Unemployment and high level poverty are two major obstacles to getting housing finance in Nigeria. Poverty level in the country is high despite the country’s apparent wealth from petro-dollar. This is made worse by rising unemployment figures in excess of 20 million.
Africa is regarded as a poor continent and, despite its relative large population size, the continent is economically underweight with an estimated €113 billion gross asset value of real estate which represents 1 percent of the world’s total value.
A World Bank report once estimated that only 3 percent of the African population, about 15 percent of the world’s 7.3 billion population has income viable enough to qualify them for a mortgage. This explains the need for initiatives that can lead to viable income to qualify people for mortgage.
That estimate simply underscores the level of poverty in the black continent where some households live below poverty line. Home ownership in most parts of Africa remains a luxury because houses are literally unavailable and where they are, they are inaccessible and unaffordable.
In Nigeria, the continent’s most populous nation and one touted as its largest economy, it is estimated that 70 percent of country’s over 180 million people lives below poverty line, which is the reason for the low home ownership level in the country that is a little above 10 percent.
It is also estimated that about 90 percent of houses in Nigeria are self-built with less than 5 percent of them in possession of formal title registration. Because of this, mortgage loans and advances in the country stand at 0.5 percent to GDP in contrast to 30-40 percent in emerging economies and 60-80 percent in advanced economies.
Adigwe Arinze of Homebase Mortgage Bank attributes this to hostile business environment and lack of structure which hitherto existed in the mortgage market now being addressed by the Uniform Underwriting Standard championed by the Nigerian Mortgage Refinance Company (NMRC).
There are other obstacles to mortgage finance that include dearth of long-term funds, absence of a viable secondary mortgage market, inadequate branch network of Primary Mortgage Banks (PMBs), among others which means that a lot still needs to be done to grow housing finance in the country.
The growth of housing finance in Nigeria, according to Guillaume Roux of Lafarge Africa Group, needs the support of the small microfinance institutions in their efforts to expand and diversify their offering, adding that the growth would also come from the large commercial banks which are becoming more and more attracted by the low to medium income segment of the housing market.
Roux’s argument is that both the microfinance institutions and commercial banks need support to develop housing products and build up projects which would positively affect the low income segment, urging organisations and institutions to help one another to achieve these goals.
Nigeria needs to grow housing finance through such initiatives as ‘Housing Microfinance Academy’ which Lafarge launched in 2014 in partnership with International Finance Corporation (IFC) and African Finance Development (AFD).
Training sessions need to be organised to promote housing microfinance and develop the capabilities of banks in that field. Roux sees governments as critical stakeholders required to create the regulatory framework that would make the housing market work for the low income segment, noting that the setting up of NMRC and the institutions for housing finance, including microfinance and mass housing financing, with the support of the World Bank, is a good example of a platform which would facilitate the growth of initiatives there.
“This will progressively enable a decrease in interest rates in the mortgage industry. However, more support from the government is needed to lower the interest rates for the funding of affordable housing and social housing projects. Today, they represent a cost of up to 30 to 40 percent of the construction, which is borne by the end user”, Roux said.
It needs to be stated that there is a need to improve affordability of construction itself in which case social housing projects should be setting the stage by showcasing new construction techniques that could improve quality, deliver faster and reduce the cost of construction.
African governments need to creatively innovate in order to improve the living standard of their people through the provision of affordable and mortgage-backed housing programmes. Also, the mortgage system has to be improved to make it not only accessible but also affordable.
Chuka Uroko
