As Nigeria’s middle class expands and retail investors grow savvier, real estate remains a cornerstone of wealth-building. Yet direct property ownership is expensive, complex, and increasingly inaccessible. Enter Real Estate Investment Trusts—REITs.
In theory, REITs offer Nigerian investors a gateway into the property market without the burdens of owning physical real estate. They promise steady dividends, asset-backed security, and portfolio diversification. But over a decade after their formal introduction, Nigeria’s REITs market remains underwhelming.
Is this a policy failure, a structural lag, or a case of unrealized potential? This feature explores the evolution, performance, and future of REITs in Nigeria, weighing their promise against persistent hurdles.
What Are REITs and Why Do They Matter?
REITs are publicly traded companies or trusts that own, operate, or finance income-generating real estate. Globally, they serve as a popular investment vehicle, allowing individuals to buy shares in large-scale property portfolios.
In Nigeria, REITs are regulated by the Securities and Exchange Commission (SEC) and listed on the Nigerian Exchange (NGX). They are structured to distribute at least 90% of taxable income to shareholders annually.
Benefits include:
- Liquidity: Shares can be traded like stocks
- Diversification: Exposure to different types of real estate
- Access: Lower entry threshold compared to direct ownership
- Income: Regular dividend payouts from rent, leases, or mortgage finance
Yet Nigeria’s REIT sector, with barely three listed entities and limited investor traction, has not lived up to its transformative potential.
The Current Landscape of REITs in Nigeria
As of 2025, Nigeria has three SEC-registered REITs:
- Union Homes REIT
- Skye Shelter Fund
- UPDC REIT
These funds collectively represent a tiny fraction of the Nigerian capital market. Their combined Net Asset Value (NAV) hovers around ₦50 billion—minuscule when compared to REITs in developed markets like the U.S. or South Africa.
Despite steady dividend payments in early years, most have underperformed on total return metrics. UPDC REIT, for example, has seen both market price and NAV decline due to asset devaluation and rental yield stagnation.
Challenges Undermining REIT Performance
1. Low Public Awareness and Retail Participation
Most Nigerians do not understand what REITs are. This has led to poor uptake among retail investors. Unlike stocks or mutual funds, REITs are rarely marketed aggressively by asset managers or brokerage firms.
2. Regulatory and Tax Uncertainty
Although REITs are meant to enjoy pass-through tax benefits, inconsistent enforcement and regulatory bottlenecks have dampened issuer enthusiasm. Unclear valuation methodologies, weak oversight, and burdensome approval timelines further disincentivize new entrants.
3. Illiquid Property Markets
REITs rely on stable, cash-flowing assets. But Nigeria’s property sector is marred by low tenancy rates, unpredictable rental cycles, and underdeveloped asset valuation standards. This undermines the ability to generate consistent income.
4. FX Risk and Development Constraints
Many REIT portfolios include assets built with foreign components—steel, fittings, technology—that expose them to naira devaluation. Rising inflation and FX volatility also erode real returns.
How Do Nigerian REITs Compare Globally?
Globally, REITs have become a powerful tool for real estate monetization and capital markets depth. The U.S. market has over 200 REITs with a combined market cap of $1.5 trillion. South Africa, Nigeria’s closest peer, boasts over 30 listed REITs on the Johannesburg Stock Exchange.
South African REITs benefit from:
- Strong corporate governance
- Transparent property valuation
- Pension fund participation
- Tax clarity
Nigeria, by contrast, lags in all of these areas. Without robust secondary market liquidity and institutional adoption, Nigeria’s REIT ecosystem remains stunted.
A Glimmer of Hope: New Interest and Policy Support
Recent policy reforms and growing investor interest are sparking cautious optimism.
- FMDQ Private Markets: A new platform to encourage structured real estate financing
- SEC REIT Framework Update: 2022 guidelines aimed at aligning local REITs with global best practices
- Institutional Interest: Pension fund administrators and insurance companies are slowly warming up to REIT allocations
More importantly, a new crop of private developers and fintech-backed platforms are exploring tokenized REITs or fractional property funds. Though still early-stage, these models could democratize real estate investing in ways traditional REITs have not.
What Must Change for REITs to Thrive?
To unlock the promise of REITs in Nigeria, stakeholders must address systemic barriers:
- Tax Clarity: REITs must be granted unequivocal tax exemptions on income and capital gains.
- Asset Quality: Sponsors should prioritize income-producing assets in resilient sectors like retail plazas, warehousing, and hospitality.
- Retail Education: Massive awareness campaigns are needed to educate retail investors on REIT mechanics.
- Regulatory Harmonization: SEC, NGX, and state authorities must align on faster approvals and dispute resolution.
- Technology Integration: Use of blockchain for transparent ownership tracking and asset tokenization could attract younger investors.
Conclusion: Promise Deferred, Not Denied
REITs in Nigeria are still a work in progress. While the market has underperformed expectations, it remains a powerful idea with long-term potential.
The opportunity is clear: allow millions of Nigerians—who are shut out of direct land and home ownership—to invest in real estate through a trusted, regulated, and liquid vehicle.
If reforms continue, if public trust is rebuilt, and if innovation bridges existing gaps, REITs can indeed become a cornerstone of Nigeria’s financial future.
But without a concerted push from regulators, issuers, and market educators, the REIT promise may remain just that—a dream deferred.
FAQs
1. Are REITs profitable in Nigeria?
Most listed REITs in Nigeria have underperformed due to asset devaluation and weak income returns, but they still offer steady dividends.
2. How can I invest in a REIT in Nigeria?
You can buy REIT shares through a registered stockbroker or investment platform. Some fintechs are launching digital REIT-like products.
3. Are REITs safer than owning property directly?
REITs reduce some risks like fraud and liquidity constraints, but returns can be volatile due to market forces.
4. What is the minimum capital needed to invest?
Investors can buy REIT shares for as little as ₦1,000 per unit depending on the REIT.
5. Will REITs replace traditional real estate?
No, but they offer a complementary pathway to real estate exposure, especially for retail and institutional investors.
