Business

Nigeria’s real estate is an industry where people make money easily —Olajagun

Stephen Olajagun, Fellow of the Nigerian Institution of Estate Surveyors and Valuers (NIESV); Royal Institute of Chartered Surveyors and International Facility Management Association, is the Vice Chairman, Estate Surveyors and Valuers Registration Board of Nigeria. In this interview with DAYO AYEYEMI, he speaks on how petrol subsidy removal is affecting the facility management sub-sector; efforts being made at getting Facility Management Bill passed into law and the potential of Nigeria’s real estate.

How has the removal of petrol subsidy impacted the facility management sub-sector?

Removal of fuel subsidy is a decision that is long overdue because we have been living on false system. The system is not backed by the market and because of that, we are not seeing the reality of what the market really is.

We are supposed to operate by the market – demand and supply. The supply has been living on false expenses – somebody subsidising its expenses. When the subsidy on diesel was removed, the cost of the product went up from N250 per litre to N850 per litre. It became obvious to manufacturers that this is the market price and the need to adjust to it. By the time you make a promise that you want to remove subsidy today and you are not removing it, some operators like transporters have adjusted themselves, and when you don’t remove it, they don’t go back. This is what is aiding inflation. But now if it is removed and there are savings, the government can now look at the critical areas where it can impact on the people, like in provision of infrastructure.

Now that the cost of petrol is high and the roads are not good, you end up buying petrol at a very high price and then running it on a road where you don’t get to where you are going. If the roads are better and smooth, and you can move from next point to the other, you will save money.

If the transportation system is improved upon and the rail lines are working, many people will not drive their vehicles. So that means lesser vehicles on the roads, consumption will drop and people will have access to more funds to live their lives. When it comes to facility management, it has a big impact.

Why?

This is because the cost of what we need to use will rise and we are going to pass the cost to the end users, I mean the building’s occupiers. In most cases, it is not that the incomes of the occupiers have increased; However, I believe that if the fuel subsidy removal is sustained and the government is looking for other areas where it can cushion the effects by providing adequate infrastructure like stable light, improved roads’ network and transport system, life will be better, especially on major security.

If security is improved, the average executive is able to move around, it will drop the cost of consumption.

You can imagine if government is removing subsidy on petrol and diesel together now, it is going to be horrible.

The price of diesel has stabilised now. I saw in Ikoyi that most of the small offices were buying generators so that instead of using diesel engine they ran back to petrol generators. But now where will they run to? These happenings will make facility managers to explore sustainable sources of energy.

When you get solar power, inverters, you will see that people will be ingenious, looking for how to convert their petrol generators to use gas. Gas is cheaper. Very soon, you will see people converting their petrol cars to use gas.

The government was trying to force this down two, three years ago. Government claimed to have a scheme in place to even bear the cost of converting it but nobody wanted it because petrol was cheap. If government try it now I am very sure that more than 40 per cent of car owners will change to that because gas is cheaper now and cleaner.

This deregulation of the sector is hurting the facility management sector and we are talking to our clients on how to convert to alternative source of energy – solar and gas.

Has the talk started?

It has not really started; it is gradually creeping in. Why? It is because people are reducing the number of offices they occupy. Some offices are telling their people to work from homes or hybrid – work three days in the office and stay two days at home. So with that, they are going to reduce the size of office they occupy. If somebody occupies 300square metre space, it can decide to occupy 100 square metre space so as to reduce cost. Now, we are living on reality of the economy and working with what is on ground.

Does Nigeria’s real estate still have the potential to attract investors, looking at the country’s economic challenges?

Nigerian real estate industry is very rich. One of the drivers is that culturally, the average Nigerian wants to have roof over his or her own head. This is helping the industry to move on. It makes the industry thrives. The average Nigerian will rather want to deny himself or herself of food or some pleasure if that can translate into ownership of a house. So it’s still a viable industry that will move. It is an industry people come to make money easily. You see people getting money at very simple rate, single digit, bring them here, sell and probably give people two, three years to pay-up because we don’t have a good mortgage system in place. If we have a good mortgage system in place, if my rent is going to be N1million for example per annum, and I am going to be paying N1.3 million as mortgage, I would rather go for that. I will deny myself of some enjoyment to safe that N300,000, which is what happens abroad.

The only thing is that do you qualify to climb that ladder? Which is how they have been able to help the industry so that people will not take advantage of it. In England for example, the first home buyers have some rebates of what they are going to pay to get there. But for the second home buyers, the amount they are going to deposit is higher. The taxes they are going to pay become higher so that they can help first-time home buyers.

Has Nigerians embraced facility management, looking at some of the abandoned properties littering the urban centres?

The private sector is embracing it because it doesn’t have a choice. Operators in the private sector need to preserve their investments. If they don’t, they will be the losers in the long run. Anyway, there are still charlatans outsiders, who are doing the wrong things.

You see most estates now fighting the developers that the cost is high; that they want to give facility management of their estates to professional facility managers to run for them, which they were not looking at before. Government, that is the driver of the economy, has not caught up with it. Although the immediate past administration tried, a Department of Facility Management was created in the Federal Ministry of Works and Housing, trying to see how it can incorporate facility management in government’s assets. So if the next minister can build on what Fashola has done and make it run to other ministries so that they can allow professionals to help them maintain their facilities, that will be good. I was coming the other day at the Murtala Mohammed Airport and saw some parts outside the arrival area already grew up with shrubs. I wonder who is managing the place. I mean that is supposed to be the first gateway for everybody coming to the country. The name of the Airport is already covered by weeds and this is not good.

Facility management of 1004 Estate in Victoria Island, Lagos has declined. Did you notice this? Is there any step taken by facility management practitioners to raise concern about this?

We are trying, but you see, it is hydra-headed. It has so many angles to it. When they sold 1004 Estate, some people who just stumbled on money bought the apartments. In Nigeria, sometimes people stumble on free money, either as militants or from government’s contracts. When they bought these apartments because they wanted to stay on the Island, two, three years down the lane, they are no longer able to maintain, and they are already living there because they are owners.

It is also a learning curve. I believe by now the promoters would have found a way to properly structure their legal terms to hold people that, if you cannot maintain, this is the penalty. If you don’t belong to the circle again move out, but come back if you are able to do it. What it means is that majority of people living in 1004 Estate now cannot sustain living there. We are living in an environment where people don’t want anybody to know that things are down for them. They still live in make-believe life. For me if you cannot maintain living in a place, move to another place.

Why the delay in having a law guiding facility management in Nigeria?

It is very complex. We have tried severally; we went to the National Assembly to promote the Bill. Unfortunately, there are several interests. Some people wanted a part of the bill so they can insert some per cent of facility management fee, but they are not professionals.

By the time, you push this bill and the National Assembly is not able to pass it, and by the time a new one comes, you will virtually start from the beginning.

The way our political system is now, for the first six to nine months when the new members of the Assembly come, they will be struggling to be in one committee or the other. So they have not settled down to do any proper work except from Executive Bills the president sent in and they have interest.

By the time they settle down and start the public hearings, it will be a year or a year and a half to go, they are no longer serious again. Some of them are looking for a way to come back. So the time we have to engage any assembly is less than two years, which is one of the challenges we have. We are very hopeful that this time around, we need to push the bill.

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