According to the Pension Fund Operators Association of Nigeria, investment in the real estate investment trust sector has decreased over time due to its scarcity. On Tuesday, the company’s official Instagram page (penopnig) posted an analysis of PFAs’ real estate and REIT investments during the previous five years, which revealed this information.
The Nigerian Exchange Limited defines REITs as trusts or businesses that buy and manage mortgage loans and/or income property using the combined funds of numerous investors. Like stocks, REITs are traded on the NGX, and like other shares, you can purchase or sell REITs through your stockbroker. Investment in REITs decreased from a peak of N239.28 billion in 2020 to N20.06 billion at the end of 2024, according to the PenOp research.
The investment in REITs fell to N14.14 billion in 2022 from N153.52 billion in 2021, marking the lowest point in the five-year period. Before the most recent drop in 2024, it did, however, somewhat rebound to N21.04 billion in 2023.
According to PenOP, “the lack of REITs on the market is the reason for the steady decline in investment in REITs.” Nevertheless, active funds have switched to using private equity funds to invest in real estate.
Closed pension funds, as opposed to active funds, make direct real estate investments; in 2024, they invested close to N300 billion. Direct real estate investment has increased as REIT investment has cooled.
Real estate investment reached N273.06 billion in 2024, up from N245.34 billion in 2023. Just N5.13 billion had been invested in real estate five years prior.
PFAs invested a total of N293.12 billion in the real estate industry as of 2024 through REITs and directly, which is almost 10.04 percent more than their 2023 investment of N266.38 billion.
Real estate investments are a significant asset class on pension fund books because “they help to hedge against long-term inflation and ensure developers have a source of long-term capital to tap from,” according to PenOp.
For a long time, Nigerian pension funds have invested in real estate, either directly or through trusts. While active pension funds are allowed to invest in REITs, the investment legislation forbids them from directly investing in real estate. According to the National Pension Commission’s September 2011 guidelines, only administrators of defined benefit plans and closed pension funds are allowed to engage directly in real estate.
According to the criteria, direct real estate investment includes either buying an existing property or funding the construction or development of a property in order to produce revenue for the pension fund.
The REITs that were listed on the NGX’s daily list on Monday were UPDC Real Estate Investment Trust, which had the largest market capitalisation of the three at N15.21 billion, UH Real Estate Investment Trust, which was priced at N36.60 per unit, and SFS Real Estate Investment Trust, which was priced at N179.45 per unit. Prices for each unit were N5.70
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