Experts in the mortgage and housing sector of Nigeria’s economy have explained why access to mortgages remains a huge challenge to many home seekers, leading to a persisting housing shortage.
According to the experts, the mortgage sector in Nigeria, which is a long-standing pillar for financing home ownership, is struggling under a growing burden of issues that have left many Nigerians without homes.
They explain further that the sector is in dire need of reform, with hurdles such as land allocation issues, bureaucratic delays, and insufficient financing, all of which make home ownership difficult for average citizens.
Dennis Esong, a mortgage sector analyst told BusinessDay in an interview that mortgage access in Nigeria remains a challenge because of high interest rates and limited public awareness hindering uptake.
Esong explained that mortgage rates in Nigeria are around 16-17 percent annually. “For salaried employees within Nigeria, the rate sits at 16 percent, while business owners pay a higher rate of 17 percent. Nigerians in Diaspora also face the same 16 percent rate, all calculated on a reducing balance basis”, he said.
The country’s government-backed primary mortgage scheme is the National Housing Fund (NHF), administered by the Federal Mortgage Bank of Nigeria (FMBN). The NHF offers a significantly lower rate of 6 percent per annum. However, Esong noted that although this programme covers all states, many Nigerians lack awareness of its existence or struggle with bureaucratic hurdles when trying to access it.
“Many people apply and wait for years, sometimes only receiving an application tracking number without any funds. “It’s frustrating because NHF is by far the most affordable mortgage option in the country, yet access issues keep it out of reach for many”, Esong said.
He added that to qualify for NHF loans, borrowers are required to make a 10 percent down payment, with loan amounts capped at N15 million.”Payments are calculated on a reducing balance, meaning that as the principal amount decreases, so does the interest charged,” he added.
According to Esong, this model allows borrowers to reduce their interest burden by paying off the principal more quickly. He further stated that aside from NHF, commercial banks in Nigeria also offer mortgage options, though these come with higher interest rates.
Esong mentioned that while commercial banks operate mortgage arms, they tend to focus more on advertising their savings products, contributing to low awareness of mortgage services.
For civil servants, a 2.5 percent NHF contribution is automatically deducted from their salaries, with the government encouraging these contributions to facilitate future access to mortgage funding. However, the process remains highly bureaucratic, with some applicants waiting multiple years before receiving funds, although Esong noted that there is faster processing in cities like Abuja.
“The system in Nigeria could improve if mortgage providers increased their outreach efforts. If more Nigerians knew about these schemes and how to access them, it could transform homeownership across the country,” he added.
“While commercial mortgages offer more immediate access, their high interest rates deter many”, he said, pointing out that under Nigerian mortgage laws, failure to meet repayment terms leads to eviction and foreclosure on the property, reinforcing the risks associated with these loans.
“Nigeria’s mortgage market presents both challenges and opportunities. While the NHF offers an affordable solution, limited awareness and bureaucratic delays have left many Nigerians frustrated in their quest for homeownership”, Esong said.
On his part, Waliu Adekunle, a member of the Real Estate Developers Association of Nigeria (REDAN), in an interview with BisinessDay, highlighted these challenges, calling for greater governmental support in the real estate sector.
Read also: How efficient land mgt, mortgage can drive growth in housing sector—Experts
Adekunle pointed out that the most significant gap exists within the middle-income bracket, where affordable housing is crucial. “You need to solve that problem where houses can be acquired by ordinary people,” he emphasized, warning that the lack of accessible housing could have broader social and economic consequences.
Adekunle also cited the Land Use Act as a major barrier, urging national land reforms to streamline processes for real estate development. He stressed that without a supportive regulatory framework, real estate investments would remain stagnant.
“Real estate will not be real estate in its true sense if you can’t trade with it,” he added, explaining that better structures would allow the sector to contribute more significantly to Nigeria’s GDP.
Echoing Adekunle’s concerns, Minister of Housing and Urban Development, Ahmed Dangiwa, called attention to challenges in housing finance, mortgage adoption, and delivery.
Dangiwa announced new measures, backed by President Bola Tinubu, to address these issues. He revealed that reform committees will soon begin work to identify and dismantle systemic obstacles affecting the mortgage sector. Once these committees report back, Dangiwa plans to work with the National Assembly to implement necessary policy changes.
Dangiwa also pointed to the untapped potential of Nigeria’s capital market for raising long-term funds needed to support mortgage loans. “Housing needs substantial funding, and mortgages require long-term financing,” he said, adding that engagement with the capital market could provide the needed resources.
Dangiwa also emphasized that collaboration between the government, private sector, and capital markets is essential to making mortgages accessible to more Nigerians.
With the reform committees, there is hope that the government’s commitment to improving the mortgage and real estate sectors will bring lasting change, helping more Nigerians achieve the dream of home ownership.
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