Abuja – December 08, 2023 – Viewpoint Housing. Our Stand (97).
Most Nigerians, particularly those with low incomes, are unable to purchase or construct their own homes due to the mortgage sector’s very sluggish development, which has had some negative effects on the housing market.
Moving the sector from point A to point B for growth and development has been attempted in a number of methods and under a variety of conditions.
Part of the government’s endeavors to augment the housing stock and enhance accessibility and affordability include the formation of the Federal Mortgage Bank Nigeria (FMBN), the National Housing Fund (NHF), and the Federal Housing Authority (FHA).
Mortgage is a very important sector of any economy. It is a growth enabler that has a lot to do with housing. Globally, especially in advanced economies, mortgage has chicken and egg relationship with housing Each is as important as the other and it does not matter which of them comes first.
It is the surest and most convenient route to homeownership. But mortgage has not been a success story in Nigeria despite the country’s huge population which should have been a growth catalyst.
Consistent with its mandate to increase liquidity in the mortgage system and lower interest rate, the Nigerian Mortgage Refinance Company (NMRC), which is one of government’s latest effort at growing the mortgage system, has visited the capital market twice to raise funds.
As at December 2018, it has raised N18 billion with which it refinanced loans of some primary mortgage banks (PMBs) and other mortgage-lending institutions.
It was anticipated that the refinancing of an estimated 1,045 loans, which were offered by around 12 beneficiary PMBs, would have a major effect on the housing and mortgage sectors, increasing the amount of loans disbursed to home searchers and elevating the homeownership level.
However, since that has not occurred and is unlikely to, the mortgage system is fundamentally flawed. The negative aspects of the overall mortgage system are easily seen, even as operators lament the challenging business climate and macroeconomic problems that are reflected in high interest rates and exorbitant real estate prices.
Not only is there an inadequate level of transparency, but accessibility and affordability issues are impeding the expansion of Nigeria’s mortgage market. There is no one-size-fits-all method in terms of clarity. It is unknown if the mortgage banks must adhere to any government-mandated mortgage rates or standards, or whether they must follow any particular mortgage procedures.
The basic principles of mortgage is that a loan seeker must have steady income and in gainful employment. He must be able to provide income in multiples for the property that he seeks to buy. But the challenge of job insecurity and low income level remain such that mortgage lenders are hesitant in advancing loans to workers, especially the low income earners who need the loans most.
Thus, sustainable mortgage approaches are essential to closing the nation’s growing housing gap as well as promoting systemic growth. It is a good idea to adopt the Singaporean model, which entails setting up a pool of cash into which each person makes a monthly contribution and from which each person borrows money to purchase a home or flat.
The model, apart from creating jobs and transforming huge swathes of urban sprawls and slums into well-planned cities as it did in Singapore, it also has the potential to grow the economy. Singapore was a poor island in Southeast Asia, but evolved from a third to first world economy between 1965 and 2000 just because of this and similar policies.
In order to put this model into practice in Nigeria, it would only be necessary to redesign or re-engineer the National Housing Fund (NHF), which is currently in place but has many flaws. The NHF offers single-digit interest rates and longer repayment terms of 20 to 30 years, depending on the age of the subscriber.
Another smart strategy to encourage mortgage development in Nigeria is to establish an organisation that provides mortgage subsidies, similar to the building society in England. This provides mortgages on its own or through banks.
By implementing ideas that are successful in other economies, it is conceivable to begin transforming the narrative of the Nigerian mortgage system; however, this would require strong institutions and perseverance. This implies that in order for people to obtain mortgages, mortgage laws must be adjusted, put into effect, and publicized.
