The cost of accommodation in Nigeria’s big cities has put an increasing strain on the finances of ordinary Nigerians, who have been spoiled by the rising cost of goods and services. This is according to Nairametrics research findings.
According to Nairalytics, the research arm of Nairametrics, the cost of accommodation increased by more than 100% in Lagos, Abuja and Port Harcourt between 2019 and 2022, adding to the inflation rate in the country.
According to the National Bureau of Statistics (NBS), Nigerians spent a total of NBS 57.1 trillion on household consumption in the first half of the year. This includes spending on food, accommodation and utilities among others, and represents an increase of 14.4% year-on-year compared to the 49.89 billion naira spent in the corresponding period of 2021.
Increased household spending: Household expenditures in the first half of 2022 accounted for 62.4% of total national expenditure for the period, up from 61.6% recorded in the previous year.
- The increase in the amount Nigerians spend on basic utilities is due to the higher cost of goods and services, which has seen the country’s headline inflation rate rise to a 17-year high of 21.09% in October 2022.
- The cost of accommodation in major cities across the country has registered significant increases in the past three years, which has affected the earnings of the average Nigerian, despite a relatively stable income level. This has also affected the saving and investment capacity of ordinary Nigerians.
- Basic human needs include food, water, shelter, and clothing, all of which have seen unprecedented levels of increases in their cost, leaving very little for Nigerians to plan for the future.
Ideally, there is a common rule of thumb, known as the 30% rule, which states that you should spend about 30% of your gross earnings on rent. This means that if an individual earns N100,000 per month, he should not spend more than N30,000 per month on house rent.
The news continues after this announcement
However, the results show that Nigerians can spend up to 40% of their income on house rent, while food expenses still make up a large portion of their household expenses.
Anatomy of numbers: The average cost of renting a standard self-containment unit in the Kubwa area of Abuja is around N500,000 per annum, a staggering 233% increase over the average of N150,000 recorded three years ago. Similarly, a 2 bedroom flat currently costs between N1. 5 million and N1. 5 million per annum depending on the nature of the house. It used to be around 600,000 N.
The news continues after this announcement
- Also, a three-bedroom apartment, which used to rent at an average of N500,000 for a year, has risen to N3 million, which is a 500% increase in the last three years.
- The cost of apartments is higher in other upscale areas such as Gwarinpa, Maitama, Lokogoma, etc.
- In the same vein, the cost of a two-bedroom apartment in mainland Lagos has risen to over N1.5 million annual base rent from an average of N800k to N1 million. Also, the average price for a small flat in the same area is N700,000 as against the average of N550,000 recorded three years ago.
- Similarly, in Port Harcourt, Rivers State, the cost of housing has also risen by more than 100% in the past three years, which is another indication of how housing takes up a large portion of household earnings.
What agents say: In conversation with Mr. Segun Unni, a real estate developer in Lagos State. He said that the increase in house rents came as a result of the significant rise in the cost of building materials after the COVID-19 pandemic.
- “It is not surprising that the rent for the house has gone up. The price of cement has almost doubled, and the cost of sand and granite has also increased greatly in recent times, along with the general increase in prices.” He said.
Also, while talking to another real estate developer, Mr. Jonathan Annebet in Port Harcourt, he noted that the huge rise in the cost of renting a house was a result of the general increase in the economy.
According to him, immediately after COVID-19, the price of almost everything, including acquired real estate, also increased, which also led to an increase in the cost of accommodation.
- In expensive areas like GRA, Ada George and Peter Odili, a self-contained room rents at an average of N250,000, up from about N150,000 before the pandemic. A three-bedroom apartment in the same vein rents at an average of N800,000 from an initial rate. is 500,000 N,“He said.
Mr. Thompson Okudwa, an agent living in Kubwa, Abuja, explained that the rising cost of housing is a result of the increase in the cost of building materials, and so landlords are increasing their rents to reflect these changes.
He added that many residents are now moving to suburban areas of the city, such as Zupa, and Guajualada in search of cheaper apartments, even at the risk of spending more on transportation to the city.
What Nigerians do: Nigerians are currently taking on remote jobs that allow them to live in cheaper housing, without the hassle of transportation and a higher cost of accommodation. In a phone conversation with Emmanuel, a home agent in Lagos, he told Nairametrics that most clients are now asking for apartments in out-of-town areas but not too far from the city.
- “People are asking for homes in Sango, Ewekoro, Ajegunle and Ikorodu districts to avoid the high cost of homes in the state’s big cities,” He said.
While talking to Mr. Tunde Akinyele, a digital marketer, he told Nairametrics that he moved from Ikeja last year to live in Sango, Ogun State due to the high cost of accommodation in most cities of Lagos.
The rising cost of housing coupled with rising food prices has eroded the purchasing power of Nigerians, pushing more people below the poverty line. NBS reported last week that 133 million Nigerians will be poor as of 2022, representing 65% of the total population.
After the increase in accommodation costs, Nigerians who can work remotely are now getting creative by living in remote areas at cheaper costs while working from the comfort of their homes. Most young Nigerians are now looking for remote jobs from foreign companies in a bid to increase their income.