For Nigerian workers, the passage of the revised National Housing Fund (NHF) bill by the National Assembly is not only a piece of good news, but also one that raises fresh hope for enhanced access to mortgage and more home affordability. Liquidity issue in the mortgage system is expected to be a thing of the past.
Nigeria workers, especially those in the public sector, are the least advantaged in terms of home ownership in Nigeria, considering that their take home pay at N18,000 per month can hardly give them three good meals a day and pay other bills including house rents and school fees, not to think of buying or building houses.
They need some support in the form of mortgage to enable them buy or build their own houses. It was in the realization of this need that the Federal Government, 27 years ago, came up with the National Housing Act 1992 that gave birth to the NHF.
NHF was aimed to mobilise funds for the provision of affordable housing for Nigerians. The outlined sources of funds for the fund included contributions by Nigerians in both the public and private sectors; investment in the fund by commercial and merchant banks; investment in the fund by insurance companies and financial contributions by the Federal Government.
But, over the 27 years of its existence, contributions from Nigerian workers have been the mainstay of the fund. Lack of compliance to the provisions of the Act by commercial and merchant banks and insurance companies has affected its liquidity and capacity to create the required impact.
Indeed, mortgage experts argue that the slow growth and minimal impact of the fund over the years are attributable to the failure of both the banks, insurance companies and other stakeholders to live up to expectations. This was the situation that gave rise to the review and passage of the new NHF bill by the National Assembly.
Some of the notable provisions in the new bill are the 2.5 percent contribution of monthly income to the fund by Nigerians in the public and private sector. This comes with benefits and is refundable on retirement. As a contributor to the fund, a worker can apply for a housing loan of up to 15 million after only six months of continuous contribution. The loans attract low-interest rates of 9 percent per annum and are payable over 35 years.
Secondly, commercial banks or merchant banks and insurance companies are now required to invest 10 percent of their profit before tax into the fund. In the existing law, commercial and merchant banks were required to invest a whopping 10 percent of loans and advances to the fund while insurance companies are required to invest a minimum of 20 percent of non-life funds and 40 per cent of its life funds in real estate.
The bill also stipulates fines to be applied to commercial and merchant banks as well as insurance companies to ensure compliance amongst others.
Though these provisions are still contentious as analysts say that asking every commercial or merchant bank, insurance company to invest 10 percent of its profit before tax (PBT) into the fund at an interest rate of 1percent above the interest rate payable on current accounts of banks could hurt them, close watchers of the mortgage and housing market in Nigeria commend the unfolding development.
These market watchers insist that it is a positive development in the quest to tackle the perennial problem of sustainable housing finance that is required to develop the country’s housing sector.
“The provisions of the new housing bill are relevant and will enhance the potential of the NHF scheme to increase access to decent, quality, affordable housing for Nigerian workers, especially those within the low- and medium-income brackets”, said John Ikyaave, a housing industry expert, in Abuja.
The fear of the analysts is that when such a financial strain is put on private companies, they will be forced to cut costs by sacking staff and freezing new investments, just as the new bill will probably see some of the companies pass on the cost to consumers, thereby triggering a surge in inflation.
But Ikyaave reasons that the new NHF bill, which is now awaiting the assent of President Muhammadu Buhari, will support the provision of housing loans at best and lowest market interest rates of between 6 and 9 percent that can be paid for periods of up to 35 years.
“Currently, if you go to commercial or mortgage banks for a housing loan, the interest rates you will be charged usually range from 19 to 25 percent. Now, how many Nigerian workers can afford that? The NHF is the only scheme that gives housing loans at single digits and for longer-terms of 35-years. A stronger NHF with robust financial inflows will have the capacity to extend its range of affordable housing solutions to more Nigerian workers and create wider impact”, he posited.
Ikyaave commended all housing industry stakeholders who contributed to the passage of the bill and encouraged President Buhari to see its merit and sign it into law to kick-start a new phase in the provision of social housing in the country.
Chuka Uroko
