Nigeria’s housing deficit: Challenges and possibilities

For the faint-hearted, available statistics on Nigeria’s housing deficit paint a grim picture, while for the incurable optimist it presents limitless opportunities. Available data (for 2014) from the World Bank and the National Bureau of Statistics (NBS) agree that Nigeria has an estimated housing deficit of over 17 million units. With a population of almost 180 million, according to data from the United Nations, an annual population growth rate of 2.8 percent (2015), and an annual urban population growth rate of 4.7 percent, we need to stop talking and start building.

This is more so as global trends show that the world is experiencing a housing crisis and various countries, especially in the global south, have approached the issue with the urgency it requires. According to UN statistics, about 1.6 billion people live in substandard housing globally, while over 100 million are homeless. Nigeria hosts an uncomfortably large percentage of these two, with over 100 million Nigerians considered to live in substandard housing.

Nigeria’s housing problems are severe, even by continental parameters. For instance, according to former Finance Minister Ngozi Okonjo-Iweala, Nigeria’s size of mortgage finance (as a share of Gross Domestic Product) is 0.5 percent, compared to 2 percent for Ghana and same 2 percent for Botswana. In a paper – ‘Unleashing the Housing Sector in Nigeria and in Africa’ – presented last year at the 6th Global Housing Finance Conference in Washington DC, Okonjo-Iweala also pointed out that these figures contrast sharply with estimated mortgage finance to GDP ratio of 80 percent for the UK, 77 percent for the USA and an average of 50 percent across Europe. Nigeria’s abysmal ranking on the mortgage finance scale show that the several mortgage financing initiatives by successive governments in the country have failed.

Other major factors for the country’s housing crisis include the high cost of construction and an expensive cumbersome process of processing land documents and registering a property. In Nigeria, the high costs of skilled labour and building materials make the country one of the most expensive to build a house in. Referencing the World Bank’s Doing Business 2016 Report, Nigeria ranks 181 out of 189 economies in the ‘Registering Property’ index.

These factors paint an accurate picture of the fact that Nigeria’s economic growth has failed to impact on basic necessities such as creating jobs, stimulating businesses and improving access to finance, or have any effect on the rapidly shrinking middle class. A recently rebased GDP saw Nigeria overtake South Africa to emerge as the continent’s biggest economy. However, even with the rebased GDP which came to USD509.9 billion in early 2014, per capita income hovers around USD3,000, far less than that of South Africa which stands at USD7,336.

Our economic growth is non-inclusive and this has impacted on the housing deficit that Nigeria suffers. Last year, the Nigerian Bureau of Statistics (NBS) reported that Nigeria’s real estate market contributed only 6.82 percent to the real GDP in quarter one of 2014, down from 8.37 percent in the preceding quarter. However, stakeholders agree that the country’s real estate growth is impressive, with PricewaterhouseCoopers (PwC) projecting, in its report – ‘Real Estate: Building the future of Africa’ – that Nigeria’s real estate investment will rise by about 49 percent, from USD9.16 billion to USD13.65 billion in 2016.

Investors are impressed with the outlook and have made significant inroads in tapping into the opportunities presented by the country’s housing deficit. In Lagos, a consortium of investors is turning land reclaimed from the Atlantic Ocean into a vital piece of prime real estate known as the Eko Atlantic City. The development has become a model of the possibilities that abound when progressive governments play their role as a facilitator that creates the social and physical infrastructure conducive for businesses to thrive sustainably.

To encourage more of this type of investors, Nigeria’s policymakers need to ensure that access to long-term finance is guaranteed to enable investors attract consumers from the upper end of the market that play in the prime real estate sector. The gaps in government-run infrastructure would also need to be plugged to guarantee efficient urban development. Roads, electricity, security, etc. are significant areas that the government would need to invest in to ensure that developers and clients enjoy best practice residential and commercial property standards.

The government would also need to promote favourable macroeconomic policies which will in turn encourage private sector investors to partner with her in providing low-cost mass housing. These policies must result in low interest rates, stable exchange rates and low inflation to encourage investors move into mass housing projects and low-income earners move from rented (substandard in most cases) housing to their own affordable mortgage-enabled homes. These policies, in conjunction with a broader economic growth stimulation that results in lifting more Nigerians above the poverty line, will make low-cost housing actually affordable for the low-income earner.

Processes for land acquisition, construction permits and property registration must also be simplified and automated in line with global best practice. We simply cannot continue with a culture that frustrates estate developers and discourages prospective home owners. In extreme cases, prospective property owners have had to wait years to secure required approvals and documentation. Controversial legislation such as the 1978 Land Use Act and the 2012 National Housing Policy must be revisited to tackle areas of their implementation that stifle the growth of the real estate sector.

Going by his antecedents while in office as the former governor of Lagos State, Babatunde Fashola, our new minister of power, works and housing, seems the right candidate to push through such progressive policies. Nigeria, by all indices and despite its challenges, represents a huge market for real estate development, and Fashola has shown that he understands the business of government in providing an enabling atmosphere for investors. Nigeria needs almost one million housing units annually, offers a high return on investment in prime real estate, and hosts one of the world’s fastest growing populations: investors see opportunities in these figures.

Ibiene Ogolo