Since after the Central Bank of Nigeria’s (CBN) devaluation of the naira officially by about 16 percent, the exchange rate of the local currency against the US dollar has been a mind-boggling experience and, for tenants in apartments whose rents are dollar-denominated, this experience is better left to the imagination.
The naira has, in the past seven to eight months when it was devalued, seen a trajectory rise to about N243 to USD$1 at the parallel market and about N197 to USD$1 at the official market, up from N165 to USD$1 as at the time of devaluation.
The implication of this to a tenant who rented an apartment for USD$100,000 (about N16.5 million) two years ago is that, by the time he will be renewing the rent this year, his landlord would be smiling to the bank with N24.3 million which is a considerable reduction in household income.
It is against this backdrop that housing industry experts hailed CBN’s ban on use of foreign currency to transact business in Nigeria, insisting that the legal currency for doing business in Nigeria remained the Naira, hence it is illegal, going forward, for anyone to transact business in dollars in the country.
Godwin Emefiele, the Governor of the apex bank, who announced this ban after a two-day monetary policy committee (MPC) meeting in Abuja, declared that the monetary authorities were out looking for people who would be making demands for foreign currency as payment for services, landlords asking for rents in dollars, schools asking for fees in dollars, and others transacting business in dollars.
Stephen Jagun, the immediate past chairman of the Nigerian Institution of Estate Surveyors and Valuers (NIESV), Lagos State branch, at an interactive session with journalists recently, welcomed the CBN ban, saying it was perfectly in order.
“Today, many people want to denominate their transactions in dollar because it is stable. The rate at which the Naira is falling has caused crisis in the housing industry, pitching tenants against landlords. If, for instance, I rented a house for $100,000 dollars two years ago, about N16.5 million, that same house, at today’s exchange rate, would be going for N24.3 million”, he noted.
Continuing, he said, “what this means is that if I collected my money in dollars, I would be better off. Secondly, many of these people (property owners) brought in foreign investors who agreed to come because they were sure of their investments because it would be dollar-denominated”.
Jagun advised his colleagues in estate surveying and valuation and others engaged in property business to advise their clients (landlords) to abide by the CBN requirement and avoid the looming crisis.
Before now, the Nigerian housing market was one disgusting place where a home seeker’s frustration was not only in the outrageous price tags on houses for sale or rent, but also in the demand for dollars and not naira in exchange for the houses put on the market.
A very significant number of developers and landlords in the highbrow locations, especially those in Banana Island in Lagos, were guilty of this and, typical of the Nigerian elite, it was gradually becoming a fad or status symbol to live in a dollar-denominated rent apartments.
A combination of craze and greed on the part of house owners, therefore created a myth and an uncommon exclusivity around Banana Island, making it the most expensive real estate destination in Nigeria where a three-bedroom apartment rents for between N15 million and N20 million per annum and sells for N200 million.