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“Local funds inadequate for housing development”

The bid to bridge the huge housing deficit in Nigeria will require sourcing foreign funds as locally available funds are grossly inadequate to fill the shortage running into an estimated 16 million units.

Managing Director/CEO, Aso Savings & Loans Plc, Mr. Hassan T. Musa Usman, made this declaration recently, at a real estate conference in Lagos, in a paper presented on “Development and Sustaining Foreign Investor Confidence for Nigerian Mortgage-Building the Secondary Market Platform on a Solid Foundation”.

Usman who noted that the Nigerian mortgage industry is in its nascent stages but has tremendous potential for expansion, stated that the housing deficit is unlikely to be bridged within the next 10 years, even if we embarked on a major housing investment programme to develop a million units per annum in line with Vision 2020 target due to insufficient funding.

“Assuming a conservative average cost of N3.5 million per unit, N3.5 trillion (approximately $22 billion) will be required annually to develop 1 million new homes; If we assume 500,000 units per annum, we will need N1.75 trillion (about $11 billion).

“Once developed, at least 90 percent of buyers of such units will require mortgage loans. It is highly unlikely that in the medium term such an amount can be raised locally – the entire Nigerian pensions industry is today barely over N1 trillion. Recourse will therefore have to be made to foreign funding sources to complement the funding locally available – foreign funding will come into a market that is structured, transparent and stable.

“Without an effective mortgage market there will not be an appreciable increase in the number of housing units to be developed – ultimately, developers will only build if they are confident there will be buyers. An effective mortgage market will evolve only if the industry adopts best practices sufficient to attract both local and foreign funding sources,” he said.

According to Usman, the Nigerian mortgage industry, as presently strucured, cannot support Nigeria’s housing needs, primarily because it cannot attract the funding required to finance new housing developments and back end, create the mortgages required by home buyers.

“For the market to effectively support our developmental aspirations, it requires major changes both at the macro level (via the legal and regulatory framework including changes in the Land Use Act, macro economic stability) as well as at the micro level especially changes in the methods, processes and procedures in the Nigerian mortgage industry.

“There is a need for: financial institutions to implement standardized loan documentation – the Central Bank and to a certain extent, the Federal Mortgage Bank (FMBN) can take a lead in this regard by imposing the standards on the industry; development of credit bureau/introduction of credit scoring  and subscription by the operators to a minimum of two credit bureau as stipulated by Central Bank of Nigeria; embracing best practices in mortgage


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