Rising estates, shrinking factories: Nigeria’s productivity dilemma

By Andra Oriyomi

Nigeria’s growing appetite for real estate investment is raising a difficult economic question: has the country shifted too far from productive investment into land and property speculation?

The question is particularly striking when viewed against Nigeria’s industrial history. The country once boasted major manufacturing and industrial operations involving companies such as Dunlop, Michelin, Bata, Peugeot and Volkswagen, alongside sizeable textile, food-processing and other manufacturing industries.

Many of those industrial ecosystems have since declined, following years of infrastructure constraints, high financing costs, policy uncertainty, import competition and inadequate investment in modernisation.

Today, land and housing have become among the most visible destinations for private capital, particularly in major cities such as Lagos and Abuja.

Some observers have described the trend as a “voodoo economy” — a deliberately provocative expression for an economy where asset prices can rise even when productive capacity, wages and household purchasing power remain under pressure.

But real estate itself is not the problem.

The deeper concern is whether rising property values are being supported by an economy capable of generating the incomes needed to sustain demand.

A beautifully designed estate with roads, gates and marketing brochures may represent substantial investment, but it does not necessarily create the same economic multiplier effect as a factory producing goods, employing workers, developing suppliers and generating export earnings.

Manufacturing still growing, but challenge remains

Nigeria has not abandoned manufacturing completely.

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Data from the National Bureau of Statistics showed real manufacturing growth of 3.29 per cent year-on-year in the first quarter of 2026, while construction recorded real GDP growth of 4.85 per cent.

The figures indicate that productive activity remains part of the economy. However, the bigger challenge is converting economic growth into sustained employment, stronger wages and purchasing power.

This is where the country’s industrial policy becomes important.

The Federal Government unveiled the Nigeria Industrial Policy 2025 in February 2026, with emphasis on domestic value chains, manufacturing, energy, infrastructure and skills development.

The policy targets increasing manufacturing’s contribution to 25 per cent of GDP by 2030.

The objective is not simply to increase the number of factories but to develop an industrial ecosystem capable of supporting jobs, local suppliers and competitive Nigerian products.

Housing policy seeks to connect supply with demand

The Federal Government has also been attempting to move housing development away from speculative land transactions towards actual housing delivery.

Under the Renewed Hope Cities and Estates programme, government is deploying budgetary resources and public-private partnerships to increase housing supply.

The Federal Government has also promoted mortgage and offtake mechanisms intended to ensure that completed homes have identifiable buyers.

By August 2026, the State House said N140 billion had been disbursed through 21 financial institutions under the government’s real estate financing initiative, supporting 2,018 mortgages across 27 states.

The Federal Ministry of Housing and Urban Development has also stressed the importance of identifying potential off-takers before construction to reduce the incidence of abandoned housing projects.

The approach reflects a basic economic principle: housing becomes more sustainable when it is connected to real purchasing power.

Lagos and the danger of uncontrolled development

Lagos presents an even sharper version of the problem.

Rapid population growth and demand for housing have fuelled large-scale estate development across the state. But authorities have simultaneously had to intensify enforcement against illegal and unapproved developments.

The state’s inspection and enforcement activities, including those involving unauthorised structures along parts of the coastal corridor, highlight the consequences of allowing construction to move faster than planning, infrastructure and regulatory oversight.

An estate without adequate roads, drainage, water, electricity, transport links and other supporting infrastructure can ultimately become an expensive urban liability.

Where did Nigeria lose its industrial momentum?

The answer may not be that Nigeria deliberately chose real estate over manufacturing.

Rather, productive investment gradually became more difficult while land became an increasingly attractive store of value.

For investors facing inflation, currency uncertainty and limited investment alternatives, land can appear relatively attractive because it is tangible and potentially appreciates over time.

But when too much capital moves into existing assets rather than new productive capacity, the economy risks becoming increasingly dependent on the appreciation of assets rather than the creation of new wealth.

That distinction matters.

A factory can produce thousands of products, employ workers, purchase inputs from suppliers, generate tax revenue and potentially earn foreign exchange.

A piece of undeveloped land can appreciate substantially without producing any of those economic outputs.

Experts: Nigeria needs productive investment

Economists say the real policy challenge is therefore not to discourage legitimate property investment but to create conditions under which productive investment becomes equally attractive.

An economist said Nigeria needed to deepen long-term financing for manufacturing, infrastructure and agriculture while reducing the cost of energy and logistics.

“Real estate is an important part of any modern economy, but it cannot substitute for production. If incomes are not rising, property demand eventually runs into an affordability ceiling,” the economist said.

A Lagos-based investment analyst similarly argued that government should focus on creating incentives for capital to flow into enterprises capable of expanding production.

“The objective should be to make it profitable to build factories, process agricultural commodities, develop technology and manufacture locally, rather than simply hold land and wait for prices to rise,” the analyst said.

Should large estates face tougher rules?

The debate could also force policymakers to reconsider how large-scale private estates are regulated.

One proposal deserving consideration is to subject major estate developments to enforceable development timelines, infrastructure milestones and stronger disclosure requirements, alongside sanctions for prolonged abandonment.

Such measures would have to comply with existing property rights and due-process laws. But supporters argue that they could protect genuine homebuyers while discouraging speculative land banking.

Factories should manufacture goods and create skilled employment. Agriculture should supply food and industrial raw materials. Energy should power production. Finance should support businesses capable of expanding the productive base.

Real estate should provide homes and communities rather than become primarily a parking place for capital.

Nigeria therefore does not have to choose between industrial production and property development. The challenge is to build an economic foundation strong enough to support both.