Nigeria’s construction sector is building more while demand falls. The NESG’s new Construction Sector Report records production running hot and orders sliding below the line that separates growth from contraction – with developers borrowing at 20% to 46% to do it.
That combination is not sustainable, and it tells a buyer something specific about the next few months.
The indices
From the NESG Construction Sector Report, “From Cyclical Growth to Durable Investment”:
| Index | Reading | What it means |
|---|---|---|
| Demand Condition Index, H1 2026 | 97.3, down from 106.8 in H1 2025 | Below 100 – contracting |
| Supply Order Index | 97.4 | Also below 100 |
| Overall Business Conditions Index, H1 2026 | 117.7, from 122.5 in 2025 and 93.7 in 2024 | Strong, but falling |
| General Business Situation Index | 166.2 | Strongly positive |
| Production Index | 142.7 | Output expanding |
The NESG describes construction as having the strongest business conditions of the sectors it assessed – and simultaneously the weakest demand.
Demand fell 8.9% year on year and now sits 2.7 points below the expansion threshold. Business conditions eased 3.9% from 2025, though they remain well above their 2024 level.
Why demand fell while output rose
Money. The sector is borrowing from commercial banks at 20% to 46%.
The Federation of Construction Industry says the high lending rates are adding directly to the cost of delivering housing projects. And the president of the Real Estate Developers Association of Nigeria, Oba Akintoye Adeoye, has said mortgage rates typically exceed 20%, putting home loans beyond the reach of many low-income earners.
So the squeeze runs through both ends. The developer borrows at 20–46% to build; the buyer needs a mortgage at 20%+ to buy. At those rates, output can keep rising only on equity and pre-sales – which is exactly the model Nigerian developers have been forced into.
What developers are doing about it
The report names the adjustments, and they matter to anyone buying off-plan:
- Reducing apartment sizes
- Modifying building specifications
- Renegotiating project terms
- Building in phases
Every one of those is a response to cost pressure, and three of them change what the buyer actually receives.
A smaller apartment in a modified specification is not necessarily a bad purchase – but it is a different purchase from the one in the brochure you were shown at launch. The moment demand falls and rates stay high, the incentive to trim specification rises.
Building in phases deserves separate attention. Phasing is prudent for a developer and risky for a buyer paying instalments: if sales slow, the later phases are the ones that stall.
What this means if you are buying
Your negotiating position is improving. A Demand Condition Index of 97.3 means developers are short of buyers. That is the environment in which prices are discounted quietly, service charges are waived for a year, or payment plans are stretched. Ask.
Pin the specification in writing. If developers are modifying specifications to hold price points, the specification becomes the thing worth arguing over. Name the tile, the sanitaryware, the window type, the door – in the contract, not the brochure.
Ask which phase you are in, and what funds it. If your unit sits in phase three, ask what proportion of phase one has sold. Phase one selling slowly is the warning that phase three does not get built.
Check the developer’s own borrowing. At 20–46%, the interest bill is a fixed cost that must be serviced before your building is finished. A developer funding construction on bank debt at those rates is exposed; one funding from pre-sales is less so. This is a fair question to ask, and the answer is often in the payment structure they offer.
If you are paying cash, you are the customer they want. A cash buyer removes the mortgage problem entirely. That is leverage – use it on price, not just on payment terms.
The signal worth watching
Construction demand below 100 while output is above 140 is a classic late-cycle pattern: capacity running ahead of the people who can afford to buy from it.
Two things usually follow. Discounting, first, in the segments where supply is concentrated. Then consolidation – smaller developers with bank debt at 40% do not survive a slow year, and their projects stall or get absorbed.
The next NESG reading is the one to watch. If demand recovers above 100, the pressure eases. If it falls again while rates hold, expect the specification cuts to become visible in delivered buildings rather than in reports.
What is not established
The NESG indices are survey-based measures of business conditions, not counts of units built or sold. A Demand Condition Index of 97.3 does not mean demand fell by 2.7%; it means the survey’s respondents reported conditions slightly below the neutral mark.
The 20% to 46% borrowing range is what industry stakeholders told the report they are paying, not a published lending rate. Rates vary by lender, tenor and borrower.
No figures were published for construction output volumes, project completions or the number of stalled schemes.
Frequently asked questions
What are developers paying to borrow in Nigeria?
Between 20% and 46% from commercial banks, according to stakeholders quoted in the NESG Construction Sector Report.
Is construction demand falling?
Yes. The Demand Condition Index fell from 106.8 in H1 2025 to 97.3 in H1 2026 – below the 100 benchmark that separates expansion from contraction.
What are developers doing to cope?
Reducing apartment sizes, modifying specifications, renegotiating project terms and building in phases, per the report.
Does this mean property prices will fall?
Not necessarily. Falling demand creates discounting pressure, but high financing costs keep a floor under prices. The more likely near-term effect is smaller units and reduced specifications at similar headline prices.
Last updated: 8 November 2026. The Demand Condition Index (106.8 to 97.3), Supply Order Index (97.4), Overall Business Conditions Index (117.7, from 93.7 in 2024 and 122.5 in 2025), General Business Situation Index (166.2), Production Index (142.7), the 20–46% borrowing range, the FOCI statement, the named developer adjustments and Oba Akintoye Adeoye’s comments on mortgage rates are from Leadership’s report of 8 November 2026 on the NESG Construction Sector Report, “From Cyclical Growth to Durable Investment”. The percentage changes and the 2.3x lending spread are arithmetic on those figures. This is market analysis, not investment or legal advice.
