Nigeria faces a housing deficit estimated at over 20 million units. For decades, the crisis has been viewed through the lens of construction, focusing on the cost of cement, scarcity of land titles, and the need for more buildings. However, a silent, structural issue at the foundation of the real estate market has been overlooked, which is the absence of financial control.
Nigeria Rental Market Issues
Nigeria’s rental market generates an estimated ₦36–42 trillion annually across 13–15 million rental households, making it one of the largest rental economies on the continent. Approximately 80% of this market operates informally, with no verified tenant data, automated rent collection, credit reporting on rent, or insurance infrastructure built around rental assets.
The Lack of Financial Control
This informality results in a lack of control for investors after they invest, as ₦36 trillion flows through the market every year without providing lenders with the confidence to offer property-friendly terms. The issue is not just about choosing the right tenant but also about what happens after the keys are handed over.
A software engineer turned entrepreneur explored this space and initially hypothesized that verifying tenant identity and income would close the trust gap. However, early conversations with diaspora landlords revealed a deeper issue, which is the fear of what happens after the tenant is accepted.
This fear is exemplified by an investor, Chikwa, who stopped building new rental properties not due to a lack of funds but because the systemic risks became unbearable. He described the difficulties in evicting non-paying tenants and the destruction of property, which left him with no financial recourse.
Needed Financial Infrastructure
Chikwa’s experience represents thousands of Nigerians who have the capital and appetite to invest in rental property but have concluded that the risk is not worth it. What the market actually needs is a financial infrastructure purpose-built for rental property investment, which includes three layers: a data layer, an enforcement layer, and a financial layer.
The data layer would verify tenant identity and income, replacing the current reliance on gut feelings and generic rental application forms. This infrastructure could connect open banking APIs, BVN/NIN verification, and credit bureau data to provide a standardized report on a tenant’s creditworthiness.
The enforcement layer could provide a mechanism for reporting payment defaults to licensed credit bureaus, creating accountability for defaulting tenants. This could give landlords confidence to invest in property, as tenants may be incentivized to pay rent on time to maintain a good credit score.
The financial layer would give investors clarity on their properties‘ financial performance, tracking rental income and expenses for each property and automatically producing a clear profit-and-loss picture. This could enable landlords to make better decisions and provide lenders with verifiable financial history.
The absence of this financial infrastructure is a major obstacle to solving Nigeria’s housing deficit, which is estimated to be growing by hundreds of thousands annually. With the demand, capital, and appetite for investment existing, the focus should be on building the infrastructure that turns rental property into a calculable, bankable asset class.
Diaspora Investment Potential
Nigeria’s diaspora community sent over $20 billion home in 2024, driving up to 70% of property purchases in Lagos alone. The capital exists, but the infrastructure to support it does not. The solution lies in creating a platform that provides data, accountability, and financial visibility, which could give investors the confidence to put their capital to work.
The founder and CEO of Tenalet, a landlord banking platform, is working to address this issue by building the necessary financial infrastructure for rental property owners and managers. The goal is to enable a proven asset class to flourish, providing a solution to the housing deficit and giving investors the confidence to invest in Nigeria’s rental market.
According to local reports, the housing deficit will not be solved by buildings alone, but by building the financial infrastructure that gives investors confidence to put their capital to work. Data, accountability, and financial visibility are the key components that will unlock the potential of Nigeria’s rental market. When these components exist at scale, investors will come back, and the housing deficit can begin to be addressed.
Unlocking Rental Market Growth
In 2024, the Nigerian diaspora community played a significant role in driving property purchases in Lagos, with up to 70% of purchases being made by diaspora investors. This trend is expected to continue, with the demand for rental properties remaining high.
This could give landlords confidence to invest in property, as they may be able to track the creditworthiness of their tenants and make more informed decisions about who to rent to.
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