August 22, 2011

Nigeria requires holistic reform of housing finance – CBN

By Yinka Kolawole

The Central Bank of Nigeria (CBN) has declared the need to embark on a holistic reform of the nation’s housing sector that would involve restructuring of the housing and mortgage finance system in order to achieve desired economic development.

Deputy Governor, Financial System Stability, CBN, Mr. Kingsley Moghalu, made the assertion during a stakeholders’ roundtable on housing/mortgage finance organised by the apex bank in Abuja. He said that plans have been concluded to set up a robust financing system and measures that would check the high cost of housing in the country, noting that the current state of mortgage finance contributing less than 1 percent of the nation’s GDP is appalling, when compared with situations in some emerging markets. “In Malaysia it accounts for 24.7 percent of GDP; 29 percent in South Africa; and 85 percent in New Zealand,” he noted.

Moghalu lamented that the appalling situation has continued to prevail despite attempts by all tiers of government to facilitate access to housing finance. He said that CBN plans to engage all stakeholders in the sector to drive the needed reforms as well as develop strategies that would expand the availability of affordable housing to the low income group in the country.

Typical mass development of affordable housing

He further stated that the proposed reform agenda for the sector would entail strategic re-positioning and strengthening the primary mortgage banks as a vehicle for housing delivery and home-ownership in Nigeria, as well as promoting a robust housing/mortgage finance system through market support initiatives to unlock home equity in both urban and rural areas to finance micro, small and medium enterprises.

According to him, measures to be put in place include: appropriate legal framework, accelerated development and production of affordable houses, development of an institutional framework, establishment of a mortgage refinance/liquid company and possible introduction of a national housing intervention fund. He added that the major focus of the apex bank would be to ensure adequate financing of the project.

The CBN top official noted that major challenges facing the sector in Nigeria included dearth of long-term funds, absence of mortgage refinance/liquidity, weak capital base and inadequate branch network of primary mortgage institutions (PMIs), poorly designed National Housing Fund (NHF), inadequate capital and weak corporate governance structures, inadequate skilled labour, and high cost of building materials.

“In the face of these challenges and given that housing and mortgage finance is a key component of the financial service industry, it has become imperative for the CBN to champion reform efforts in the sub-sector. The CBN has therefore decided to constructively engage all stakeholders in the sector to drive the needed reforms and develop strategies that will expand the availability of social and affordable houses to eligible Nigerians,” he said.

Also speaking at the event, Minister of Lands, Housing and Urban Development, Ms Ama Pepple, remarked that government would require a minimum of N60 trillion to provide 17 million new housing units to address the current deficit in the sector. She noted that an estimated 80 per cent of Nigerians live in indecent informal housing structures with no basic amenities and in deplorable conditions. The minister said key initiatives such as the reviews of the National Housing Policy, National Building Code as well as the targeting of low income earners in delivery of affordable houses are all aimed at easing the present conditions in the sector.