Housing at 60: Nigeria remains a large market with few wares

At 60, Nigeria has clearly come a long way. Some people argue that if the country were a civil servant, it would have retired this year, meaning that it has exhausted its useful and productive years. Yet, in most sectors of its “large-size economy, there are more to jeer than cheer.

In the housing sector, it could be said that some level of progress has been made in terms of improved architectural designs that have given rise to iconic structures and well-developed estates. But this progress is grossly diminished by shouting deficits, making the country a big but largely empty market.

With a population estimated at 200 million, Nigeria is a large market that presents lots of possibilities and opportunities that investors, domestic or foreign or both, should see as a compelling destination.

Whether this is happening now at the right and expected level or volume remains, in our view, a matter of conjecture. Despite the federal government’s protestation to the contrary, statistics abound that validate reports that the country’s housing deficit is over 20 million and still counting.

With a growing population of 200 million and high urbanisation growth rate estimated at 4-5 percent per annum, housing stock in Nigeria remains between 12 million and 15 million units while record shows that about 25 million households with six members each don’t have homes of their own.

A report by BusinessDay Research and Intelligence Unit (BRIU) on Nigerian Real Estate says out of 200 million Nigerians, only 8 million people qualify for the luxury property market, adding that while there is more than enough for the latter, hardly any thought is spared for the remaining 192 million citizens.

Sadly, at 60, Nigeria has the lowest home ownership level even among its peers. While the level is 84 percent in Indonesia, 75 percent in Kenya and 56 percent in South Africa, Nigeria, Africa’s most populous nation, and the continent’s largest economy, has only 25 percent.

Taking it further, as against 72 percent home ownership level in the US, 78 percent in the UK, 60 percent in China; 54 percent in South Korea and 92 percent in Singapore, the homeownership level in Nigeria, 60 years after independence, remains at 25 percent.

In Lagos, the country’s sprawling commercial nerve centre with a population estimated at 20 million, report has it that over 60 percent of this population lives in rented accommodation, while about 86 percent of the housing stock in the city is funded from household income.

It is pertinent to note, however, that the country made some giant strides in housing development within the first two decades after independence. For instance, the first National Development Plan of 1962 – 1968 saw “young” Nigeria establishing a state-owned housing corporation which was for the provision of urban infrastructure and industrial estates in three key areas – Lagos in South West, Port-Harcourt in South East and Kaduna in the North.

The second National Development Plan from 1970 to 1974 saw the establishment of National Council on Housing and the creation of Federal Housing Authority (FHA) in charge of housing Nigerians and the establishment of National Housing Programme (NHP) to construct about 59,000 housing projects.

Regrettably, all these efforts petered into almost nothingness for a combination of factors that include policy reversals, lack of a supporting mortgage system and poor infrastructure development.

Till date, 60 years after, mortgage which is a major vehicle for owning homes in other economies remains largely under-developed in Nigeria. The Association of Housing Corporation of Nigeria (AHCN) says the underdevelopment of Nigeria’s mortgage sector in driving homeownership is worrisome as more than 90 percent of new homes utilise funds from personal savings. We can’t agree more.

It is painful to note that mortgage loans in Nigeria account for less than 1 percent of the loan portfolio of commercial banks, and only about 5 percent, or 685,000 of the housing units in the country are mortgage-backed.

When we compare what obtains in Nigeria with those of other African countries like Ghana and South Africa, we feel pained the more that, in South Africa, mortgage contributes about 40 percent of housing finance while in Ghana, our West African neighbour, the contribution is 3 percent.

As for infrastructure which accounts for about 30 percent of housing construction cost, we align with the World Bank in advising that government should stimulate investment in infrastructure by providing funding solution for lenders by linking them with the capital markets

We are of the opinion that Nigeria needs clearly articulated targets, need-based resource allocation, reviewing of existing development guidelines, development of integrated infrastructure and encouragement of PPP as a viable development initiative.

Additionally, President Muhammadu Buhari must prioritise infrastructure development and this must include massive construction of roads network to be followed by a well-articulated transport system to open up the country, especially the hinterlands, for housing development.