A Bank of Industry report highlighting the country’s severe housing deficit reflects the reality that many citizens are at risk of destitution and homelessness. With an estimated gap of 28 million units, the bank says it would take 21 trillion naira to fill the gap. It is a major challenge for federal and state governments to review existing policies and roll out new, more effective policies to address the problem.
In its report titled “Institutional Turnaround for the Next Level”, the BoI noted that “with a growing urban population, rising construction costs and falling household incomes, access to affordable housing is becoming more difficult for millions of citizens. It’s not surprising; According to World Bank projections, of the country’s 216 million inhabitants, around 95.1 million live below the poverty line. The poor simply cannot afford a house.
Paradoxically, despite recognizing the housing challenge and the huge costs needed to address it, the federal government has budgeted a paltry N470 billion for housing in 2022. Clearly, beyond the rhetoric, governments Central and sub-national governments have not given sufficient attention to this sector.
Although the government’s Vision 20:2020 plan aimed to add 10 million new houses to the national housing stock – 1.0 million units each year with at least 50% in urban centers – there has been no fidelity to the fulfillment of this noble dream. Instead, a report states that only around 100,000 units are added each year and this is mostly due to private efforts.
The dramatic consequences of this failure are visible throughout the country: slums and urban sprawl resulting in poor air and water quality, insufficient water availability, waste disposal problems, density of growing population and demands on urban environments.
Housing, says the World Urban Forum, “is a key element of economic, social and civic development”. He adds, “Investment in housing remains valuable and is a major economic driver in both developed and developing countries.” For this reason, successful economies prioritize housing. To bridge the gap between rich and poor, the Austrian government provides all residents with social housing, and it has reached 60% of its target. He promised to provide government housing for all by 2030.
Investment in housing creates capital, thereby facilitating capital accumulation, according to the Central Bank of Nigeria. Housing contributes 14% to GDP in the United States and drives an additional 6.0% in downstream spending. It contributes 16% in Egypt, but a meager 3.0% in Nigeria.
The UN estimates that by 2050, 75% of Nigeria’s population will live in cities, creating an annual housing need of at least 700,000 units to cope with population growth and urban migration.
Experience shows that an increase in housing production, especially at the lower end of the market, stimulates the creation of jobs, whether skilled or not; and that investment in housing and other infrastructure is closely linked to economic growth. Research in Colombia indicated that five additional jobs are added for every $10,000 (about 4.2 million naira) spent on housing construction. In India, 1.5 direct jobs and 8 indirect jobs are created for each dwelling; and in South Africa, respectively 5.6 and 2.5 direct and indirect jobs are created.
The availability of housing finance is essential, while the production of sustainable and equitable housing depends on access to residential land and basic services. An efficient and transparent land administration; legal protections; and a macroeconomic environment that maintains low inflation and cheap loans are also crucial. Making housing finance work for the poor requires the availability of housing at lower prices and access to long-term, low-interest credit.
To unlock the enormous potential of the Nigerian housing market to generate high economic value, jobs and its immediate benefit to unskilled labor, the enabling environment must be made conducive. An effective building society and mortgage industry is essential. The government and the CBN should work together to facilitate a resilient and vibrant financial sector to provide long-term lending.
Successive federal administrations have had strategic plans, intervention funds, development finance agencies and institutions. The CBN also has intervention programs. However, the implementation of all these, including the national housing policy, has been hampered by the usual constraints of bad administration, nepotism, sectionalism and political somersaults. Corruption has crippled these plans.
The institutional framework is weak; intervention funds provided for single digit loans reach very few people; most are diverted and regulation is ineffective. With interest rate volatility ravaging the economy as a result, lenders are offering between 22% and over 35% interest for the mortgage business. It’s counterproductive. Home ownership is also limited by high fees and transaction costs. State governments should address this issue.
In addition, changes to land and legal frameworks would help the housing and mortgage sectors. These include making greater use of the power of state governors to consent to land transactions, including sales and mortgages; improve administrative procedures by reducing red tape to register property; digitization of land registers; the introduction of electronic payments and the simplification of the overall process so that an individual can register a property without the need for a lawyer.
A housing survey in Nigeria conducted jointly by the World Bank and UK Aid in 2016 noted that home ownership could be extended to over 50% of the population if houses were built for people with an annual income. $2,000 or more. Incremental construction, co-ops and other forms of housing could meet the needs of another 25% of the market.
The construction sector is weak and needs to be strengthened to meet the challenges, while the domestic mortgage market is unable to provide sustainable long-term loans to borrowers due to a lack of access to long-term funds. The CBN and financial institutions have named this as the main impediment to market growth.
Increased partnership with the organized private sector is key to unlocking opportunities in the real estate market, while the use of affordable materials such as plastics, clay and wood can significantly reduce costs. All three levels of government should therefore prioritize housing.