Shelter or Housing is one of the very important, basic needs of mankind. Unfortunately, the acquisition of Land and Houses continue to be a herculean task; principally due to an ineffective Land Tenure System, with a double-digit interest rate financial environment.
The now-repealed National Housing Fund Act Cap. N45, which created the National Housing Fund to assist with the pooling of funds from multiple sources, with such pooled funds used to alleviate the excessive housing deficit, has from available data been mostly unsuccessful for some of the reasons stated above, among other reasons.
The National Housing Fund (Establishment) Act 2018 (“the 2018 NHF Act”) has in addition to repealing the former above-mentioned legislation, seeks to among other things provide for additional sources of funding individual home acquisitions and improvements. Transitional provisions are also provided in the 2018 NHF Act to cater for transactions under the old repealed Act which transactions are now migrated and transitioned to the rebranded National Housing Fund (“NHF”).
New NHF Sources of Funding
The avenues from which the NHF can now source for and obtain funding to facilitate an efficient housing development regime is under the 2018 NHF Act expanded to include investments made in the NHF by Pension Fund Administrators (“PFAs”), and a 2.5% Sustainable Development Levy charged and derived from each bag of 50 kilogramme cement, whether locally produced or imported.
Other sources of funding for the objectives of the NHF in the repealed NHF Act are retained in the new NHF Act. And these other sources of funding include, in addition to the two mentioned above, contributions made by individuals in the private and public sectors of the economy, contributions made by the Federal Government for long-term housing loans, and investments in the NHF by Commercial Banks, Merchant Banks, and Insurance Companies.
Mandatory Individual Contributions
Every person, whether employed or self-employed, earning the national minimum wage and above, are now required to contribute 2.5% of their monthly income to the NHF.
A 2% per annum or such other interest rate of return as may be determined by the Federal Mortgage Bank (“FMB”) shall accrue on every NHF contribution.
Contributors who attain the age of 60 years or who have expended 35 years in service and are not indebted to the NHF are eligible to apply for a refund of all their NHF contributions within three (3) months of their submission of such an application. Where the Contributor is deceased, all the contributions and the interest earned are to be paid to the Contributor’s Executors or Personal Legal Representatives.
Contributions and Refunds under the NHF are exempted from any form of taxation.
Institutional NHF Investments
Every Licenced Commerical Bank, Merchant Bank, Insurance Company and Pension Fund Administrator are mandatorily required to invest in the NHF, a minimum of 10% of each institution’s annual Profit Before Tax (“PBT”) at an interest rate of 1% above the interest rate paid on deposits held with the FMB.
Contravention of the above investment requirement in the NHF by any of the licenced Commercial Banks, Merchant Banks, Insurance Companies or Pension Fund Administrator attracts penalties. One of the most punitive of such penalties is the cancellation of the Operating Licence of such defaulting Institution, by its Regulator, for infringing the NHF 10% PBT investment rule.
Sustainable Development Levy
A 2.5% Sustainable Development Levy is now imposed, to be collected and remitted to the NHF, by all importers and manufacturing companies.
Barring repetition, all imported and locally produced cement are also now obligated to bear and remit to the NHF a 2.5% Sustainable Development Levy on each bag of 50KG cement or its equivalent in bulk.
Some of the penalties that any of the above persons may incur for any contravention, on conviction, is a punitive fine or imprisonment to a term of three (3) years or both the fine and the term of imprisonment.
Contributions, Levies, and Investments in the NHF are managed and administered by the FBM. FBM is required to, among other things, utilise these funds in the NHF to finance the housing sector through Wholesale Mortgage Lending to licenced Primary Mortgage Banks (“PMBs”).
A registered PMB is in turn required to utilise the housing loans obtained from the FMB to finance mortgage lending to NHF Contributors wishing to build, purchase or renovate their houses.
Mortgage Loans are required to be secured by Tripartite Legal Mortgage Agreements between the NHF Contributor, the PMB, and FMB.
General Offences and Penalties
Failure to deduct, remit or produce any documents requested for, obstructions, making false statements and misrepresentations are some of the offences itemised in the 2018 NHF Act.
Penalties on conviction for any of the offences under the 2018 NHF Act include punitive monetary fines and terms of imprisonment. The defence of not knowingly committing the offence complained about is one of the defences available to anybody accused under the provisions of the NHF.
Critic of NHF
The success of any National Housing Fund must be premised on a well-founded Land Tenure System. An ineffective Land Tenure system, that is not fit for the purpose of developing the housing industry, will only lead the NHF to continue to suffer from “building collapse due to the use of poor building materials.” A modernised Land Use Act is therefore critical at this time.
Legislation which encourages voluntary contributions and investments premised on a sound financial return from the housing fund and the housing market is a much-preferred pancreas to evolving the NHF into a sound and well-grounded housing development institution.
Mandatorily requiring minimum wage earners to contribute 2.5% of their monthly remuneration to the NHF will only improvise this category of wage earners who do not earn a living wage. This is especially as this contribution criterion imposes a higher contribution burden on the poor. There is also a very slim likelihood of low wage earners been able to afford a Loan from the NHF. A higher remuneration threshold will, therefore, be more viable for the constructive development of the NHF.
Requiring 10% of the PBT of all licenced Banks, Insurance Companies and PFAs to be invested in the NHF may likely further increase the costs of funds as the nominal single-digit interest rate on NHF contributions and Investments are not competitive with the double-digit interest rate obtainable in the open financial markets.
Finally, the Sustainable Development Levy of 2.5% on every 50KG of Cement ex-factory will be transferred to the end-user thereby further increasing the price of cement which is a key building material. Collecting this Levy may also be a challenge as most aspects of the construction industry are still largely informal.