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1.0                                                         INTRODUCTION

1.1       Background of the study

Property investment has been considered as an investment that is very lucrative in the economy of most nations and it is a major investment option that gives investors the courage to invest because it is recognized to have inflation hedge. Unlike other assets class, commercial properties are types of properties that are owned to generate income. It is heterogeneous, physically modifiable and segmented asset which is treated separately (Hendershott et al., 2000).  It houses most locations where economic activities take place within an economy.  As an investment asset, it represents a means for accumulation of wealth by investors. According to Ibottson and Associates (2001), commercial properties and real estate constitute more than half of the economic wealth in the world.

The economy of Jos has grown significantly well from an agrarian and tourism driven to a business oriented one. The property market of Jos is assumed to be doing well in the sense that property investments with reference to commercial properties in this area has become `particularly strong and generated huge capital profit to its owners. As commercial properties are important part of Jos landscape, which service both the business and financial aspects of the locality, it contributes immensely to the growth of real Gross Domestic Product (GDP).

In addition, the office market has been given a lot of attention by most practitioners as compared to order sectors of property. This is because, the office market is usually seen to be well established with quite regular transactions over a long term and mostly has good geographical locations than some other property class (Higgins & Valence, 2000).

There is no particular place referred to as the real estate market due its characteristics. These property characteristics usually make it difficult for a uniform price to be fixed on properties of the same type even if they are located close to each other. The prices of commercial properties are often volatile due to the fact that they are determined by the market’s internal and external forces within which most property decisions are made. The yields from real property are arrived at by both internal and external factors such as gross domestic product, inflation, exchange rate and interest rate.

There are a lot of risks involved in different asset class and inflation is said to be one of those threats which can affect the performance of commercial properties. (Bryan et al., 1997) is of the view that inflation has to do with the increase in money supply in an economy which may be referred to as ‘monetary inflation’, as distinct from ‘price inflation’ which is an increase in the price of commodities in a country. In other words, the word inflation can simply be referred to any increase in the general level of prices which is sustained and non-seasonal in character. Problems can arise during inflation when we suddenly experience an unexpected inflation which is when the increase in prices of goods and services does not adequately match with the rise in individual’s personal income.

The rent of every commercial property is regarded as a major cost to the lessee and an object of generating revenue to the lesser and it also shows the performance of the real estate market. Participants in this category of market such as developers use it as a measure of the viability of their investment. The inflation rate inherent in the nation’s economy is caused by both the endogenous and exogenous factors to the economy which has a direct effect on the property market. A good investor always want to put his money where it is guaranteed to a large extent so therefore they tend to invest in inflation-proof businesses such as the property investment. From the perspective of a tenant however, his major aim is to be able to afford his rent and still have something reasonable to take home as profit from the income he generates. Such is made possible if he enjoys a subsidized rent from his lease.

1.2       Statement of the Problem

It is a reality that real estate investment now yields a lot of return from its sales and rental value which has encouraged lots of asset investors to go into real estate development. This has resulted in making many asset investors to develop more properties and also modify and beautify the already existing properties. Just like other developing countries, the Nigerian economy has also been experiencing a lot of changes in prices of its commodities, labour and service charge as a result of expected and unexpected inflation. In the light of this however, commercial property owners (landlords) extort their tenants by fixing rents arbitrarily without due consideration of the demand and supply factors.

Nowadays, the way and rate commercial property rents are been reviewed is alarming. Adequate and comprehensive research needs to be carried out to properly consider the impact of inflation on the rental values of commercial properties in the study area and perhaps find a lasting solution to the stated problem.

This research focuses on the extermination and assessment of the extent to which the changing inflation rate in the economy affects the rental values of commercial properties and to further determine whether commercial properties are good hedges against inflation in the study area.

1.3       Aim and Objectives of the Study

This study aimed at assessing inflation impact on the rental values of commercial properties in Jos, Plateau State from 1990 - 2014, while the objectives of the study are to:

1. Examine the rental levels of commercial properties in the study area.

2. Determine the variation in rents across commercial property (shops and offices) types in Jos, Plateau State from 1990 to 2014.

3. Examine the trend of inflation rates in Nigeria over the study period.

4. Examine the effect of inflation on rents of commercial properties in jos metropolis, from 1990 to 2014.

1.4       Research Questions

1. What are the trends in rental value of commercial properties? Do commercial property rents vary across the study area?

2. Is Treasury bill a good proxy for expected inflation?

3. Does commercial property return hedges expected and unexpected inflation?

1.5       Research Hypothesis

Null hypothesis (H0): There is no statistical significant relationship between Unexpected Inflation rate and rental values of commercial properties (shops and offices) in Jos, Plateau State from 1990-2014.

Alternative hypothesis (H1): There is statistically significant relationship between Unexpected Inflation rate and rental values of commercial properties (shops and offices) in Jos, Plateau State from 1990 – 2014.

1.6       Scope of the Study

This study is limited mainly to the impact of inflation on rental values of commercial properties in Jos Metropolis from 1990 to 2014. It is specifically limited to shop and office properties. This research work seeks to be limited to only shops and offices because, they are the most common types of commercial properties in the study area and more information can be gotten from them.

To ensure that we arrive at a reasonable conclusion that can be generalized, Ajayi (2000) stated that a wide range of studies should be used as it can provide a strong basis for a thorough comparative analysis.

1.7       Significance of the Study

This study will be of significant to the government and the various players in the Nigerian real estate sector as it assesses the impact of inflation on rental values of commercial properties in Jos. It would give us more information and facts on inflation and how it affects the rental values of commercial properties in the area of the study. Hence, exposing investors, estate surveyors and valuers to understand inflation better and how it impact on the rental value of commercial properties in Jos and Nigeria at large. In addition, it will also help in contributing to the wealth of knowledge established by other researchers in this area.

1.8 Limitation of the Study

First of all this work was limited on the ground floor for shops and 1st floor for offices. Also I had some challenges during the course of data collection because some firms didn’t fill the complete questions while others did not even return the questionnaires.  

1.9 Geographical location of the Study Area

Plateau State is situated in the North-central and the middle belt zone of Nigeria. It is lying between latitude 80°24'N and longitude 80°32' and 100°38' east. The northern part of the state is mostly rocky consisting of hills and lots of captivating rock formations. It is about 179 kilometres (111 miles) from Abuja, the nation's capital city. Jos is linked by road, rail and air to order parts of the country. At an altitude of 1,217 m (3,993 ft) above sea level and enjoys a more temperate climate than most part of the states in Nigeria with an average monthly temperature ranging from 21–25 °C (70–77 °F). This temperature is however different from mid-November to late January bringing about a night-time temperature drop to as low as 11 °C (52 °F), resulting in cool or cold nights. Owing to the cool high-altitude, the weather of Jos receives about 1,400 millimetres (55 inches) of rainfall annually arising from the precipitation due to the location of the city on the Jos Plateau.

1.10 Population and Economic base of the Study Area

Plateau State is said to be a small Nigeria primarily because nearly all the languages of Nigeria are present there. There are more than 50 languages in Plateau state. These include: Berom, Ngas, Tarok, Alago, Goemai, Mada, Nwaghavul, Gbagyi, Eggan, Youn, Montol, Gwandara, Mapun, Chip, Rindre, Bagghom, Egbura, Hausa, Fulani, Kambari, Bassa, Afo, Fler, Taroh, Geomai, Fier, Bugi, Miship, Pyem, Challa, Ron-kulere, Afizere, Miango, Youm, Boggohom, Rukumba, Piapung, Kwalla, Montol, Jukun, Ninzam, Koro, Gade, Amo and so on.

Plateau state is best known for its mining and agricultural activities of the peoples. Sorghum, maize, Acha (a grain known as “Hungary rice”) potatoes, cowpeas, rice, fruits, vegetables and millet are the main staple crops of the area. Plateau state is an important mining area in Nigeria and is known for its major export of tin and columbine. Plateau state can also be described as a state with lots of vocational jobs such as businesses and arts. It has high rate of commercial activities due to its weather which usually attracts people and investors. This can be seen by the existence of large industries such as coca-cola and Nasco Company.


Plateau State is known as The Home of Peace and Tourism with the following tourist attractions: Wildlife Safari park, Shere hills, National Museum, Assop falls, Kurra falls, Wase rock, Riyom rock and others.

Fig. 1.1: Nigeria showing Plateau State

Source: National Centre for Remote Sensing Jos  (NCRS) 2014.

Fig 1.2: Plateau State

Source: National Centre for Remote Sensing Jos  (NCRS) 2014.

Fig1.3: Google earth map of study area.

Source: Google earth

Fig 1.4: Location Map of the study area

Source: National Centre for Remote Sensing Jos  (NCRS) 2014.

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