Housing Finance in Niger

Introduction

The Niger Republic is a landlocked country in the north-western part of Africa, covering 1 267 000km² with two-thirds of its land mass desert. The population is concentrated in the narrow strip to the south where the main economic activities are farming and herding.  Only 12% of Niger is arable land, where the main cash crops are onion, peanuts, sesame and black-eyed peas.  The country is rich in natural resources such as uranium, petroleum, coal, gold, molybdenum, tin, phosphates, iron ore, gypsum and salt.  Among the natural resources, uranium, gold and petroleum are currently exploited and Niger is one of the largest producers of uranium in the world. In spite of its resources, Niger remains one of the least developed countries in the world, ranking second lowest (187 out of 188) on the 2015 human development index. The country enjoys a relative political stability with peaceful presidential and parliamentarian elections in early 2016, but continues to suffer from external threats along its borders, including conflicts in Mali and Libya, and religious conflicts such as “Boko Haram” in Nigeria.

Niger Republic has a young and growing population, 20.7 million inhabitants in 2017 with 18% living in towns and cities, making the country lightly urbanised compared to other countries in the region.  With a fertility rate of 7.5 children born per woman, one of the highest in the world, the urban population is estimated to double in 12 years and the demand for housing and other urban infrastructures to remain very high.

According to African Development Bank, economic growth accelerated to 5.2 percent in 2016 due to a good winter harvest and increased oil production, and is expected to continue in 2017 and 2018. Niger’s economic recovery could have been greater had neighbouring Nigeria’s economy not fallen into recession. The economic outlook is good and growth is estimated at 5.6 percent in 2017 and 6.7 percent in 2018, due in part to ongoing road constructions, the expected launch of Immouraren, the uranium project, and the construction of oil pipelines increasing oils exports.  However, the outlook is subject to risks related to oil price shocks, climatic shocks, and conflicts in the neighbouring countries.  The insecurity in the Diffa region due to Boko Haram remains a major economic, social, security and budgetary challenge.

Access to Finance

Penetration of formal financial services remains very low in Niger in 2017, with 6.5% of adults 15 and above have bank accounts compared to the average of 34.2% in sub-Sahara Africa.  There is one central bank and 12 commercial banks, with branches mostly concentrated in Niamey, the capital, and some other big cities. An agriculture bank (Bagri) was established in 2011 with branches added in 2015 in Niamey and two other cities. A mortgage bank (Banque d’Habitat) was created early 2011 (but still not operating in 2017), some insurance companies, two pension institutions and some microfinance institutions. Microfinance is steadily growing, with about 27 active Financial Service Providers (FSP).   These 27 FSPs disbursed a total of US$52 million to 260 000 borrowers in 2016, and  held US$32 million in deposits from 231 000 consumers in the country.  ASUSU SA remains the leader of FSPs in Niger with US$36. 55 million in disbursed loans, 154.780 active borrowers and US$23 million deposits. Prior to 2000, the government of Niger offered housing finance and government subsidised homes to government employees through a public and private owned credit and loan institution known as Crédit du Niger (CDN) and through a government-owned housing development company called Société Nationale d’Urbanisme et de Construction Immobilière (SONUCI). The SONUCI is still operating but CDN has been liquidated, and in 2011 was replaced by Banque d’Habitat which to date is not yet operating.

In 2017 all the commercial banks operating in Niger offer housing loans to employees of formal registered companies and other international governmental and non-governmental organizations. Some of the banks have agreements with the companies and organizations to offer preferential interest rate to employees. The loans are secured by the employer, or are mutual guarantee loans.   The interest rate is between 6.5% and 9%, and in most cases 10 % down payment is required at a maximum term of 20 years.

Mortgage financing is still in an embryonic stage due to the low average income of employees and low employment rate. There is no mortgage bank in Niger, however each commercial bank offers housing loans under certain conditions, including employer-provided collateral, as well as partnerships or other agreements with developers in the housing industry. In most cases, down payment requirements are a minimum of 10%-25% of the loan. The interest rate is between 8% and 10%, at 7 to 20 years.   Apart from banks and other formal enterprises some private but informal housing promoters use their personal funds to build houses for low income and higher income brackets for rentals. Other forms of housing finance include personal savings, remittances and family assistance.

As with most West African Economic and Monetary Union countries, long-term funding remains a major challenge for Niger’s housing market.  Nevertheless, there are opportunities for developing national and regional mortgage banks and credit bureaux.

Housing Affordability

Access to mortgage finance is limited, and when available, interest rates and loan tenure render the cost of borrowing very high.  As such, most Nigerians cannot afford homeownership. The smallest mortgage available as of 2016 is FCFA Francs 7.5 million (about US$12 647, which, at an interest rate of 10.5% and repayable over seven to 15 years, would require a monthly repayment of US$ 70 to US$151).  About 7% of the country’s population earn below US$ 100 a month (or US$3.1 a day), which makes even the smallest mortgage unaffordable.  Only about 22% of salaried workers representing less than 1% of the entire population (in most cases high-level government officials, and to some extent middle management staff in private companies and international organisations), have access to housing finance.

The majority of the population in the urban areas rent their homes, provided primarily by informal housing promoters and SONUCI.  Rents vary according to quality and location and range from the equivalent of US$169 to US$3 000 a month for middle and upper income housing in Niamey, the capital. Other forms of rentals include the popularly known ‘rooms’ or ‘room and parlour’ arrangements found all over Niger, especially in the popular streets of the capital, ranging from US$25 to US$100 a month.  At present no company or institution currently provides rentals on a larger scale (including SONUCI which used to do so in the past). Additionally, less than 1% of the population has access to government subsidies for housing due to the fact that only salaried workers (and particularly government employees) qualify for subsidised houses.

Housing Supply

According to Sahel Dimanche, the public national newspaper, the rate of housing supply is insufficient to meet the demand, as illustrated by different national surveys.  Demand is estimated to be 50 000 units per annum, for the whole nation and 6 000 for Niamey. The economic growth and rapid urbanisation has escalated rents and demand for houses, while the absence of mortgage banks in the provision of end-user finance is a major challenge to the development of housing.

There are no recent statistics about the number of registered companies in the construction industry but most development companies function in the roads and urban infrastructure sector, with very few in the real estate sector.  Those in the real estate sector focus on land acquisition from traditional proprietors and servicing the land into plots. The serviced plots are sold to potential homeowners who build their homes incrementally. The majority of potential homeowners finance these purchases with savings and loans. Among MFIs, the most popular scheme consists of initial savings over three to five years for land acquisition, after which a loan is granted according to the client’s income and the land title. The loans in most cases are insufficient for building a home, therefore, most homeowners must build their homes over time.

Housing stock found all over Niger can be classified into three categories based on the material used for construction:  construction with mud and straw, and ceilings of wood (maison en terrecuite /banco); construction with mud and plaster with cement, and corrugated iron sheet for the ceiling (maison en semi dur); and construction with cement, concrete and stone, and corrugated iron for the ceiling (maison en dur) modern homes. The average cost of construction of the different categories depends on the geographical location, the size of the land, the plan and the quality of the material used.  In the capital, housing stock is predominantly constructed with durable materials, cement and concrete.

In the 40 years between 1960 and 2000, the government of Niger financed only 1 236 houses.   Prior to 2000, the government of Niger offered government subsidised homes to government employees only and middle to senior civil servants.  More recently, the government has introduced policies that are intended to induce the private sector, including public private partnerships and facilitating land access for developers. The Sary- Koubou project in Niamey, financed by government is a good example of recent progress, providing 174 one- to four-bedrooms houses. Each home is constructed on 200m²-400m² of land, and were all delivered as of 2016. Other projects include 100 homes in Dosso by SONUCI (Dosso Sogha) delivered in August 2015, 100 houses “Cite de renaissance” in Niamey, 198 houses by Society Federal Niger development in Niamey, 50 houses by SATU SA in Dosso, 76 houses in Maradi by DB IMMO, 248 houses for the military in Niamey.  The government acquired 88 hectares of land and 1 000 plots of land.

According to the housing ministry, the rate of housing supply is insufficient to meet the demand, despite incentive policies to encourage the private sector to invest in mass construction of economic and affordable houses. Demand remains high and housing is one of the priorities of the current presidential programme of Renaissance 2. To date the programme is yet to be implemented. Affordable housing is among the presidential campaign promises and housing remains one of the priorities of the government, as illustrated by the ambitious housing goals of 25 000 houses to be built from now through 2021, or about 6 250 per year. In 2016, the administration initiated a programme to work with the Chamber of Commerce to encourage local entrepreneurs to take advantage of the incentive policies to boost supply and satisfy the national need for affordable housing.

Property Markets

Property prices have risen steadily over the past decade given an increase in demand for houses (and insufficient supply) due to economic growth, the influx of non-governmental organizations, a nascent petroleum industry, and the increase in urbanisation. Affluent Nigeriens, neighbouring Africans, and the Diaspora are buying properties and investing heavily in modernising the stock of residential and commercial properties in the capital and other cities.  The growth in the market is expected to continue due to the growing demand for houses and commercial outlets, coupled with the president’s ambitious programme, known as ‘Niamey Nyala’ or ‘Niamey the cute’, a programme to metamorphose Niger’s capital into a modern, attractive city.

According to the World Bank’s 2017 Doing Business Report, Niger ranks 150 out of 190 economies in terms of ease of doing business, 179 in dealing with construction and 125 in terms of registering property. Four procedures are required to register property (less than the six procedures required, on average, across Sub-Saharan Africa), and the process takes 35 days (almost half the Sub-Saharan African average). Niger has maintained property value, 9% for the past four years compared to 11% of 2013, but the cost of registration is still relatively high.

Housing Policy and Regulations

Since the late 1990s, there has been a significant evolution in urban planning and urban management.  The Niger Republic’s National Policy and Regulation on Land (Politique Nationale en Matière d’Habitat) was adopted on 29 December 1998.  The law defines the procedures for housing finance and the approach to promoting housing development. These include creating a national housing fund scheme, creating a national research centre to promote construction materials and technology, and transforming CDN into a housing finance bank.  The National Policy on Habitat advocates for housing loans by commercial banks, and encourages private investments and savings. However, to date the National Housing Fund Scheme and the National Research Centre have not been created.

In 2012, the Public Private Partnership Act was adopted regarding development of urban infrastructure, especially housing, where long-term financing is crucial. The goal of the Act is to promote private interest in the development of housing and other urban infrastructure.

In terms of urban planning and land administration, the Land Administration Law (la Loi d’Orientation sur l’Urbanisme et l’Aménagement Foncier, or LOUAF) was adopted in March 2008.  LOUAF deals with customary property rights and decentralisation. The adoption of LOAUF has contributed to the clarification of responsibilities between the central authority and communal authorities which has facilitated the registration of properties in rural areas. Prior to implementation, it was impossible to register rural land or properties. There are no recent statistics on the number of registered properties. Research is needed to measure implementation and evaluate the impact on the decentralised communities and on the development of housing and housing finance in Niger and other UEMOA countries.

There are different land ownership rights (for example, full and temporary rights, as well as customary rights), and some reform in land administration and the registration of properties to obtain full ownership rights. As a result, the process has improved, although some difficulties persist. There is no official data for the number of full ownership rights of land and property titles, or Titre Foncier issued since Sheida, the reform system adopted by the UEMOA countries in 2006 to simplify the process of obtaining full ownership title.  The reform has also reduced the cost of registration, and has eliminated unnecessary bureaucratic authorisations.

Sheida, LOUAF and the new investment code will hopefully contribute to accelerating the development of housing and housing finance in Niger.

Niger adopted a law in June 2013 providing for urban planning and urban management, which was signed in 2014 as a major reform in urban regulation. It is expected that the decree will facilitate the implementation of projects of upgrading slums and contribute to making urbanisation a tool for economic and social development.

Housing Sector Opportunities

Niger offers potential opportunities for housing and mortgage products due  to shortages in affordable and adequate houses, its high rate of urbanisation,  exploitation of mineral resources, the exploitation of petroleum in spite of a recent drop in global demand, and construction of a second cement factory by Dangote; the ambitious government priorities of the current (and recently re-elected) president, and a significant increase in middle class Nigeriens.  Niger is very rich in mineral resources especially resources such as limestone and gypsum used in making cement.

Because Niger is landlocked, it pays relatively high logistics costs.  Low energy production constrained growth of the cement industry, but the rate of urbanisation, the government program for housing and the development of energy and infrastructure favours the development of cement industry. The growth of cement industries will not only increase production and reduce costs, but will generate employment, revenues for the government, and accelerate the development of urban infrastructures and housing.

The Niger market also offers potential for other urban infrastructure investment. There is a need for long-term financing to develop affordable houses for most Nigeriens, and higher income properties for the minorities and expatriates. The ambitious government programme to transform the capital city of Niamey into a modern city also bodes well for increased investment. The reform in land management, registration of properties and fiscal advantages offered by the government of Niger Republic to formal private enterprises are incentives for promoting dynamic housing development and housing finance sectors.