Contrary to global best practices, the Central Bank of Nigeria has unveiled a N200 billion facility to enable Family Homes Funds Limited implement the Federal Government’s social housing programme as part of the Economic Sustainability Plan 2020. Curiously, the processes leading to the selection of the lone private real estate firm to disburse the funds and undertake the assigned task of ensuring affordable social housing were not made known by the regulator.
It could be tempting to commend the CBN initiative, but it is also easy to see that the paltry amount is definitely inadequate to address the country’s bourgeoning housing deficit, which has been put at between 16 million and 22 million units. Besides, the initiative is a deviation from convention, given that the National Housing Fund (Establishment) Act 2018 allows individuals earning the national minimum wage upwards to contribute 2.5 per cent of their monthly salary to a pool, from which contributors can borrow at affordable rates to build their own homes through primary mortgage institutions.
The Economic Sustainability Committee chaired by Vice-President Yemi Osinbajo had in July, delivered the Nigerian ESP, outlining objectives and key projects for the various sectors, including housing. Incidentally, the target, which the government had set for itself in the Economic Growth and Recovery Plan in 2017 to construct 2,700 housing units in the short-term to create 105,000 direct jobs a year and gradually increase to 10,000 housing units per annum by 2020, was not attained.
The CBN reckons that this latest intervention becomes inevitable given the centrality of mass housing construction to job creation and economic rejuvenation. It explains, “It is in the light of this that the bank introduces this financing initiative to support the Federal Government’s Economic Sustainability Programme to fast-track the deployment of 300,000 homes in the 36 states of the federation and the Federal Capital Territory and to create up to 1.5 million jobs in five years.”
It is projected that the new social housing initiative will “revitalise local manufacture of construction materials, including doors and windows, ironmongery, sanitary fittings, concrete products, tiles, glass, electrical fittings/fixtures and bricks among others,” utilising at “least 90 per cent locally manufactured inputs and as a result conserve foreign exchange.”
No doubt, every plan targeted at addressing the country’s housing deficit should be encouraged, but this goes beyond the government, through the CBN, simply throwing money at the problem. Public private partnership remains the most sustainable option for solving the deficit. On its part, the government has a duty to crash the debilitating high interest rate in the mortgage sector in Nigeria to a single digit as is prevailing in other countries to encourage the participation of the private sector and individuals in housing provision. Until 2011, when public housing — provided by local councils — provided the bulk of rented accommodation in the United Kingdom, a mix of PPP, private investment, state-supported mortgage financing and housing associations has changed the narrative. Thirty per cent of the UK homes are owned by occupants, 40 per cent are owner-occupied on a mortgage, and 12 per cent are rented privately, while just 18 per cent are social housing.
A 2018 World Bank report estimates that Nigeria’s urban population is growing annually at 4.23 per cent, while its urban population accounts for 50 per cent of its total. This surging urbanising rate, largely caused by migration, the report claims, has increased the demand for housing, and the inadequate supply of affordable accommodation explains the housing deficit. This is more pronounced, understandably, in the urban centres, accentuated by growing levels of industrial and commercial activities.
Nigeria’s construction sector contributes about four per cent to the country’s GDP and is a key employer of unskilled and semi-skilled labour. For every job created directly in construction, it is believed another job is most likely being generated due to its strong linkages with other sectors such as manufacturing, transport, and banking. In the first quarter of 2020, the construction sector grew by 1.69 per cent and has the potential to spur economic growth if the government can properly harmonise its policies and galvanise available resources for economic development.
Housing is vital for poverty eradication, helps in wealth creation and provision of decent living, but it should not be the sole preserve of the Federal Government. State and local governments should shoulder a similar desire. The amount involved in this latest initiative will still amount to a drop of water in an ocean if the government fails to fix the high inflation rate at 13.22 per cent. This has hobbled the construction sector and truncated the aspirations of many Nigerians to own a home.
But by far the most critical task of government should be the provision of basic infrastructure like roads, electricity and security for private investors in the construction sector to take advantage of. Currently, real estate investors in new areas have to underwrite the additional cost of providing these facilities by themselves, alongside bearing the huge construction costs. This is discouraging and contributes to the high cost of housing in the country. High prices explain why there are so many unoccupied estates belonging to private developers all over the country at a time there is a huge deficit. The government should aim at affordable housing for the citizens to shield them from the harsh realities of the elements.
CSL Stockbrokers, a member of the Nigerian Stock Exchange, identifies the challenges inhibiting the development of the country’s housing sector. These include “low access to mortgage financing amid high cost of finance (22 per cent to 25 per cent), rising cost of constructing houses attributable not only to the cost of factors of production but also regulatory costs of building or owning houses (surveying fees, certificate of occupancy, land settlement costs), and shrinking disposable income particularly among the middle income earners.”
There is a need to design a workable framework that can address these issues for the benefit of the sector.
