverse portfolio of real estate in Lagos and Abuja. The trust is overseen by the Securities and Exchange Commission.The fund manager for UPDC REIT is Stanbic IBTC Asset Management, one of Nigeria’s leading investment managers.
Market capitalization: 9.47 billion
Return on Assets*: 2.61%
Return on Equity*: 0.75%
2. Union Home Real Estate Investment Trust
UH REIT is a real estate investment trust company that was listed on the Nigeria Stock Exchange in 2008 and became fully operational in February 2009. It is the second largest Nigerian REIT by asset value.The trust manages a portfolio of commercial and residential properties located in Lagos and Abuja. Market capitalization: 9.15 billion NGN
Return on Assets*: 2.26%
Return on Equity*: 3.83%
3. SFS Real Estate Investment Trust
SFS REIT is a close-ended real estate fund that is traded on the Nigerian Stock Exchange. It invests money in income-generating real estate such as apartments, offices, shopping malls, and warehouses. SFS is the smallest but best performing REIT in Nigeria.
Market capitalization: 1.84 billion NGN
Return on Assets*: 3.77%
Return on Equity*: 7%
* Annual - 5 Year Average
Another option for people who want to invest in real estate in Nigeria is to purchase shares of real estate developers but one should keep in mind that stock investing is significantly more risky.
Last update: 27/09/23
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