The Head of Real Estate Finance for West Africa at Stanbic IBTC, Mr. Adeniyi Adeleye, says dual currency funding structures can bring stability and robustness to real estate deals in sub-Saharan Africa.
He said developers and retailers were anxious to seek solutions to the volatility currently, being faced in their domestic economies.
Speaking at the West Africa Property Investment (WAPI) Summit in Accra he said the West Africa region has a main challenge of currency volatility and its related regulations that was thwarting efforts in financing the real estate sector.
He stated that the volatility period experienced over the last 12 to 24 months across West Africa and Sub-Saharan Africa had made the local currency interest rates shoots up.
“In Ghana the rates are around 28 to 30 per cent for prime customers, in Nigeria the rates are between 16 and 20 per cent for prime customers and these local currency rates are too high for customers to sustainably finance, let alone execute real estate projects,” he said.
He said “the solution is in the hybrid situation, where you can consider a portion of the funding in dollars and a portion in the local currency to help manage the situation until there is a long-term solution, either in terms of long term rates coming down and all such projects being financed to local currency or the foreign exchange market stabilises and local currencies are re-financed into foreign currencies”.
Mr. Adeleye further noted that another way out was for countries to resolve the macroeconomic challenges to bring the interest rates down sustainably.
“Generally speaking we prefer to finance real estate assets with local currencies but in markets like ours it is quite difficult to do that but reality still remains that the need for the property is still very clear and apparent in our economy, we need malls, offices, residential projects and industrial projects among others,” he added.
By Raymond Ackumey