Propertygate Development and Investment Company’s Managing Director, Mr Adetokunbo Ajayi in his characteristic manner of exhaustive analysis of Nigeria’s operating environment and the company’s resilient mode of sustaining operations addressed the shareholders yesterday at a colorful Annual General Meeting ( AGM). The excerpts:
The year 2018 was dominated by flurry of political activities, as the country prepared for general elections that were scheduled for early 2019. Investments, local and foreign, slowed down as the year drew to an end. Some investors (corporate and individuals) held back, and would not commit until after the elections.
On the economic front, the country recorded a GDP growth of 1.93 percent by the end of 2018. That was an improvement compared to 0.82 percent growth recorded in 2017. The year also ended on a positive note with a GDP growth of 2.38 percent in the last quarter of 2018. Looking at the performance of the real estate sector during the period, the results disclosed a sector in troubled waters. It recorded a negative annual real GDP growth of -4.74 percent for the year; a further decline compared to -4.27 percent recorded in 2017. Quarter 4 result was equally negative, with a real GDP growth of -3.85 percent. Its overall contribution to total real GDP for the year declined to 6.6 percent compared to 6.85 percent in 2017. The construction sector performed relatively better than real estate. It recorded annual real GDP growth of 2.33 percent for 2018, an improvement on 1.0 percent annual growth of 2017. Its contribution to total real GDP was relatively stable at 3.73 percent compared to 2017. Real estate development for sale remained sluggish throughout the year. Contracting market, spurred by lack of functional mortgage, rising unemployment, fragile economy and consumers’ apathy, was a major contributor to poor transaction volumes recorded in the year.
Mindful of the weak state of the market, the company operated a disciplined business and financial operation within the year under review, with concentration on its on-going projects. The company was pleased with its overall results, given the difficult environment of 2018.
Outlook for 2018 and Beyond
Global and National Economies
The International Monetary Fund (IMF) April 2019 World Economic Outlook projected global growth to slow from 3.6 percent in 2018 to 3.3 percent in 2019, before returning to 3.6 percent in 2020. In another April 2019 Report, the IMF projected a real GDP growth of 2.1 percent for Nigeria in 2019 and 2.5 percent in 2020. The report further predicted an annual average inflation of 11.7 percent in 2019 and similar figure for 2020. The Central Bank of Nigeria was more optimistic with a projection of 3 percent for the current year. First quarter result showed real GDP growth of 2.01 percent, which was better than 1.89 percent of Quarter 1 2018, but lower than 2.38 percent recorded in Q4 of 2018. The CBN expects inflation to rise to 12 percent, and then drop downward due to projected productivity gains in the agricultural and manufacturing sectors. It projected stability in the foreign exchange market, given increased oil production and contained import bill. It maintains this positive outlook, notwithstanding expected pressures from volatility in the oil markets. It intends to adjust Monetary Policy Rate in line with unfolding conditions and outlooks.
The last few years have been very challenging for the sector. It recorded negative real GDP growth for the last 3 consecutive years (-6.86 percent in 2016, -4.27 percent in 2017 and -4.74 percent in 2018). Unfortunately, many of the factors accounting for the struggle of the sector are still much with us. Many operators in real estate development and services space have been hard hit by the lingering slowdown in the sector. They have suffered from acute revenue shortage to severe liquidity crunch. These have had devastating impact on many operators, even threatening their business continuity.
Going forward is however not an easy task, as some of the challenges are systemic in nature. Innovative thinking and actions are required on the part of operators. The need for diversification of revenue should be taken very seriously in view of the experience of the last 3 years. Having a mono income source can put an operator in a severe strain when the business climate of the income source begins to falter. Operators may also have to rethink their business structure and other operational strategy issues, products and services offering, funding mechanics and other fundamental issues critical to corporate success. It is high time for vibrant industry groups to emerge, to seriously engage and collaborate with governmental authorities and other stakeholders on burning issues affecting the sector.
Propertygate intends to focus its attention mainly on real estate development. The company has over the decade operated more as a development trading company. Going forward, it intends to do more in development for investment for strategic reasons. It is exiting property advisory services. With exit from advisory offering, the company is currently holding a significant stake in PG Readzon Services, a real estate and allied services firm. This will help the revenue diversification goal of the company. It intends to push the diversification goal forward by deliberately pursuing investments in other carefully selected areas and ventures.
The company continues to recognize that people are central to its drive in building a sustainable business institution. It will strive to recruit, develop, motivate and reward needed personnel, who will help its vision, mission and corporate goals. The Board which has been a major pillar of the company gave needed support in critical areas including driving corporate governance during the year 2018, and has pledged its commitment to do more in future. The customers, who are our other major stakeholders, will continue to occupy a supreme position in our considerations and actions. We will also not fail to give due attention and regards to all our other stakeholders.