After much motion without movement in its mortgage system, the next best step for Nigeria is to seek what is working in other climes that it can adopt in order to grow that segment of its economy.
The Singapore model readily comes to mind here. This involves creating a pool of funds into which everybody contributes monthly and from which everybody borrows to buy a flat or house.
Singapore, a once poor island in Southeast Asia, evolved from a third to first world economy between 1965 (when it gained independence from the British) and 2000. Under Lee Kuan Yew, the country’s first Prime Minister, the government transformed huge swathes of urban sprawls and slums into well-planned cities that spurred economic dynamism and growth.
Their mortgage model succeeded not by an act of magic but because the government was determined, through a deliberate policy, to make that model work.
Conversely, the national housing fund (NHF) scheme in Nigeria can only be described as a failure because the vision is not there to drive the scheme. For too long, the mortgage system in Nigeria has failed to grow and the obvious effect is the low home-ownership level in the country and widening gap between housing demand and supply.
The Federal Government’s intervention in the housing sector was the setting up of the Federal Mortgage Bank of Nigeria (FMBN) followed by the establishment of the NHF scheme which was aimed to make mortgage affordable for contributors to the scheme at 6 percent interest rate for upwards of 20 years, depending on the age of the borrower.
This scheme has failed, hence the need for the remodeling of the entire mortgage system in the country. The Federal Government is expected to ‘top up’ contributions into a remodeled NHF with, at least, N10 billion every year to make it affordable.
If the entire system is modeled after that of Singapore, Nigerian citizens will be able to obtain 20 to 30-year low interest mortgage to acquire houses through a pool of funds into which all workers must contribute 20 percent of their salary.
It should be noted however that the NHF scheme attempted the Singapore model but failed because contributors couldn’t access the loans as they couldn’t afford the deposit for the houses. The scheme also failed because one effect of inflationary policies is high interest rates charged on mortgage loans.
Anywhere in the where, non-inflationary fiscal policy, flexible, sustainable exchange rates and hence, low interest rates, are important for attaining a mortgage system that will also attract foreign investment into mortgage market. Those are the kind of things Nigeria needs at the moment to grow its mortgage sector.
Nigeria’s mortgage system as it stands today is incapable of supporting a housing policy that will deliver houses to Nigerians. This is why the country should imitate other countries with mortgage systems that have delivered housing for both the rich and the poor.
Nigeria needs an efficient housing policy whose aim is for the government to assist millions of citizens to obtain lower-interest mortgages. This is how most citizens are helped to acquire houses in many countries with successful housing policy such as Singapore, South Africa and Malaysia.
The housing sector also has suffered slow growth over the years and this has blamed on high mortgage rates with short tenures, a difficult business environment, high inflation, and unstable policies that have together hampered the growth of the housing sector in Nigeria.
As a result of this, there is an estimated deficit of 17 million housing units. FMBN estimates that the country needs to build 720,000 units per year to bridge this gap.
Housing development experts say there is always a link between transformational housing policy and the economy. They explain that a housing policy that works for all Nigerians, including the rich, the poor, civil servants, small business people, artisans, informal sector workers and entrepreneurs, young graduates, young people with limited formal education, banks, construction companies etc, will boost construction activities and make a significant contribution to economic development.
The need for an efficient mortgage system is critical to providing accommodation for most Nigerians and this is because house is the single biggest investment an overwhelming majority of people will ever make in their life time.
It is on record that less than 3 percent of Nigerians acquire their homes through mortgage. Yet millions of them invest in building houses of different costs and quality without any help whatsoever from the government. This is the reason about 90 percent of the country’s housing stock are described as ‘dead assets’ because they are not in any formal mortgage.
Chuka Uroko
