in Commercial Real Property
Portfolio in Nigeria
FEATURED PAPER
By Kenechi Peter Ifeanachoi, ii and Alexander Nnamdi Udobiii
i Department of Estate Management, University of Nigeria Nsukka,
Enugu State, Nigeria
ii Department of Estate Management, Nnamdi Azikiwe University,
Awka, Anambra, Nigeria
Abstract
International investment, otherwise known as foreign investment, plays a crucial role in the growth and advancement of many nations across the globe. However, the flow of foreign investment into various sectors of an economy can be hampered by various factors. This study examined the barriers to foreign investment in commercial property portfolio in Nigeria. The study revealed that the barriers to foreign investment in commercial real property portfolio in Nigeria includes currency risk, bureaucratic land title registration process, financial risk (banking risk), lack of property market transparency/maturity, political/country risk, amonst many other identified barriers. This research recommends that government at federal and state levels should enact policies and initiatives in place to reduce the barriers to foreign investment in Nigeria commercial property market. The government should amend the Land Use Decree of 1978 to eliminate the challenges associated with accessing land for commercial property development and real estate transactions.
1.0 Introduction
Advancement in the world economy, and the accessibility of various investment option have led to diversified foreign property portfolio (Oyewole, 2014). Globalization of investment markets has provided a great platform for universal investments in various investment vehicles across different sectors and geographical locations (Dabara et al 2016). Property investment has become a global phenomenon over several decade (Eichholtz et al. 2011). Property investors invest in foreign markets to diversify their portfolio investment, and take advantage of higher returns on investment (Udobi et al. 2016). The major motivation for drivers for investing in foreign property market include increased opportunities for diversification, and enhanced returns (Baum & Murray, 2011). International property investments are made in a foreign country in order to reduce the investor’s portfolio risk (Lee, 2005). The drive for diversification of foreign property investment can be attributed to the gains/benefits (returns) that investors derive from such investment strategy (Hoesli et al., 2004).
Investors across American, Asian, Pacific and European, including Sovereign wealth funds and Pension funds and other investors are investing outside their countries to countries across continents of the world so as to diversify risk and increase their earnings (Newell, 2014). Foreign direct investors target viable markets across the globe, and they have good preference for nations that have optimum risk-adjusted returns, high business confidence and investment attractiveness (Obi et al. 2019).
The potential benefits of foreign investment in real estate comes with increased complexity of execution. Investing in foreign property markets entails investing in the unknown, where investors can encounter strange political and economic climate, currency instability, unfamiliar cultures and languages (Lee, 2005 Omorodion et al. 2024; Udobi, 2016). Property investment in foreign market is not devoid of challenges/risks; and these challenges include foreign investors’ lack of local expertise and the limited access to local market information (Eichholtz et al. 2011); fluctuating currency/exchange rate (Udobi et al. 2016); lack of property information transparency (JLL 2012, 2014; Dugeri, 2011; Dugeri et al, 2014); political risks (Baum & Murray, 2011; Udobi, 2016); financial risk (Omorodion et al. 2024; Udobi et al.2016); increased taxes and costs ((Baum & Murray, 2011), etc.
Africa has been neglected by foreign property investors (Akpan & Ogunba, 2015). The limited foreign investment in the real estate sector of Africa is shocking due to the huge population, which should make it a good destination for real estate investment (Akpan & Ogunba, 2015). Opaque property market information has affected international investments in Africa because risk conscious investors need property investment performance indices to make informed property investment decisions pertaining issues such as financial returns on investment and diversification potential (Ogunba, 2014), and this is greatly lacking.
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How to cite this paper: Ifeanacho, K. P. and Udobi, A. N. (2025). Challenges of International Investment in Commercial Real Property Portfolio in Nigeria; PM World Journal, Vol. XIV, Issue I, January. Available online at https://pmworldlibrary.net/wp-content/uploads/2025/01/pmwj148-Jan2025-Ifeanacho-Udobi-Internationa-investment-in-Nigerian-commercial-property.pdf
About the Authors
Mr. Kenechi Peter Ifeanacho
Awka, Nigeria
Mr. Kenechi Peter Ifeanacho holds an M.Sc in Estate Management from the Department of Estate Management, University of Nigeria Nsukka. He is currently a Ph.D student at the Department of Estate Management, Nnamdi Azikiwe University, Awka, Nigeria. He has over 6 years lecturing and research experience. He is a lecturer at Department of Estate Management, University of Nigeria Nsukka. He has co-authored articles published in international peer reviewed journals and some of these journals (Property Management, Land Use Policy, and Cities) are indexed in scopus and web of science. He has equally presented papers at international conferences such as Pacific Rim Real Estate Society Conference (2021, 2022), and European Real Estate Society Conference (2022, 2023). He can be contacted at kenechi.ifeanacho@unn.edu.ng
Prof. Nnamdi Alexander Udobi
Awka, Nigeria
Prof. Alexander Nnamdi Udobi is a Professor of Estate Management at the Department of Estate Management, Nnamdi Azikiwe University, Awka, Nigeria. He holds a Ph.D in Estate Management from the Department of Estate Management, Nnamdi Azikiwe University Awka, Nigeria. He has over 20 years varied experience in teaching, research, administration and professional consultancy. He has co-authored numerous articles published in international peer reviewed journals. He has successfully supervised several Masters projects and he is currently a Ph.D supervisor.
