With an ever-growing population and increased concentration of workers in urban areas, there is a large housing deficit in Nigeria, one that could climb to a deficit of well over 20 million units by 2020. Any visitor to the state capitals nationwide will immediately notice that there is greater focus on the construction of retail and luxury property units that there is on affordable housing for working class people. In Lagos, top-end buyers are being catered for by developments such as the Eko Atlantic City Project, developments in Banana Island and the sand filled environs of Osborne and Ajah. The east has the planned Aba mega Mall, which will be one of the biggest Malls ever built in Africa. In Abuja, there is Centenary City, a project driven by the private sector that will include service apartments, a golf course and retail and entertainment space as well as the world trade centre in Abuja’s business district– all of which are well out of the reach of the majority of Nigeria’s population who have little disposable funds and very little access to credit in the form of mortgage financing.
A very real housing crisis looms and it is important that the government makes the provision of affordable housing a top national priority. In addition to helping to ease overcrowding and improve sanitation, the provision of affordable housing and access to mortgage financing at reasonable rates will also provide a great boost to employment and help grow the Nigerian economy, which is in the throes of a crippling recession at present.
There are signs that the Federal Government is prioritising the need to provide affordable housing, but it does have an uphill struggle to convince a population that has seen many government housing schemes come and go and have encountered numerous bottlenecks whilst trying to secure mortgage financing.
At the recent Affordable Housing Summit 2016, which included key figures from the Nigerian finance and housing industries, emphases was placed on creating a stronger mortgage policy in line with the campaign promise made by President Buhari’s admistration for infrastructural development. Issues addressed included the urgent need to restore investors’ confidence in the housing sector and to improve best practice to ensure transparency of processes.
The obstacles in the way of aligning affordable housing and mortgage credit are numerous: For one, there is the issue of matching income with obligation, another is the need to regulate the rate of mortgage interest charged, something which at present seems to be unilaterally decided by banking institutions, all of which also make demands for collateral before mortgage credit facility can be considered. As at July 2016, mortgage varied in range from 18 percent to a colossal 31 percent with repayments ranging from just 10-20 years.
In addition, there is also the issue of how to gain the confidence of buyers that the house in which they are committing their hard earned finances will be built to a good standard and that the its value will increase over time.
With an effective policy of mortgage financing in place, the potentials for economic growth in the country and the benefits to Nigerian citizens are huge. Nigeria currently as a low homeownership rate of just 25 percent. This shows a much slower growth in the sector when compared with countries such as South Africa (56 percent) and Kenya (73 percent). It is clear that the mortgage finance industry in Nigeria is still in its infancy and that there is much potential for growth.
With a stronger emphasis on housing civil servants, the military and low-income workers, there should be significant growth in the housing sector, as demonstrated by policies in other emerging markets. It is proven that investment in the mid to low income sector is very profitable for government, for the construction industry and for those who invest their money in acquiring their own property.
NOW is the time for the federal government to make a strong push to focus policy interventions on lower income earners who also have aspirations to own their own homes.