Out of the 69.54 million Nigerians reported by the National Bureau of Statistics (NBS) to have been gainfully employed as at third quarter of 2018, only 5 million of the total number earn a salary of N3 million and above per year, as compiled from data by Graeme Blaque Group, a Lagos-based advisory firm.
This data put employed Nigerians who can buy affordable housing at only 7.19 percent, meaning as much as 64.54 million people who earn less than N3 million cannot afford to own their own home except of course there is an increase in their income level.
“We found that less than 5 million Nigerians earn up to N3 million a year, and when we first brought out the data a lot of people shouted, so when you put that into consideration and look at affordable housing; if I give you a house at zero interest rate for even 50 years, what type of house can you afford?” Zeal Akaraiwe, CEO of Graeme Blaque Group and member, Technical Advisory Committee to the Nigerian Senate, said.
According to the Akaraiwe, before addressing the issue of affordable housing and whether or not one can afford or have access, earning capacity of the average Nigerian needs to be able to allow for it to happen.
With the current income level in Africa’s most populous nation, Akaraiwe believes that Nigerians cannot afford to own real estate property in the urban areas.
If someone earning N3 million per year (N250,000 per month), wants to save towards acquiring a house, he or she would have to set aside N83,333 per month (the one-third of total earnings allowed by HR). This will amount to N1 million in a year, and to buy a four-bedroom semi-detached house in Lekki worth N75 million such a person would have to save for 75 years.
Even if the person was to acquire a property in Ikorodu, Ebute Metta, both in the mainland axis of Lagos, or Choba in Port Harcourt, which have similarities with Wuse in Abuja, he or she would have to save for at least 20 years.
Nigeria’s housing challenge borders on insufficient stock that meets the demand of low-income earners, low ownership level and lack of demand enablers in terms of mortgage or low-rate housing finance.
According to the Association of Housing Corporation of Nigeria (AHCN), the underdevelopment of Nigeria’s mortgage sector in driving homeownership is worrisome as more than 90 percent of new homes utilise funds from personal savings for incremental construction.
“The biggest problem of the mortgage sector in Nigeria is the high cost of the very limited mortgage that is available. If they can develop a policy to ease housing finance, it will be impactful,” Wole Olabanji, the CEO of CoBuildIT, a real estate firm said.
The high mortgage rate is considered as one of the key culprits of Nigeria’s housing challenge. A typical mortgage in Nigeria ranges between 7-10 percent for Federal Mortgage Bank of Nigeria (FMBN) and between 15-25 percent for commercial mortgage institutions, one of the highest in the world and the main reason the industry has become less attractive to many whose purchasing power was eroded by the 2016 recession.
Nigeria’s economy continued to expand at a sluggish rate in the third quarter of 2019 after state data agency, NBS, reported a 2.28 percent growth for the period.
Although that’s the fastest growth in four quarters, it’s unlikely to resonate with many Nigerians because even though the headline GDP seems to be expanding, it is shrinking in per capita terms.
Individual efforts at increasing Nigeria’s real estate stock by way of developing more houses offering insights into possible solutions, have not helped to reduce the demand-supply gap or increase the ownership level estimated at more than 17 million units.
Whereas homeownership level is 84 percent in Indonesia, 75 percent in Kenya and 56 percent in South Africa, it is only 25 percent in Nigeria whose population is estimated at 200 million. Going by United Nations projection, the country’s population will be as high as 400 million in 2050.
“The major issues that continue to affect housing delivery in Nigeria, which also account for the wide demand-supply gap, include constraints related to the high cost of securing and registering secure land title,” said Nasir El Rufai, Kaduna State governor.
Commenting on how to provide affordable housing to Nigerians with low-income capacity, Tayo Odunsi, CEO, Northcourt Real Estate said even if a real estate developer in Nigeria wanted to run its business like an NGO, it still wouldn’t have the capacity to be able to manoeuvre market forces to make housing to be affordable.
“But the government, being the one that governs land access, approvals, planning and what can be built and controls who accesses it, the government can play a role in delivering social housing, and the policies that will ensure they are delivered to the low-income earners,” Odunsi said.
ENDURANCE OKAFOR
