The undeniable fact that the Nigerian housing sector is at the moment hobbled by a plethora of challenges is not a matter of debate. With a weak authorized and regulatory framework, excessive prices of land and building supplies, excessive inflation, a weak worth of the naira, an absence of crucial funding within the sector, and an infrastructure deficit, the checklist of challenges seems almost countless.
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“As it stands today, more often than not, owning a home in Nigeria requires the capacity to pay outright, but the figures show that only 10 percent of Nigerians who desire to own a home can afford it.”
In addition to all of the challenges already highlighted, a significant problem is the shortage of an environment friendly mortgage and credit score system that may assist low-income earners to have the ability to afford a home. As it stands right this moment, most of the time, proudly owning a home in Nigeria requires the capability to pay outright, however the figures present that solely 10 p.c of Nigerians who want to personal a home can afford it.
This actuality is just not in any approach shocking, particularly within the face of the present financial realities: about 63 p.c of the inhabitants is in multidimensional poverty, the center class is quick scaling down, wages are low, buying energy continues to be eroded each day on account of fiscal and financial challenges, and the naira continues to face depreciation in comparison with different currencies, particularly the greenback. All of those challenges mixed clearly recommend that extra individuals are falling beneath the poverty line each day.
The present housing hole of 28 million models has grown progressively from 2 million housing models in 2007 to 14 million in 2010, 20 million in 2018, and extra just lately, 28 million housing models. Since housing constitutes a crucial social demand, bettering access has change into an pressing precedence. This can be corroborated by the truth that the nation’s inhabitants is projected to double by 2050; this may predictably result in a proportionate enhance within the housing hole and doubtlessly a rise within the variety of homeless Nigerians. I reckon that this isn’t the longer term we wish to build.
The present rural-urban migration, at the moment rising at 4.3 p.c, can be anticipated to double by 2037, resulting in extra demand for housing in city centres. If we should meet this demand, access is vital, particularly in finance, which comes within the type of mortgages and credit score. This wouldn’t be far totally different from the observe globally, in all places on the earth. Because of their nature as capital-intensive property, homes are bought on mortgage, with generally individuals paying for the remainder of their lives, and I reckon Nigeria can’t be left behind if we should put an finish to the present stage of homelessness.
The problem with mortgage and housing finance in Nigeria is that it’s not solely inaccessible; it’s also costly, with very brief tenors, generally lower than 10 years. How does one clarify that rates of interest for mortgages often vary from 18 to 27 p.c? With the present realities, it’s merely out of the attain of many Nigerians. However, in equity to the banks and different lenders, the excessive cost of borrowing doesn’t exist in isolation; it’s partially the results of the nation’s financial coverage fee (MPR), set by the Central Bank as a part of efforts to ease inflation.
For instance, in February, the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) raised the Monetary Policy Rate (MPR) by 4 hundred foundation factors to 22.75 p.c from 18.75 p.c, making it the best enhance in MPR in over 20 years. The effort was to stem the rising inflation, which at the moment stands at a mean of 31 p.c. Simply put, when MPR goes up, the financial institution lending fee to customers additionally goes up, together with mortgages. These are the important thing and knotty points.
I consider that if we don’t handle the problems round mortgage and housing finance, it will be not possible to shut the housing hole, as a result of even when homes have been available, Nigerians would nonetheless not be capable of afford to personal a home with out access to a mortgage. It has been lengthy established that international locations with a better mortgage penetration fee can shut their housing deficits quicker.
Therefore, if Nigeria should shut the housing deficit, there’s a want to right away reform the mortgage and shopper credit score to be accessible, optimum, and inexpensive, ideally at a single-digit rate of interest and an extended tenure. This may require some type of authorities intervention and association with lending establishments for individuals to access mortgages at a particular fee, aside from acquiring an rate of interest at any time.
The Federal Mortgage Bank of Nigeria (FMBN) additionally has a job to play on this regard; its National Housing Fund, a contributory scheme for staff to access mortgage loans, is a laudable concept. The problem with the scheme is that it has been largely inefficient, in comparison with the variety of individuals it ought to cowl. As of 2019, the scheme had solely disbursed mortgages to lower than 19,000 staff; that’s too inconsequential. The authorities should check out the scheme once more to make it extra environment friendly in such a fashion that it may well ship public items to the best variety of individuals.
Improving mortgage penetration has change into an urgency now. The authorities should instantly work with non-public sector gamers, particularly the banks and key gamers within the housing sector, to attract up a plan for creating an environment friendly mortgage system for the individuals. This can be in step with world observe; Nigeria wouldn’t be the primary.
Babatunde Bayo Lawal is co-founder of DukiyaInvestments.
