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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.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economy

Nigeria’s Plan to Review Oil Companies’ Gas Flaring Strategies

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Oil

Nigeria is ramping up its efforts to address environmental concerns in the oil and gas sector with a comprehensive plan to review gas flaring strategies of international and indigenous oil companies.

The Minister of State for Environment, Dr. Iziaq Salako, announced this initiative during a national stakeholders engagement meeting on methane mitigation and reduction held in Abuja, Investors King reports.

Gas flaring, a common practice in the oil industry, releases methane—a potent greenhouse gas—into the atmosphere, contributing to climate change and posing health risks to communities near oil facilities.

Nigeria aims to end routine gas flaring by 2030, aligning with global climate goals and commitments.

Dr. Salako explained the importance of reducing methane emissions and highlighted the detrimental effects on public health, food security, and economic development.

He outlined practical steps being taken to tackle methane emissions, including the development of methane guidelines and the engagement of government institutions.

The ministry, through the National Oil Spill Detection and Response Agency, will conduct periodic reviews of oil companies’ plans to ensure compliance with the gas flaring deadline.

Deloitte management consultants will assist in conducting comprehensive forensic audits to scrutinize the legitimacy of forward-contracted transactions.

President Bola Tinubu’s commitment to environmental sustainability underscores the government’s dedication to addressing climate change and fulfilling its multilateral environmental agreements.

The engagement event served as a platform for stakeholders to discuss methane mitigation strategies, existing policies, and implementation challenges.

Collaboration and dialogue among diverse sectors are crucial in charting a unified course towards sustainable methane reduction in Nigeria’s oil and gas industry.

As the country navigates its environmental agenda, ensuring accountability and transparency in gas flaring practices remains paramount for achieving a greener and healthier future.

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Economy

Interest Rate Jumps to 24.75% as CBN Takes Aggressive Stance Against Inflation

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Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has announced a significant increase in the monetary policy rate, known as the interest rate, to 24.75%.

This move disclosed by CBN Governor Olayemi Cardoso during the 294th Meeting of the Monetary Policy Committee press briefing in Abuja, represents a bold step by the apex bank to address the mounting inflationary pressures faced by the country.

With inflation soaring to 31.70% in February, the CBN aims to moderate this upward trend by tightening its monetary policy stance.

This decision follows the previous hike in the interest rate to 22.75% in February, showcasing the CBN’s commitment to combatting inflationary forces.

While the bank opted to maintain the Cash Reserve Ratio at 45%, the significant increase in the interest rate underscores the urgency of the situation and the need for decisive action.

Governor Cardoso emphasized that these measures are essential to stabilize the economy and safeguard the purchasing power of the Nigerian currency.

The 294th MPC marks the second meeting under Governor Cardoso’s leadership, indicating a proactive approach to addressing economic challenges.

The next MPC meeting is scheduled for May 20th and 21st, 2024, highlighting the ongoing commitment of the CBN to navigate Nigeria’s economic landscape amidst inflationary pressures.

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Economy

Nigeria Braces for 10th Consecutive Interest Rate Hike by Central Bank

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Central Bank of Nigeria (CBN)

As Nigeria grapples with persistently high inflation, the Central Bank of Nigeria (CBN) is gearing up to implement its tenth consecutive interest rate hike in a bid to curb the soaring prices and attract investment.

Analysts surveyed by Bloomberg are anticipating a substantial 125 basis-point increase in the key rate to 24%, marking one of the most significant adjustments in the current tightening cycle.

The decision, expected to be announced by Governor Olayemi Cardoso on Tuesday at 2 p.m. in Abuja, comes on the heels of inflation accelerating to 31.7% in February, far surpassing the central bank’s target range of 9%.

This surge has been primarily attributed to the sharp depreciation of the naira, prompting authorities to devalue the currency twice since June to narrow the gap with the unofficial market rate and encourage investor confidence.

While these measures have seen the naira strengthen in recent days and bolstered investment inflows, including a fourfold increase in overseas remittances and significant foreign investor portfolio asset purchases, there remains a palpable need for more decisive action.

Giulia Pellegrini, a senior portfolio manager at Allianz Global Investors, emphasized the necessity for the CBN to intensify its tightening efforts to regain foreign investors’ confidence in the local bond market.

While acknowledging the positive strides made by the central bank, Pellegrini stressed the importance of a more assertive approach to prevent the diversion of investor attention to other frontier markets.

As the Nigerian economy navigates through these challenging times, the impending interest rate hike signals the CBN’s determination to address inflation head-on and foster a more stable economic environment.

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