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Restrictive legislation undermines REITs operation — NSE President

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By Peter Egwuatu

PRESIDENT of the Nigerian Stock Exchange, NSE, Mr. Abimbola Ogunbanjo, has blamed the underdevelopment and ineffectiveness of the Real Estate Investment Trusts, REITs, in Nigeria on restrictive legislation as well as poor knowledge and understanding of the industry.

Ogunbanjo spoke at the maiden REITs conference with the theme “Real Estate Investment Trust in Sub-Sahara Africa: The Role of the Capital Market”, hosted by the NSE in Lagos.

According to him the clarity on diverse regulatory issues which are required to stimulate greater market confidence, transparency and foreign capital inflows are still lacking in the industry.

He stated: “The major challenges facing the REITs industry in Nigeria include restrictive legislation, poor knowledge and understanding of the industry in addition to prolonged bottlenecks created by the Land Use Act of 1978. Nigeria’s Land Use Act is embedded in the constitution of our country. Thus, any attempt to rectify its inadequacies requires a constitutional amendment which in itself is a major challenge”.

He, therefore, called for the establishment of a separate and dedicated lands registry in each viable state of the federation, a (REITs registry of sorts) within the existing legal framework to specifically handle all REIT related transactions.

Also speaking, Mr. Oscar Onyema, Chief Executive Officer of the NSE, noted that the African REITs market is presently valued at US$29 billion and is available in four countries, including Nigeria, Ghana, South Africa and Kenya.

He said: “There are only 32 REITs in Africa with South Africa being the largest REIT market having 27 REITs and Nigeria second with three REITs listed. In 2015, an estimated $265 million worth of transactions were concluded in Kenya, Nigeria and Ghana, a big improvement to the $65 million seen in all three markets during 2012. This indicates an increasing market as a larger number of investors are beginning to take increased interest and participation in the real estate investment sector”.

Onyema further stated that “Whilst the Nigerian market may not be as developed as other emerging markets such as Mexico, South Africa and Singapore, this asset class has definitely come to stay. Today we have about N40 billion in REITs market capitalisation listed on the NSE and a total of N96 billion in the construction/real estate sector of our equity market”.

REITs are corporations or trusts that use the pooled capital of many investors to purchase and manage income property and/or mortgage loans. REITs are traded on the NSE just like stocks.

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