Why Govt must partner with private sector to bridge housing gap

One of the Sustainable Development Goals (SDGs) is Goal 11, which makes the case for access to adequate, safe, and affordable housing. In 2021, the World Economic Forum (WEF) reported that an estimated 150 million people globally lack access to decent and adequate housing, adding that about 21 million of that population were domiciled in Nigeria.

In welfare economics, housing is regarded as one of the major factors required for improving the living standards of any population; it is also largely described as a fundamental human right and a foundation for all other rights. According to the National Bureau of Statistics (NBS), the country’s multidimensionally poor population is currently at about 63 per cent, and among other factors contributing to the high level of deprivation are inadequate housing and slum shelter.

Lack of access to adequate and decent housing constitutes a national security concern. In addition to poverty, the situation is also exacerbated by the continued rise in population, which currently stands at 2.7 per cent annually, making Nigeria one of the fastest-growing populations globally. Rural-urban migration is also on the rise, with Nigeria’s urban population projected to be growing at 4.3 per cent. The urban population has increased significantly from 15 per cent at Independence to 50 per cent in 2021.

In addition to the growing poverty, rising population, and rural-urban migration, Nigeria’s soaring headline inflation also presents a major challenge to access to adequate housing. Earlier in February, NBS disclosed that inflation rose to 29.9 per cent in January, reaching a record high. The situation has led to a decline in household income, savings, investment, and a worsening cost of living crisis. The current situation is also not helped by the continued depreciation in the value of the naira and the increase in the cost of building materials, such as cement, which have gone up by over 25 per cent.

The Federal Mortgage Bank of Nigeria (FMBN) estimated that N21 trillion would be required to close the housing gap. It is, therefore, noteworthy that the government is already aware of this responsibility. Recently, the federal government launched 3,112 housing units in Renewed Hope City in Karsana, Abuja, which are part of the 20,000 housing units to be delivered in Abuja. The Renewed Hope Cities are also expected to be replicated in two other locations: Kano, with 1,500 housing units, and Lagos, with 2,500 housing units.

While these efforts are commendable, they are not enough. Closing Nigeria’s huge housing deficit requires a bold and ambitious housing plan that will cut across the country. It is, therefore, important for the government to seek to replicate such an initiative on a national scale to provide more affordable and decent houses for all Nigerians, particularly low-income earners. The scale of the challenge also shows that the government cannot do this alone; it must explore necessary private sector collaboration to attract domestic and foreign investment into the sector. In addition to private sector collaboration, the government must also encourage sole private sector intervention by providing the enabling environment for private sector players to invest in the sector to reduce the housing gap.

Another major component is the ability to support citizens’ capacity to afford their homes. The Central Bank of Nigeria (CBN), at its Monetary Policy Committee meeting in July 2023, raised the Monetary Policy Rate (MPR) by 400 basis points to 22.75 per cent; it has been described as the biggest rate hike in a long time. This rate hike implies that the lending rate with the banks would also be disproportionately impacted, and consumers, especially those looking to secure a housing mortgage, could be looking at a rate in the region of 30 per cent.

The reality is not especially helpful when you juxtapose a 2019 CBN report that only 10 per cent of Nigerians who desire to own a home could afford it. There is, therefore, a need for the government to implement mortgage and credit reforms to support Nigerians who are willing to buy a house to access mortgages at a marginal interest rate. This will go a long way toward closing the housing gap.

Providing access to decent housing remains a critical priority for the government and all stakeholders. There is a need for the government to collaborate with private sector players to improve the number of housing units that are delivered annually. The interventions would range from enabling business reforms to key policy instruments.

We must restore the right of every Nigerian to decent housing; there should be no Nigerian living in a slum. That is the only way we can build an inclusive economic future that leaves no one behind.
Lawal is the co-founder of Dukiya Investments.