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Recession Hits Luxury Office Buildings, Occupancy Rate Drops

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  • Recession Hits Luxury Office Buildings, Occupancy Rate Drops

As a result of the current economic recession in the country, multinational and indigenous firms are cutting down on expenses, giving rise to a high number of vacant grade ‘A’ office buildings across the country.

Investigations by our correspondent showed that the occupancy rate of luxury office complexes was as low as 30 per cent.

Findings also showed that along Kingsway Road, Ikoyi, Lagos alone, there were more than five luxury office complexes, all with less than 50 per cent occupancy rate.

Same goes for grade ‘A’ office complexes in Victoria Island, Lagos and parts of Abuja.

Before now, the country’s reputation as the business hub of sub-Saharan Africa had fuelled a strong demand for grade ‘A’ office space with rents going as high as $800 (N253,600) to $1,000 (N317,000) per square metre in such buildings.

Prior to the country entering into recession, growth in the real estate sector had been boosted by rising per capita income, foreign direct investment, a fast growing middle class and rapid urbanisation.

Real estate investment firm, Broll Nigeria, had said that by the end of 2016, the country would have about 275,000 square metres of office space available following the huge demand.

But with the recession, corporate organisations have devised means of reducing overhead expenses, including rent.

The Chief Executive Officer, Broll Nigeria, Mr. Bolaji Edu, recently noted that “Nigeria has seen significant increases in the cost of maintaining and operating commercial buildings due to soaring inflation and foreign exchange challenges.”

He added that the high operating costs coupled with an oversupply of grade ‘A’ traditional office spaces and the slowdown that had gripped the economy in recent times had led to the glut of such office spaces currently.

Despite the glut, more than 50,000 square metres of office spaces are expected to be delivered this year.

Before the recession, rents for grade ‘A’ spaces in prime areas such as Victoria Island and Ikoyi in Lagos were rated among the world’s highest but according to findings, in recent times, prices have crashed by 50 per cent from about $100,000 per annum in some of the buildings to $50,000, yet the spaces remain unoccupied.

“Even with the drop in prices, there are no enquiries let alone leasing or outright purchase,” an estate surveyor and valuer, Chief Kola Akomolede, said.

“Not many businesses require such luxuries anymore. Banks, oil companies and telecommunications firms and other big spending companies were the main targeted tenants, but not anymore; the economy has taken a toll on many businesses,” he added.

Estate surveyor and valuer, Mr. Rogba Orimalade, said the situation should be blamed on lack of investors’ confidence in the economy.

He said, “Many multinationals currently lack the confidence to invest in the country and this has impacted negatively on office buildings because these buildings are developed with the projection that blue chip companies will take up spaces in them.

“Landlords have been forced to drop rents but even at that, they are still looking for tenants.”

For smaller and upcoming businesses, co-working and office sharing are gradually becoming the norm.

Co-working spaces, where in most cases tenants share a secretary or receptionist and a conference room on demand, currently cost between N15,000 and N180,000 per month depending on the location, or between N3,000 and N15,000 per square metre.

The Chief Executive Officer of 3invest Limited, Ms. Ruth Obih, said, “To mitigate the financial and operational difficulties of occupying a traditional office space in today’s gloomy economic climate, many businesses are turning to the opportunities and conveniences that serviced offices and co-working spaces provide.

“These include flexible payment terms, networking and collaborating, cost savings and lower operating costs, zero and limited overheads, while still attaining the same level of prestige and quality that you would achieve in a traditional office.”

According to Akomolede, real estate has been the most affected sector of the economy since the recession began and the lull is expected to continue until the economy recovers.

“I don’t think there will be much difference between 2016 and 2017. The year 2018 can be better; things may begin to take shape but only if we start refining our own crude oil,” he stated.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

Nigeria’s Excess Crude Account (ECA) Balance Now $72.4 Million

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Zainab Ahmed Finance Minister

Nigeria’s Excess Crude Account (ECA) Balance Now $72.4 Million

The Minister of Finance, Budget and National Planning, Zainab Ahmed, on Thursday said Nigeria’s Excess Crude Account (ECA) stood at $72,411,197.80 as of January 20th, 2021.

The minister disclosed this at the first National Economic Council (NEC) meeting of the year presided over by Yemi Osinbajo, Vice President and had in attendance State Governors, Federal Capital Territory Minister, Central Bank Governor and other senior government officials.

Ahmed said “Excess Crude Account (ECA), balance as at 20th January, 2021, $72,411,197.80; Stabilization Account, balance as at 19th January, 2021, N28,800,711,295.37; Natural Resources Development Fund Account, balance as at 19th January 2021, N95, 830,729,470.82.”

The minister also said President Muhammadu Buhari has approved N6.45 billion for the setting up of gas plants in 39 locations nationwide in an effort to increase COVID-19 treatment.

What is Excess Crude Account (ECA)

Excess Crude Account (ECA) is an account used to save the disparity in the market price of crude oil and budgeted price of crude oil as stipulated in the Federal Government Appropriation Bill.

Key Takeaways of Excess Crude Account (ECA)

  • Excess Crude Account (ECA) was established in 2004 by the Federal Government to stabilize Nigeria’s economy and smooth out the effect of crude oil fluctuation on Africa’s largest economy.
  • The ECA rose to its highest of $20 billion in November 2008 during the global oil boom when prices were above $100 per barrel.
  • Controversy, allegations of corruption, and uncertain performance have trailed the ECA since creation.
  • The balance plunged from $20 billion in 2008 to $72.4 million in January 2021.

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Economy

AfCFTA: Nigeria Customs Service Requested For Detailed Role In The Free Trade Agreement

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Container Shipping

AfCFTA: Nigeria Customs Service Requested For Detailed Role In The Free Trade Agreement

Nigeria Customs Service (NCS) requested for a proper and detailed role expected to be carried out in the implementation of the African Continental Free Trade Area (AfCFTA) agreement.

The NCS said detailed explanations of roles and responsibilities of all parties involved in the free trade agreement should be spelled out to avoid overlapping of duties and to achieve a seamless implementation of AfCFTA.

Mr. Joseph Attah the Public Relations Officer, on behalf of the Comptroller-General of the NCS, Col Hameed Ali (Rtd.), issued a statement to address the call for a detailed role of the Customs.

“Our functions are highly automated and primarily systems-driven, hence the need to methodically harvest and integrate all data associated with AfCFTA into our system for easy deployment, access, and use by the trading public.

“We, therefore, await the National Action Committee (NAC) on the list of duties and charges waived for liberalised goods under AfCFTA. The list of the 90 percent liberalised national trade offers (NTOs); list of the 70 percent non-liberalised exclusive goods at the regional level; and list of the 3 percent non-liberalised sensitive goods.

“The appointment of a competent authority responsible for issuing and authenticating certificates of origin and registering enterprises and products within the region.” He said.

In the statement, NCS pledges commitment to the success of the trade pact and also identifies the transformational impact the free trade agreement would have on businesses in Nigeria and the Africa continent at large.

“Also, it is pertinent to inform the public about steps which must be taken to enable its smooth and full implementation,” He added

NCS recommended that the member-country of the free trade agreement should have a representative in the continental chamber, this is to ensure transparency and build the confidence of the members in the system.

“This, in our view, should be complementary to the activities of the various chambers of commerce of each country in the region. While awaiting clear directives concerning tariffs for all goods covered by this agreement, we want to assure the public of our preparedness to fully deploy our services at the shortest notice.

“Our desire is to imbue trust in the system while guaranteeing the economic safety and wellbeing of businesses within the country,”  NCS noted.

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Economy

COVID-19: Nigeria Record Highest New Cases on Thursday as Continent Death Nears 83,000

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COVID-19: Nigeria Record Highest New Cases on Thursday as Continent Death Nears 83,000

The largest African economy, Nigeria recorded her highest ever COVID-19 new cases on Thursday, 21st of January.

Nigeria recorded her highest daily count of 1,964 new COVID-19 cases on Thursday, this was 300 higher than the previous high record of 1,664 new COVID cases it recorded on the 7th of January, 2021.

The country has recorded a total of 116,655 cases, 93,646 recoveries and, 1,485 deaths across the states since the outbreak of the Corona Virus.

According to health experts, the daily increase of new cases in the new year could be ascribed to the massive gatherings during the festive season, the relaxation of COVID-19 protocols in the various parts of the country, and in the two major airports, Lagos and Abuja airport.

The adverse effect of the global health pandemic has seen Africa recorded 82,781 COVID-19 death cases across the continents.

Confirmed Cases of COVID-19 from 55 African countries reached 3,364,031, reported deaths were 82,781 and, 2,809,825 were reported to have recovered as of January 22, 2021

The Africa country with the most reported COVID-19 cases in South Africa with a total of 1,380,807 cases of which 39,501 are death cases. Other most-affected countries are Morocco (463,706), Tunisia (190,884), Egypt (159,715), Ethiopia (132,326), and Nigeria (116,655).

The numbers are compiled by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (world map) using statistics from the World Health Organization and other international institutions as well as national and regional public health departments.

 

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