In the face of a housing deficit that numbers millions of units, Nigeria is working to increase home ownership by improving access to credit and reducing development costs for low-income housing.
To address this problem, the FMBN signed a memorandum of understanding (MoU) in January with the Real Estate Developers Association of Nigeria (REDAN) and pan-African finance institution, Shelter Afrique, to establish a $2 billion affordable housing fund.
The money will help to finance the construction of a targeted 10,000 homes annually over the next decade by distributing $200 million per year to developers. In addition, the signatories of the MoU expect the construction work generated by the funding to create more than 150,000 jobs.
“We agreed that we needed to bring in Shelter Afrique to work in partnership with REDAN to make available some funds over the next 10 years by providing REDAN members with the necessary construction finance that is required to drive the national housing model,” Richard Esri, acting managing director of FMBN, told media during the signing ceremony.
In March, the Federal Government announced it would waive an initial 10 per cent payment on mortgages below N5 million ($15,700) administered by the state-owned Federal Mortgage Bank of Nigeria (FMBN), targeting future homeowners taking out mortgages in the low-to-mid price range. The average cost of a mortgage is $18,000, with interest rates at around 19 per cent as of September, according to the Centre for Affordable Housing in Africa.
The move comes on the back of the creation in September of the government’s Family Homes Fund. The mandate of the N500 billion ($1.57 billion) fund is to keep mortgage rates for affordable housing at well under the average 23 per cent, targeting 9.99 per cent payable over 20 years.
With prospective buyers required to put down an initial deposit of 10 per cent to qualify for these home loans, 70 per cent of the mortgages are expected to go to houses priced between N2.5 million ($7900) and N4.5 million ($20,000).
Financed by the Sovereign Wealth Fund, federal government bonds and Bank of New York, the scheme will work as a public-private partnership. It is also expected to promote the development of primary mortgage institutions, which tend to have a narrow banking licence and are generally reliant on wholesale funding, making them more vulnerable in times of financial or economic crisis.
These changes will come as welcome news to many Nigerians, with half of the population living on less than $1 a day.
Furthermore, the minimum wage is currently around $60 per month, meaning home ownership is often out of reach for those in the low- to middle-income wage bracket.