Mortgage and housing finance in Nigeria

In a normal market economy, the growth and development of the housing sector go hand in hand with a functional mortgage system and this explains why, in developed economies, owning a home is almost synonymous with taking a mortgage facility. In Nigeria, the story is different. This is a country where a lot of people argue that there is no mortgage system in the country. For them, this is another way of explaining the country’s well over 17 million housing units deficit and a low homeownership said to be a little above 10 percent.
Here’s a country where mortgage accounts for less that 3 percent of housing finance and homeownership contrary to what obtains in other jurisdictions, especially the advanced economies, where individuals and households buy homes through credit given to them by mortgage banks or other mortgage lending institutions. In Lagos, for instance, a city of about 18 million people where over 60 percent of this population live in rented accommodation, unconfirmed report has it that about 86 percent of the housing stock in the city is funded from household income. Close market watchers say housing finance by public authorities in Nigeria is about 10 percent; mortgage banks contribute about 2 percent, while contribution from banks and other institutions is insignificant.
When we compare what obtains in Nigeria with what is found in other African countries like Ghana and South Africa, we feel pained to note that, in South Africa, mortgage contributes about 40 percent of housing finance while in Ghana, our much smaller West African neighbour, the contribution is 3 percent. Experts explain that the low mortgage contribution to housing finance in Nigeria is as a result of the cumbersome and unfriendly land administration in the country because the country ranks highest in property registration and construction permits.
We agree totally with this, knowing that Nigeria is ahead of all other African countries in procedures legally required for registering property as it takes about 360 days to register property here as against Ghana’s less than 10 days. It is therefore not difficult to understand why mortgage component in housing finance is so low given that, even in Lagos, which is regarded as a microcosm of the larger entity called Nigeria, there are altogether 16 stages and 60 steps to getting a property registered—eight stages and 30 steps for each of the lender and the borrower.
It is pertinent for us to point out that Ghana, before now, had a dysfunctional land administration, long and expensive procedures that lasted up to five years and involved six different agencies supervising which resulted in an inefficient state land bureaucracy and customary tenure. But when government instituted reforms, property registration in that country was cut down to 34 days and queues at the lands commission disappeared, making it possible for the mortgage sector to thrive.
Similarly, in Egypt, government identified high fees and inefficient government agencies that hindered the formalisation of real estate as a major issue and sorted it out by reducing property registration fees and simplifying the property registration process, thus encouraging citizens and companies to obtain titles which are major requirements for getting mortgage for housing finance.
We do not see reason why Nigeria, particularly Lagos, Abuja, Port Harcourt and other major cities, should not do the same so as to fast-track mortgage access , increase homeownership level and drastically reduce housing deficit in these cities and the country as a whole.
We join other industry operators to call for discarding of multiple verification payment and deployment of Global Information Services (GIS), making payments with a single receipt, improving capacity building and significant investment in technology to ease property registration considerably. We also advise that government should use Land Use Act to empower people and not as an economic and political tool by state chief executives and it should be taken away from the constitution so that it could be easily tinkered with.
Land administrators should adopt a three-one-three strategy for land registration which involves land titles being perfected in three days, at one central place, and at the cost of 3 percent of the value of the land. This way, we feel, mortgage access will be increased and more houses would be built and sold.