Title: Impact of Inflation on Real Estate Investment Trusts (REITs) in Nigeria
Authors: Adeyinka Amos Ogundiran, Igho Fayomi
Volume: 9
Issue: 10
Pages: 128-134
Publication Date: 2025/10/28
Abstract:
This study examines the impact of inflation on Real Estate Investment Trusts (REITs) in Nigeria, a critical yet underexplored area given the country's volatile inflationary environment. With inflation peaking at 34.8% in 2024 and housing-related inflation reaching 27.64%, understanding how REITs navigate these pressures is vital for investors and policymakers seeking sustainable real estate strategies. A mixed-methods approach was employed, combining primary data from questionnaires and interviews with six stakeholders across Union Homes REIT, Skye Shelter Fund, and UPDC REIT, alongside secondary financial and inflation data (2014-2024) from SEC filings and the National Bureau of Statistics (NBS). Quantitative analysis focused on inflation trends and REIT performance metrics, while qualitative insights explored operational and strategic responses. Findings revealed that 83.3% of respondents strongly agreed inflation increases operational costs, with secondary data showing construction material prices surged by 15-25% during high-inflation periods. 66.7% noted reduced dividend payouts, aligning with Skye Shelter Fund's 2024 dividend per unit (?9.00) lagging behind 34.8% headline inflation. All respondents confirmed inflation volatility erodes asset valuations, evidenced by UPDC REIT's net asset value (NAV) growth of 8% (2023) versus 20% inflation. Diversification emerged as a mitigant, with 83.3% agreeing sectoral spread reduces inflation risks. However, only 16.7% viewed REITs as effective inflation hedges, contrasting global trends. Secondary analysis highlighted structural vulnerabilities, including currency depreciation exacerbating borrowing costs (e.g., Skye Shelter Fund's debt rates rising from 16% to 20% in 2020) and fixed lease structures failing to offset inflation (e.g., 12% escalations vs. 18% inflation in 2022). This study concludes that Nigerian REITs face significant inflationary headwinds but can enhance resilience through inflation-indexed leases, diversification into logistics/healthcare sectors, and proactive cost management. Policymakers must prioritize macroeconomic stability and regulatory reforms to strengthen REIT performance.