Nigeria’s economy has been hit hard by a cash crunch due to several policy reviews by the Central Bank of Nigeria (CBN) to tackle inflation and protect the Naira. These policies include raising the monetary policy rate (MPR), launching the Naira4Dollar scheme, adopting the NAFEX rate, and clamping down on Bureaux De Change (BDCs) operators. The redesign of naira notes and a cash swap program have also contributed to a scarcity of cash, which has resulted in a contraction of the economy and hardship for individuals, families, and businesses.
The impact of the cash crunch on the real estate and construction sectors has been significant. These two cash-based sectors are struggling to pay daily wage workers, and the lack of cash and its impact on transport have caused delays in construction sites.
Contractors and developers now have to manage longer delivery times for building materials, as builders’ merchants and suppliers adopt cash/payment confirmation before delivery. All these have resulted in construction delays and increased the cost of construction, which will ultimately impact the cost of housing.
The dwindling confidence in digital banking is also affecting the retail and logistics segment of the real estate market, causing delays in the timely delivery of orders and potential revenue loss. While this situation is temporary, its impact on productive hours and potential revenue is significant.
The cash crunch has also impacted property transactions, with buyers and sellers struggling to access cash for transactions. The lack of cash has resulted in a decrease in property transactions and a slowdown in the real estate market. Investors are hesitant to invest in the market due to the uncertainty and risk associated with the cash crunch. Real estate developers are also struggling to secure financing for their projects, as banks are reluctant to lend due to the current economic situation.
Overall, the cash crunch has had a severe impact on the real estate market in Nigeria. The sector is in dire need of financial intervention to mitigate the effects of the cash crunch and prevent further damage to the sector.