South African financial services company Old Mutual and Nigeria’s independent wealth fund, last week sealed an agreement to set up dual funds to invest in Real Estate and agriculture in Africa’s most populous nation.
It was agreed that both parties would jointly raise 500 million U.S. dollars fund to invest in Real Estate while another 200 million U.S. dollars is for agricultural projects in Nigeria.
The Country is currently facing the worst crisis in decades as global oil prices slumped thus reducing revenues and the naira falling. The Gross domestic product shrank in the first quarter and the central bank governor has said a recession is likely to occur.
Chief executive of NSIA, Uche Orji, said both parties would each commit 100 million U.S. dollars as initial commitment for the real estate fund and 50 million U.S. dollars for the agricultural fund.
“We are looking at office towers as well and we are also looking at obviously both hospitality and residential but at the moment the focus is commercial real estate and logistics will be one of those key areas that we will be looking at, offices will be another key area we will be looking at. For agriculture it is equity that we are investing and there are several,” Orji said.
“Until you can move goods from the farm to where they are being sold efficiently we would not be able to be competitive so we have got to put the enabling infrastructure in place. Our fields are as fertile and as good as anybody else’s anywhere in the world. The problem is that it is cheaper to move goods from China to Lagos than move it from Kano to Lagos, and that’s because we don’t have the infrastructure so we have got to get our rail moving and then we can begin to really scale up on the direct primary agriculture,” Finance Minister Kemi Adeosun said.
Nigeria established the Sovereign Investment Authority (SIA) in 2011 with 1 billion U.S. dollars of seed capital in an effort to manage oil export revenues.
The new funds, which will stay invested for up to 12-years, will target returns of around 20 percent, Hywel George, chief investment officer at Old Mutual said.
A successful real estate investment in Nigeria can earn a return of approximately 30-35 percent, while rental income yields in cities such as Lagos and Abuja can easily reach 10 percent, developers and estate agents reported saying.