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How to tackle Nigeria’s housing challenge


IkoyiHOUSING plays a special role in the social, political but more importantly economic dialogue in most societies. Housing has been known to be a major component of creating stable and healthy communities and it is often the largest single category of household expense.

For housing to be successful, a country needs to have a stable macroeconomic environment. Moderate to high inflation rate and nominal interest rates as witnessed in Nigeria are typical features of volatile economies.

Nigeria’s housing problem is derived from a historical lack of focus on housing development, says Roland Igbinoba, founder of PISON Housing Company current the Managing Director, FHA Mortgage Bank Limited. He advised that housing should be placed in cadres of Ministry of Finance, Central Bank of Nigeria, where experts in their field run these institutions.

These features have strong effects of reducing the affordability of mortgages. A volatile economy also affects the supply of funds and the types of mortgages offered by lenders. In such an environment, lenders are concerned about liquidity risk and reluctant to offer long-term loans.

The solution to this then becomes government’s strong institutional intervention in terms of favorable policy drafting and implementation. The coming on board of the Nigerian Mortgage Refinance Company (NMRC) is a commendable step towards scratching the surface of this challenge.

In all countries of the world, formal sector financial intermediation can only exists with support of some government intervention. Government may intervene through enhancing a legal system of enforcing private businesses or may even operate or be a significant player in the primary housing finance system.

Today, countries enjoying very high level of housing finance systems are the ones that have created sound enabling environment for the private sector (except Thailand whose Government Housing Bank is a world class model of direct government involvement in lending to the individual through the primary lending model).

What has happened in many emerging economies all over the world is that the government of the day has hired housing experts and policy analysts (strictly on professional basis, devoid of political gimmicks) to devise ways to overcome housing challenges in their countries knowing how significant housing is to a nation’s GDP. Recent examples include India, Mexico, Jamaica, Malaysia, Brazil and Thailand.

These countries have deployed strategies and models ranging from Home Loans Guarantee, Mortgage Insurance, Liquidity Facilities, Pass-Through Mortgage Backed Securities, and tax credit for Low Income Housing, Seed Capital, Hedging of foreign long-term debt for private market operators, etc.

In Nigeria today, what we need in policy making are housing specialist who have the requisite knowledge and competence and not just political figures who do not understand by any means the role of housing in an economy.

With a population of over 170 million people, a good, sound and smart team of policy makers with leadership (not based on geopolitical zones) will boost the housing and housing finance market.

The forward and backward linkages of a viable housing industry are obvious. Let me not even go into that area. But what I must mention is that with such a population, and still growing, Nigeria faces significant challenges in both its present and future housing stock requirements. Frankly speaking, Nigeria’s housing problem is derived from a historical lack of focus on housing development.

Over the years, the country has not been able to develop a viable and sustained housing finance system either because of lack of expertise, up to date and knowledgeable industry leaders especially in the policy making arms, lack of funding for relevant institutional agencies / department, political and selfish gains.

Twice in the housing development history of Nigeria has the Ministry of Housing been created and scrapped. Government has oscillated between direct construction of houses and direct lending to the individuals.

In all the scenarios, what is evident is that we have not hired professional policy makers and implementers who have deep interest in housing and in providing houses to over 14 million households in demand of housing. We have always taken our Housing Ministry as one of the other numerous government functions that should be politicized or zoned or used to satisfy political thirst and loyalty.

Thus what we have always come up with is a situation where the government at the center has not prioritized the housing ministry. Again, the importance of housing to our overall economy cannot be overemphasized.

These events all together have created neglect for the housing needs of the citizenry, which when combined with a series of economic, financial, weak macroeconomic environment and poor title registration system; make it extremely difficult for the housing sector to blossom in the country.

It is very important to mention here that the present administration is doing everything humanly possible to fit square pegs in square holes. In view of this, I will suggest further that housing and housing finance should be made a top national priority with a clear and professional leadership with unified direction of all government agencies related to the provision of housing for Nigerians.

Housing should be treated with a holistic approach that encompasses all elements and processes required in housing production. This will mean that housing should be placed in cadres of Ministry of Finance, Central Bank of Nigeria, and others, where these institutions are run by experts in their field. The Minister of Lands, Housing & Urban Development must be an individual with passion and interest in the housing sector.

He/She must be a professional who is interested in making significant positive strides in the sector. Furthermore he/she must be an individual who has undergone requisite capacity building and acquired relevant knowledge concerning this industry not just locally, but also globally.

That is the kind of person we need in the housing industry, and it should not matter from which geopolitical zones the leadership emanates from. The first criteria should be the deliverables as it concerns the sector.

For specificity, the most qualified housing minister irrespective of which geopolitical zones he/she is from should be a professional from a related discipline with a high ethical personality to (a) pursue the strengthening of institutional framework and effective coordination of the sector (b) vigorously undertake land reforms (with strong will), urban development, property rights and infrastructural investment that affects housing finance (c) should possess requisite knowledge to increase the efficiency and quality of housing subsidy programs that are effectively harmonized with other factors of housing production (d) roll out policies to expand and diversify market-rate housing credit (e) push for adequate laws, titling systems and strong judicial process that allows household to establish ownership of property.

This will enhance enforceability and will make mortgage business attractive to the lender (f) promulgate policies that will make for competitive and efficient primary mortgage markets, backed up with developed risk-sharing mechanisms like mortgage insurance, liquidity facilities, etc.

This will definitely expand the supply of credit to low and moderate income households (g) immediately provide an infrastructure for assessing collateral risk and credit risk.

(h) Focus on the development of mortgage capital markets. Sustained ability to access long term funding through issuance of mortgage securities that enhances supply of funds.

The above is not a job for a professional politician who has no idea in this field or any passion to provide houses to millions of Nigerians who pay over 40 per cent – 50per cent of their earnings for rent (or the lower end Nigerian who do not even have sustainable income), but a job for a professional housing/housing finance expert who has zeal to excel in this uncontestable blue ocean market space that will boost our country’s GDP.

Whether that individual is from the North, South, East or West or from the innermost remote part of Nigeria that is not zoned for any government appointments does not matter. What matters is to have an expert to man the Ministry of Lands, Housing & Urban Development, and the provision of housing to our citizenry.

It is no longer news that access to housing strongly supports economic growth and poverty reduction. This is basically because; amongst other things housing construction constitutes an engine for both employment and industrial growth.

If we limit our focus to deliverables instead of geopolitical zones, I am certain that we will find some revolutionists who can lead the sector in promulgating policies that will bring a turnaround in our housing/housing finance sector. This will ultimately fix our housing problems.

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  • Kevin Fisher

    Although this topic has been studied over the years, and there has been specific programs designed for immediate impact, the need for social housing and affordable quality housing remains unmet. This can be seen throughout the world. It is not to say these efforts have been in vain, but with the things that have worked well in
    the past always seem to fall short on scalability.

    There are probably three themes which have affected the outcomes to date: a lack of leadership and understanding among stakeholders, top-down programs focused on roofs-over-heads, and an inadequate financial infrastructure to fully mobilize capital in the marketplace.

    Housing is about people. It is not about structures/buildings or about financial transactions. It is about addressing
    basic needs of a population so that people can become fully engaged as productive citizens.

    Donors (whether governments or NGOs) have long served as the catalyst for social/affordable housing. However, this donor model is not sustainable and more often than not, face many political risks.

    The social housing and affordable housing industry must move from donor driven funding models to comprehensive social integration models that encompass sustainable financing that addresses the fundamental needs of a
    community. This is not growth for growths sake but growth that generates measurable outcomes and broader participation of all stakeholders including investors. Today, social housing is threatened by social and funding problems.
    Expediency in provisioning, and tactics that push for short-term profitability are crippling countries’ ability to attract enough capital and sustain financing for the long-term.

    There needs to be a model for social housing that articulates a Hierarchy of Collaboration for Efficient and Sustainable Growth™.

    Some of the biggest challenges to market efficiency and sustainable growth facing the social housing industry are the lack of trusted institutions, gaps in technology and capabilities, disconnects with the broader societal issues and inconsistent information flow among all stakeholders.

    With respect to Latin America, there are a number of issues that must be understood; the unique barriers to expansion, practices in collaboration that produces measurable results, the anticipated outcomes of positive changes, and the unintended consequences of half-measures and lack of focus.

    A call for action – for the social housing industry to evolve in emerging economies, there needs to be a new framework to
    develop policy. It should be harmonized within specific global regions. This requires a highly collaborative series of discussion among all stakeholders to promote knowledge and awareness of housing and community development, as well as the barriers to attracting capital.

    Our research over the past ten years has shown that real positive impact from social housing initiatives is only achievable when the emphasis moves from roofs-over-heads to a society-based approach that produces real returns – social and financial – for all stakeholders.

  • Dr. Joseph Aluya

    Interesting, read about my 2008 publication on housing phenomenon in Abuja and 2007 publication on housing in Sub-Saharan here at