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solutions to Nigeria’s housing challenge

stakeholders seek solutions to Nigeria’s housing challenge

“For three days, Nigeria’s housing sector stakeholders including developers, bankers, manufacturers of building materials, government officials, built environment professionals, etc gathered in Abuja for the annual Abuja Housing Show discussing and searching for solutions to Nigeria’s housing challenge.”- Business Day

A country of over 180 million people with rapid urbanization, Nigeria in spite of its abundant natural and human resources endowment, is struggling to provide adequate shelter for its citizens which, according to the stakeholders, is as a result of a combination of factors most prominent among which are finance and infrastructure.

In Nigeria, finance for housing is too costly to encourage private sector investment in that sector.  At between 20 and 25 percent interest rate on housing loan, it is not only that return on investment is eroded significantly, but also houses have become too expensive for those who need them.

Hinged on the theme of the conference which was ‘Solving Nigeria’s Housing Challenge Through Innovative Finance and Infrastructure Solutions’, the need for innovation in dealing with the impediments to affordable housing solutions was also at the front burner of discussions.

Both finance and infrastructure are at the core of affordability factor in the Nigerian housing market. While cost of funds is extremely high, infrastructure is virtually non-existent in sub-urban areas and grossly inadequate in the urban areas where a greater percentage of the population lives.

The United Nations estimates that 65 percent of Nigerians will be living in the cities by 2050 and that is when the country’s population is projected to hit 400 million. At the moment, over 40 percent of the population lives in urban centres, mounting serious pressure on infrastructure.

“Although, rapid urbanization is putting much pressure on urban environment, innovative ideas and activities can help ameliorate present and future challenges. Government alone cannot solve the problem of housing, we need both public and private efforts”, appealed the stakeholders in the communiqué issued at the end of the housing conference.

According to them, there is urgent need to build for the poor through a social housing programme which needs, at least, N1 trillion that should come from private and mainly public sector sources and, by so doing, stimulate economic growth for the entire country. “Federal government should contribute N100 billion and mobilize businesses and private sector operators to also partake in the programme. The Federal Mortgage Bank of Nigeria (FMBN) needs to be recapitalized to provide decent houses for people in line with the provisions of the programme”, the communiqué said.

Affordability factor is reason for Nigeria’s staggering housing deficit. But Kecia Rust of the Centre for Affordable Housing Finance, South Africa, says there two simple ways through which this can be tackled. “Real estate investment trusts (REITs) and workers cooperative societies can be explored in delivering affordable housing”, said Rust who spoke on ‘Aggregating Opportunities in Affordable Housing Delivery’ at the housing conference.

She considered REITs a good opportunity for financial intermediation in the housing sector while  cooperatives have the capacity to amass and coordinate household savings towards homeownership. “Investors need access to finance while household affordability needs to be broken down, hence the need for REITs and cooperatives”, she explained.

Simon Walley, a Senior Housing Finance Specialist at the World Bank said at the conference that bridging Nigeria’s housing deficit, estimated at 17 million units, is achievable, but the state governments have to be fully involved to make property registration, building approvals etc easier for developers.

“Increasing housing affordability in Nigeria will make the 2030 target of affordable housing a reality”, he said in the paper he presented at the housing event.

But in this country, mortgage financing of homeownership is as tedious as it is costly and the way forward, according to Adeniyi Akinlusi, MD/CEO, Trustbond Mortgage Bank, is to de-risk the sector in order to attract private capital.

Mortgage operators see payment default, high level poverty, job insecurity, unemployment, the mismatch between short term deposits and long term lending are huge risks for the sector. Akinlusi canvassed uniform under-writing standard to enable investors know the level of risk they are taking.

“As we speak, there is no underwriting standard for the informal sector and the self-employed which is not supposed to be so because these people constitute about 50 percent of the population”, he said.

Source: Business Day

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