By Aderemi Oludayo Adelekan

Housing is universally recognized and acknowledged as a fundamental human need, as well as a right. The cornerstone of human dignity, peace, security and well-being, a basis of stability for an individual or family, housing plays a critical role in enhancing, and in protecting cultural identities. It guarantees access to essential services, all of which are vital for a healthy and fulfilling life. Above all, stable and affordable housing provides a stable workforce, enables productivity and development, fueling and driving progress and development.

The United Nations Human Settlements Programme (UN-Habitat), the agency mandated to promote adequate shelter for all, socially and environmentally sustainable urbanization, development of inclusive, safe, resilient, and sustainable cities and communities, in a statement urged communities and governments to recognize rights to housing, and take critical steps towards ensuring housing for all, as this would foster a more harmonious and equitable society.

Responding to the call, the European Commission plans to invest 153 billion pounds per year to build more than two million homes each year, in a bold move to meet the demand for affordable, sustainable, and quality housing in Europe. The Commission’s strategic objective is to strengthen the housing construction sector’s competitiveness, productivity and innovation.

Nigeria faces a significant housing deficit estimated at about 14.9 million units in 2025, making it increasingly out of reach for many low- and moderate-income renters, particularly in the nation’s urban centers and their surrounding suburbs, as supply did not keep pace with growth in demand. As a result, vacancy rates decrease, and the average number of people living in a rental unit increases. Of course, rents keep skyrocketing, with growing pressure on government and critical stakeholders in the housing sector to deliver affordable homes. The situation is compounded by population growth, rapid urbanization, rising construction costs, and limited access to affordable housing finance. No matter the scope and size of the project, housing is expensive, due to factors such as inflation, persisting unfavorable policies and a full-blown liquidity crisis, speculative investments and rising cost of building materials.

Despite the nation’s construction and real estate sectors contributing N20 trillion to the Gross Domestic Product (GDP), many Nigerians are unable to own homes and rent property in major cities in the country.

In the developed economies of Europe and the United States of America, mortgage is central to the housing finance market. Mortgage not only acts as a primary avenue for the housing market, but also reflects the impacts of socio-economic shifts. The US is characterized by notable government participation and a developed secondary mortgage market. The UK’s mortgage market is mainly supported by retail deposits, wholesale banking, and inter-bank lending, with limited government involvement. The mortgage market in these countries is structured in such a way that makes it easier and convenient for their citizens to become homeowners. In other words, the housing finance market, particularly the mortgage sector, plays a pivotal role in national financial systems, influencing broader economic stability and development significantly.

Compared to these developed economies, the mortgage system can be said to be at the embryonic stage in Nigeria, with housing finance contributing so insignificantly to overall credit and GDP.

A significant proportion of workers who contribute to the Federal Mortgage Bank of Nigeria (FMBN) and the National Housing Fund (NHF), the primary government-driven mechanisms for delivering affordable housing loans, could not even access loans on time, and when approved, loan amounts often fall short of meeting real market costs. Double digits interest rates offered by private sector mortgage made it a no go area for middle- and low-income earners. Inflation and unstable macroeconomic conditions further worsen affordability, as repayment schedules quickly outpace household incomes.

Established in 2015 to inject liquidity and extend loan tenors, the Nigeria Mortgage Refinance Company (NMRC) has made some progress, but its activities remain limited in scope and impact. It has been grossly ineffective. Land titling, foreclosure processes, and weak judicial enforcement discourage lenders from expanding mortgage products. The informal nature of Nigeria’s workforce also restricts participation, as most potential borrowers cannot meet the rigid documentation and income verification requirements imposed by lenders. Cultural resistance to long-term debt and mistrust of financial institutions further reduce demand.

In other words, mortgage finance, a tool that has transformed housing access in advanced economies has so far failed to take root in Nigeria as a result of challenges of macroeconomic instability, institutional inefficiencies and weak legal enforcement. Despite Nigeria’s massive housing deficit, estimated at over 14.9 million units and a growing urban population that urgently requires affordable housing, the mortgage sector has remained stunted, capturing less than 1% of the country’s GDP. Yet, mortgage finance remains the pivotal option to bridging the housing gap in Nigeria. In essence, the future of Nigeria’s mortgage system depends on harnessing its transformative potential while carefully mitigating its inherent risks. When properly harnessed and approached with less reliance and strong regulation, mortgage would unlock opportunities for millions of Nigerians, drive urban regeneration, and strengthen the economy, otherwise it risks entrenching inequality and exposing the financial system to instability.

Going forward, the government and the private sector should both drive the mortgage system. The role of the government is in two fronts, there is the overall need to maintain the macro economic variables, via disciplined fiscal and monetary policies for stable growth and low inflation to support low interest rates. The direct interventionist role to promote liquidity of the mortgage industry at single digit interest rates via the Nigeria Mortgage Refinance Corporation (NMRC) and Family Home Fund (FHF) should be strengthened. Key is that the private sector via mortgage banks retain the role of underwriting mortgages directly and will boost effective demand for homes, which is about 14.9 million housing shortfall. It is important to stress again that the core focus of the government should be on how to control inflation in the long run to allow for single digit interest rates, rather than just intervention policies. The critical issue is not whether Nigeria should embrace mortgages, but how to design and regulate a system that delivers sustainable, inclusive, and equitable benefits.