Property developers in Nigeria are encouraged to cater for more than just the high-end of the market. Photography: Tim Graham / Alamy/ Alamy
Improving access to mortgages will not only make more houses available but will also create hundreds of thousands of new jobs
Nigeria’s housing market is failing its people. Supply is far behind demand, with only 100,000 new houses being built annually compared with a need for over 700,000 and an accumulated deficit of some 17 million units. This is a worsening problem given Nigeria’s fast expanding and rapidly urbanising population.
Getting the housing market moving is an important priority for DfID’s GEMS3 programme, implemented by Adam Smith International, more so because as Nigerian president Goodluck Jonathan himself has said, the housing sector is acknowledged globally as a major avenue for job creation and economic stability. However, in common with other Nigerian markets, the housing market is severely over-regulated, and the land titling system is particularly dysfunctional. As a result it is estimated to cost approximately US$50,000 to build a three-bedroom house in Nigeria, compared to US$36,000 in South Africa and just US$26,000 in India. Up to 20% of this goes on regulatory costs. This prices out many poorer Nigerians from owning their own homes.
On 16th January 2014, president Jonathan launched his government’s solution to this growing crisis: the Nigerian Mortgage Refinancing Company. The NMRC, which Adam Smith International helped the ministry of fnance design and make operational, is based on the belief that improved access to mortgages gives people who would not otherwise be able to afford it the chance to buy their own property. The NMRC will provide liquidity, initially funded through the sale of bonds, to mortgage lenders, allowing them to refinance their mortgage portfolio. The project is supported by a $300m World Bank soft loan and comes hand in hand with a micro-finance housing scheme, intended to open up the housing market to a wider range of the Nigerian population, and with efforts to stimulate the construction sector itself, which suffers from a lack of skilled labour and exorbitantly high costs of materials.
Adam Smith International also helped develop the NMRC’s financing model, business plan, and corporate governance structures, and sourced its senior staff. The NMRC is intended to be an independent, sustainable institution that is privately run, with high standards of governance.
While the NMRC project will of course directly improve the quality of living of those Nigerians who it will enable to become homeowners, it will also have a number of important wider benefits. Not least, property developers will be encouraged to cater for more than just the high-end of the market, expanding their businesses and generating employment and skills for many people. Indeed, the ministry of finance has stated that based on World Bank estimates “the successful implementation of this programme will, conservatively estimated, set a growth process in motion that will deliver 75,000 homes per annum, and generate and sustain at least 300,000 direct and 488,000 indirect jobs after the initial project period.” This will make a huge difference to thousands of people, helping to bring them and their dependents out of poverty.
Moreover, a long term financing mechanism is a necessary and positive step for any economy as it moves towards a more sustainable economy. Equally, increasing demand for housing and the creation of clear land titles will help put political pressure on the Nigerian authorities to develop effective land registration systems, which in turn will fuel further economic growth.
A programme like this has an extremely wide reach, and has the potential to enable dramatic improvements in Nigeria’s economic growth. It provides further evidence of the high impact that can be achieved through effective technical assistance.
This content is produced and controlled by Adam Smith International
Source: http://www.theguardian.com/global-development-professionals-network/adam-smith-international-partner-zone/nigeria-mortgages-housing-market
