| Nigeria | Jan 28, 2015
In Makoko, Lagos’ infamous slum, dwellers of different nationalities have come together to form an autonomous neighborhood that houses over 1 million people, most of whom live in shacks and […]
In Makoko, Lagos’ infamous slum, dwellers of different nationalities have come together to form an autonomous neighborhood that houses over 1 million people, most of whom live in shacks and shanties on piles over heavily polluted waters. In other cities around the country, people live in likewise makeshift shelters, as rapid urbanization and population growth have combined with low incomes and high costs of housing to produce a housing deficit that is estimated at 17 million homes.
The Honorable Minister of Lands, Housing and Urban Development, Mrs. Akon Etim Eyakenyi, told TBY that the Federal Government was trying its utmost to bridge this deficit. Concerned with the obvious negative repercussions that a housing deficit inevitably has for Nigeria, the Minister points out that the current Jonathan Administration has made “a mass housing delivery program one of its major cardinal goals, as the provision of accessible and affordable housing is one of the strategic national imperatives designed for guaranteeing the well-being and productivity of the citizenry.”
The World Bank estimates that $323 billion is needed to bridge Nigeria’s housing deficit, an amount that cannot be solely funded by the National Housing Fund (NHF), which is a government scheme that entitles all Nigerians who are above the age of 21 and enrolled in paid employment to a low-interest, government funded loan. Acknowledging the need to tackle access to housing finance as the root cause of the housing deficit, the federal government has embarked on the Nigeria Housing Finance Programme (NHFP). With foreign partners, such as the World Bank and the International Finance Corporation, and domestically supported by the Central Bank of Nigeria, the program has as its primary aim the deepening of primary and secondary mortgage markets in Nigeria.
One of the most significant components of this program is the establishment of the Nigerian Mortgage Refinance Company (NMRC), which was launched on 16 January 2014 by President Jonathan. The rationale behind the creation of this institution is that it will allow Nigerians increased access to mortgages by reducing mortgage rates, thus making residential housing more affordable. The NMRC is a private sector led mortgage refinance institution, and will provide mortgage-lending banks with improved access to liquidity and longer-term funds at an affordable interest rate in the mortgage market, which enables the banks to charge lower rates for mortgage lenders. Killing two birds with one stone, the NMRC will not only result in an increase in the number of homes constructed per annum to 70,000, but will also generate and sustain jobs in the sector as a result of said construction. In another bid to attract further private capital to the market, the Ministry has started to work in cooperation with Development Finance Institutions (DFI) such as Shelter Afrique, which can provide credit in the form of long term loans and equity contributions to fund medium and low income housing schemes, which are otherwise left alone by developers, who still focus heavily on the high-end market that only caters to a small portion of Nigeria’s population.
As the government has set the goal of building 1 million housing units annually, the room for improvement is crystal clear, and opportunities thus abound for foreign investors in addressing Nigeria’s housing deficit. With housing being a basic human need, it seems imperative that Nigeria’s federal government closes the gap from both a humanitarian and economic point of view. Curbing the deficit would have a multiplier effect in the sense that a fully matured real estate sector would create employment in construction and related industries. Moreover, a well functioning housing market is an enabler of wealth creation through savings and entrepreneurial development, as claimed by Nigeria’s Coordinating Minister of the Economy and Minister of Finance Dr. Okonjo-Iweala. Therefore, reducing the housing deficit could truly unlock the potential that the real estate sector has to contribute significantly to the GDP of Africa’s most populous nation, and move Nigeria closer towards the twenty biggest economies in the world.