The real estate sector has been described as one of the economic pillars of growth owing to its contributions to the Gross Domestic Product (GDP) of countries the world over.
However, the high cost of building materials, inflation, and low income has crippled the gains of the sector as developers are finding it difficult to provide affordable housing to Nigerians.
This situation is further exacerbated by the combination of rapid population growth, urbanization and widening economic disparities leading to a significant shortfall in housing supply.
Traditionally, the allocation of housing finance in Nigeria was heavily skewed towards the salaried and formally employed population who fall in the minority of Nigeria’s working population.
According to the National Bureau of Statistics’ (NBS) National Labour Force Statistics Report, Nigeria’s informal employment rate, which is the share of employed people in the informal sector and informal employment, was 92.7% in Q2 2023.
The implication of this is that only a tiny population of Nigerians are formal sector employees and could originally access housing finance, leaving a vast majority of those in the informal sector without viable options for homeownership or even affordable rental housing.
With a housing deficit of over 28 million, experts and operators have continued to harp on the need to drive a mortgage financing scheme that will not only provide affordable housing to Nigerians but also ensure that it is sustainable.
Subsequently, at the heart of the discourse is the Federal Mortgage Bank of Nigeria (FMBN) which has been saddled with the responsibility of providing affordable mortgage financing to the people.
The role of FMBN
Checks by the Daily Trust show that the FMBN has undertaken some initiatives to tackle the housing deficit and improve access to mortgage for low and middle-income earners.
It is today seen as one institution with the capacity and design to provide the kind of housing solutions that Nigerians need.
Checks also show that the bank today is the only institution in Nigeria that offers housing loans and mortgages at single-digit interest rate, mostly at 6-7 per cent, while also offering a repayment tenor of up to 30 years.
As the institution mandated to oversee the National Housing Fund (NHF) scheme, a contributory scheme was set up to provide a pool of funds through monthly contributions from Nigerian workers. This includes economically active Nigerians from both the public and private, formal and informal sectors.
Once an individual has contributed 2.5% of their monthly income to the scheme for up to six months, such an individual qualifies to apply for a mortgage loan of up to N50 million, depending on affordability, and for up to 30 years, depending on age or number of years left before their 60 birthday.
However, experts have highlighted that sustainability is key, especially with the high inflation that is currently eroding the purchasing power of Nigerians.
Among the initiatives introduced are different mortgage products and providing off-taker guarantees for the Renewed Hope Housing scheme introduced by President Bola Ahmed Tinubu, among others.
Diaspora mortgage initiative
The Diaspora Mortgage Loan Product, a collaborative effort between FMBN and NiDCOM, is targeted at affording Nigerians abroad the opportunity to access mortgage.
The Managing Director of FMBN, Shehu Usman Osidi, while commenting on the initiative, said, “The FMBN is approaching the product with a strong sense of responsibility, ensuring it meets the highest professional standards.”
Alluding to the level of work already done, Osidi reported that a lot of progress has been made with regard to the technicalities relating to the platforms and International Money Transfer Operators (IMTOs).
He noted that the extensive engagements with the Central Bank of Nigeria (CBN) have been fruitful, adding that the bank had mandated the establishment of a technical committee with membership drawn from the FMBN, CBN and NiDCOM.
“The CBN is pleasantly disposed to the product and is looking at other avenues beyond what we are thinking of doing,” he explained.
Rental assistance loan
In response to the urgent need for a more inclusive and equitable housing finance system, the Federal Mortgage Bank of Nigeria (FMBN) recently introduced the Rental Assistance Loan, a groundbreaking initiative aimed at providing financial relief to individuals and families struggling with high costs of rent.
FMBN MD, Shehu Usman Osidi, who made the announcement during the recently concluded 18th Africa International Housing Show (AIHS) 2024, said in a presentation that the scheme is to improve mortgage provision for affordable housing solutions.
Daily Trust understands that the Rental Assistance Loan is a micro-housing loan product meticulously designed to alleviate the financial burden of rental payments for eligible Nigerians. This product ensures that all Nigerians, regardless of their income level or employment status, have access to safe and affordable housing.
The innovative rental assistance was crafted to ensure accessibility, affordability and flexibility, making it a viable solution for many who have found it challenging to secure housing finance through other traditional financial arrangements.
One of the key requirements for qualifying for the Rental Assistance Loan is that applicants must be contributors to the National Housing Fund (NHF) scheme.
This pre-requisite ensures that beneficiaries are actively engaged in a system that promotes long-term financial planning for housing. By making contributions to the NHF, applicants demonstrate their commitment to securing their housing future, which is a critical aspect of financial discipline.
Unlike traditional loans that may require a substantial lump sum payment, the FMBN Rental Assistance Loan mandates consistent contributions to the NHF for a minimum of six months. This approach not only encourages financial discipline but also broaden the loan’s accessibility to a larger demographic.
The loan offers a maximum loan amount of N2,000,000, which is subject to the beneficiary’s affordability.
N100bn guarantee for renewed hope housing scheme
To support affordable homeownership for Nigerians, the Federal Mortgage Bank of Nigeria is supporting the 100,000-housing unit Renewed Hope Cities and Estates Programme with N100 billion in off-taker guarantee.
The Daily Trust gathered that the N100 billion off-taker guarantee will be provided to the consortium of developers for the project.
He added that the amount is in addition to the bank’s commitment to provide mortgage loans to the off-takers upon completion of the houses, which will be spread across the nation with prospects of several members of the police force emerging as beneficiaries.
Aside the off-taker guarantee, further findings by this paper show that the ongoing projects by the bank include the Global Ministerial Pilot Housing Scheme 1,134 units which have created about 28,350 and currently in 16 locations.
Similarly, the Global FMBN/NLC/TUC/NECA projects, with 2,046 housing units, is said to have created 51,150 and ongoing in 13 locations while Global Cooperative Housing Development projects consisting 3,673 has so far created 91,825 and ongoing in 77 locations.
Why recapitalization of FMBN should be priority – Expert
Speaking to Daily Trust, a real estate expert, Musa Ibrahim, noted that for Nigeria to achieve affordable mortgage financing through the FMBN, there is an urgent need for the bank to be capitalized to at least N500bn from the current N5bn.
Ibrahim said it is the only way the bank will increase delivery of affordable housing to subscribers of the NHF scheme.
“The capitalization of FMBN is long overdue with over the four million subscribers to the National Housing Fund scheme, FMBN’s current capital base of N5 billion is not sufficient to provide both mortgage and construction loans to lessen the housing deficit in the country.
“Therefore, the federal government must see this as a national emergency to ensure that Nigerians have affordable mortgages through the FMBN and the only way is to recapitalize the bank to at least N500 billion,” he explained.
He added that the major challenge facing the housing sector is funding and affordability, adding that if recapitalization of FMBN is successful, it will go a long way toward tackling the rising housing deficit in the country.
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