Housing Finance in Nigeria
Overview
This profile is also available in French here.
To download a pdf version of the full 2022 Nigeria country profile, click here.
Nigeria is anticipated to be the world’s third-most populated country by 2050, with over 300 million people, due to its rapidly rising population. Urban regions are home to more than half (53%) of Nigeria’s estimated population of 216 883 577 people.The majority of the urban population lives in slums, with 33% of the overall population jobless and a housing shortage of 28 million units. Urbanization, population expansion, poverty, and high unemployment have all put pressure on the country’s real estate sector and its capacity to provide enough housing.
Nigeria’s economy is on the verge of collapsing as a result of spiralling inflation and a decline in revenue and foreign exchange earnings following COVID-19. Inflation is at its highest level in more than five years, owing to rising food prices, high diesel prices, and naira depreciation. In the first quarter of 2022, real GDP grew by 14.66%, indicating a slowing of economic activity.
Approximately 45% of adult Nigerians borrow from the formal sector. However, 98% of Nigerian women were left out of the formal credit market, unable to secure loans from formal financial institutions like banks. This lack of borrowing power among women was largely attributed to low education and limited decision-making power.
In 2021, the number of outstanding mortgages in Nigeria was 32,608. The Federal Mortgage Bank of Nigeria (FMBN) offers mortgage interest rates ranging from 6% to 28.3%. Mortgage loan loan-to-value ratios range between 70% and 90%. Between 2005 and October 2021, an estimated 1 trillion dollars (US$2.4 billion) was disbursed to consumers by approximately 887 licenced microfinance banks.
From a housing supply perspective, Nigeria’s high dependency on imported building materials allows the construction sector to pass through the effects of exchange rate depreciations. In 2021, Nigeria spent over 386.3 billion (US$930.2 million) on importing iron and steel. To reduce building construction costs, the federal government partners with major cement producers to sell cement at a discount.
A newly constructed cheap one-bedroom expandable flat of 42 m2 costs 3.9 million naira (US$9,319 per month) and is rented for 15 000 naira per month.However, because of high unemployment and poverty, most of Nigeria’s urban population lives in slums. The strategy calls for yearly NHF contributions to rise from US$118 million in 2018 to US$686 million by 2024.
In terms of opportunities, there are some real estate investment platforms like Keble and Propcrowdy that offer investors the opportunity for fractional ownership of rental income-generating properties.
Find out more information on the housing finance sector of Nigeria, including key stakeholders, important policies and housing affordability:
- Overview
- Access to Finance
- Affordability
- Housing Supply
- Property Markets
- Policy and Legislation
- Opportunities
- Green Applications for Affordable Housing
- Availability of Data on Housing Finance
- Websites
Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2022 edition, which has up-to-date profiles for 55 African countries.
Download yearbookNigeria
Overview
More than half (53%) of Nigeria’s estimated population of 216 883 577 live in urban areas. With her fast-growing population, Nigeria is expected to be the world’s third-most-populous country by 2050, with over 300 million people. With 33% of the total population unemployed, and a housing deficit currently at 28 million units, most of the urban population live in slums. Urbanisation, population growth, poverty and high levels of unemployment have all put strain on the country’s real estate sector and its ability to provide adequate housing. In a bid to tackle housing issues in the country, in 2016, the federal government inaugurated the National Housing Programme (NHP) for construction of acceptable, accessible, and affordable houses nationwide. To provide over 300 000 homes and create 1.5 million jobs across the country, the Family Homes Fund (FHFL) is implementing the Nigeria government’s National Social Housing Programme (NSHP).
Nigeria’s post COVID-19 economy faces a threat of collapse due to spiralling inflation, and a decline in revenue and foreign exchange earnings largely due to the fall in oil prices and reduced demand. The growth rate in the first quarter of 2022 was 3.11%. However, compared to the last quarter of 2021, real GDP grew at -14.66% in the first quarter of 2022, signalling reduced economic activities. As of June 2022, the country’s annual inflation rate was 18.6%, 0.84 of a percentage point higher than in May 2022 (17.7%). The inflation rate is at its highest level in more than five years, driven by rising food prices, high cost of diesel, and devaluation of the Naira. The Naira/US$ official exchange rate is approximately 419.2/1, while that in the parallel market is approximately 660/1. To curb inflation, the Central Bank of Nigeria (CBN) increased its benchmark interest rate for the second consecutive time in 2022. The CBN raised the rate to 14% from 13%.
Housing and climate issues have become topical in Nigeria with environmental disasters being one of the challenges faced by many cities in Nigeria. In September 2022, the National Emergency Management Agency (NEMA), disclosed that 33 out of 36 states in the country have been ravaged by floods in the last eight months. According to NEMA, over 508 000 people were affected and 37 633 houses were destroyed during this period. Some of the affected states includes Jigawa, Taraba, Kano, Bauchi, Adamawa, Niger, Anambra, and Ebonyi States. To mitigate climate-related disaster in the country, the Federal Government has approved a national flood emergency preparedness and response plan.
Access to Finance
Over the years, the Nigerian government has made conscious efforts to improve accessibility to housing finance. One such effort is the reduction of equity contributed by people seeking mortgage loans through the National Housing Fund (NHF) from 5% to 0% for loans up to ₦5 million (US$12 040), and from 15% to 10% for loans over ₦5 million (US$12 040).[1] The Federal Mortgage Bank of Nigeria (FMBN) through the NHF scheme grants mortgage loans with a minimum interest rate of 4% to accredited Primary Mortgage Banks (PMB). PMBs on-lend at 6% to NHF contributors with a maximum mortgage tenor of 30 years.[2]
Approximately 45% of adult Nigerians borrow from the formal sector.[3] However, 98% of Nigerian women were left out of the formal credit market, unable to secure loans from formal financial institutions like banks.[4] This lack of borrowing power by women was largely attributed to low education and limited decision-making power. However, young women aged between 18 and 25 performed better than their male counterparts on a variety of indicators, including account activity, and borrowing.[5] In 2021, the percentage of Nigerian women with a financial account in any formal institution rose to 35%, the highest in 10 years.[6]
In 2022 FMBN introduced a new non-interest rent-to-own mortgage loan product to boost financial inclusion.[7] The rent-to-own model enables beneficiaries to move into FMBN and non-FMBN funded homes, and pay towards full ownership using monthly, quarterly, or annual rentals.
To deepen the market, the Nigeria Mortgage Refinance Company (NMRC) provides refinancing for mortgage-lenders to offer long-term loans at affordable rates. The NMRC refinanced mortgage loans totalling ₦21.1 billion (US$50.8 million) in 2021 compared to ₦17.4 billion (US$41.9 million) in 2020.[8] So far in 2022, the company has refinanced ₦30 billion (US$72.2 million).[9]
Over 34 primary mortgage banks and 24 commercial banks operating in Nigeria provide residential mortgage loans. The number of outstanding mortgages was 32 260 in 2021.[10] While the 6% interest rate offered by the FMBN is the lowest in the country,[11] rates offered by primary mortgage banks and commercial banks can be as high as 28.3%.[12] In January 2021, for housing development, FMBN approved a cumulative sum of ₦35.78 billion (US$86.1 million) loans out of which ₦10.95 billion (US$26.4 million) was disbursed.[13] As part of a five-year strategic plan on housing development covering the period 2020-2024, the federal government plans to increase mortgage funds to ₦712 billion (US$1.7 billion) by 2024.[14] The loan-to-value ratio on mortgage loans ranges between 70% and 90%.[15]
With over 887 licenced microfinance banks[16] in country, and a total of 8.1 million borrowers, an estimated ₦1 trillion (US$2.4 billion) was disbursed to customers between 2005 and October 2021.[17] An average loan size of ₦250 000 (US$602) is offered by the federal government in collaboration with Bank of Industry Limited (BOI) through a Bottom of Pyramid (BOP) scheme.[18]
[1] Daniel, E. (2021). How Buhari administration performed in housing in six years, by official. 10 May 2021. The Guardian. https://guardian.ng/property/how-buhari-administration-performed-in-housing-in-six-years-by-official/ (Accessed 12 August 2022).
[2] Federal Mortgage Bank of Nigeria. National Housing Fund Mortgage Loan. https://www.fmbn.gov.ng/Products%20&%20Services/products.html (Accessed 22 July 2022).
[3] Olawoyin, O. and Udegbunam, O. (2022). 98% of Nigerian women left out of formal credit markets. 25 May 2022. Premium Times. https://www.premiumtimesng.com/news/headlines/532332-98-of-nigerian-women-left-out-of-formal-credit-markets.html (Accessed 15 September 2022).
[4] Olawoyin, O. and Udegbunam, O. (2022). 98% of Nigerian women left out of formal credit markets. 25 May 2022. Premium Times. https://www.premiumtimesng.com/news/headlines/532332-98-of-nigerian-women-left-out-of-formal-credit-markets.html (Accessed 15 September 2022).
[5] Olawoyin, O. and Udegbunam, O. (2022). 98% of Nigerian women left out of formal credit markets. 25 May 2022. Premium Times. https://www.premiumtimesng.com/news/headlines/532332-98-of-nigerian-women-left-out-of-formal-credit-markets.html (Accessed 15 September 2022).
[6] Daniel, E. (2021). Nigerian women with bank accounts hit highest in 10yrs. 10 May 2021. Business Day. https://businessday.ng/financial-inclusion/article/nigerian-women-with-bank-accounts-hit-highest-in-10yrs/ (Accessed 15 September 2022).
[7] Premium Times. (2022). FMBN to boost financial inclusion with non-interest mortgage product. 7 April 2022. https://www.premiumtimesng.com/news/top-news/522362-fmbn-to-boost-financial-inclusion-with-non-interest-mortgage-product.html (Accessed 12 August 2022).
[8] Olukoya, S. (2022). Forward Steps Required for Affordable Housing – Coronation Merchant Bank. 11 August 2022. Investorsking. https://investorsking.com/2022/08/11/forward-steps-required-for-affordable-housing-coronation-merchant-bank/ (Accessed 14 August 2022).
[9] Folorunso, A. (2022). NMRC Has Disbursed About N30 Billion To Boost Home Ownership So Far. 19 February 2022. Africa Housing News. https://www.africahousingnews.com/nmrc-has-disbursed-about-n30-billion-to-boost-home-ownership-so-far-ogundimu/ (Accessed 30 August 2022).
[10] Statista (2022). Volume of outstanding residential mortgages in Africa in 2021, by country. https://www.statista.com/statistics/1068861/outstanding-mortgages-africa-by-country/ (Accessed 28 July 2022).
[11] Federal Mortgage Bank of Nigeria. National Housing Fund Mortgage Loan. https://www.fmbn.gov.ng/Products%20&%20Services/products.html (Accessed 22 July 2022)
[12] Central Bank of Nigeria. (2022). Money Market Indicators. https://www.cbn.gov.ng/rates/mnymktind.asp (Accessed 22 September 2022).
[13] Daniel, E. (2021). How Buhari administration performed in housing in six years, by official. 10 May 2021. The Guardian. https://guardian.ng/property/how-buhari-administration-performed-in-housing-in-six-years-by-official/ (Accessed 12 August 2022).
[14] Moses, O. (2022). Federal Govt Plans to Increase Mortgage Fund for Housing Units. 1 August 2022. Leadership. https://leadership.ng/federal-govt-plans-to-increase-mortgage-fund-for-housing-units/ (Accessed 14 August 2022).
[15] Federal Mortgage Bank of Nigeria. (2022). Service Charter. https://www.fmbn.gov.ng/documents/FMBN_SERVICOM_CHARTER.pdf (Accessed 24 July 2022). Pg. 14.
[16] Central Bank of Nigeria. List of Financial Institutions (Micro-Finance Banks). https://www.cbn.gov.ng/supervision/inst-mf.asp (Accessed 27 July 2022).
[17] Umar, I. (2021), Microfinance Banks lend ₦1.012trn in 16yrs – Ex-CBN Director. 7 December 2021. Business Day. https://businessday.ng/banking-finance/article/microfinance-banks-lend-n1-012trn-in-16yrs-ex-cbn-director/ (Accessed 27 July 2022).
[18] Bank of Industry. Bottom of Pyramid. https://www.boi.ng/bottom-of-pyramid/ (Accessed 12 August 2022).
Affordability
Post-Covid-19, Nigeria’s poverty rate increased, pushing more than five million people into poverty in 2022.[1] The number of poor people in Nigeria has been forecast by the World Bank to reach 95.1 million by the end of 2022.[2] Population growth is partly responsible for unemployment. NBS reported that the country’s unemployment rate rose from 27.1% in the second quarter of 2020 to 33% in the first quarter of 2021, making Nigeria the second highest on the global list of unemployment.[3]
Because of high unemployment and poverty, most of Nigeria’s urban population live in slums.
A study in 2019 revealed that 26 million households in Nigeria do not own their homes.[4] In Southwest Nigeria, a region with the highest populated urban centres, the home ownership rate is 25.5%.[5]
To improve affordability for low income earners the FMBN approved a five-year development plan covering the period 2020 to 2024. Through the scheme, FMBN plans to increase the annual NHF contributions from ₦49 billion (US$118 million) in 2018 to ₦285 billion (US$686 million), finance a total of 100 000 housing units, grow NHF contributors from 4.8 million in 2018 to 31.6 million and increase mortgages to ₦712 billion (US$1.71 billion) by 2024.[6] FMBN also partners with private real estate developers to deliver affordable houses. One of such developers is the Millard Fuller Foundation (MFF). A newly built affordable one-bedroom expandable unit of 42m2 developed by MFF is sold at ₦3.9 million (US$9 319) [7] and rented at ₦15 000 (US$36.12) per month.[8]
FMBN also introduced a rent-to-own mortgage product with a rental payment period of 30 years and an interest rate of 7% of the property price.[9] The purchase price of the property is limited to ₦15 million (US$36 121) and the monthly or annual payment must not exceed one-third of the applicant’s monthly or annual income.[10] Furthermore, applicants for the rent-to-own scheme must be over 18 years; a contributor to the NHF for at least six months; and must provide evidence of regular flow of income to guarantee loan repayment.[11] Other mortgage products offered by the Federal Mortgage Bank of Nigeria include home renovation loans, construction loans and diaspora mortgage loans.
The Federal government also attempts to bridge the country’s housing gap through the Family Home Funds Limited (FHFL). The FHFL initiative offers various home loan assistance programs targeted at low income and middle income households. One of the programmes is a Help to Own (HTO) fund.[12] This is targeted at first time home buyers who can provide an equity contribution of 10% of the property price. The HTO fund offers a low-cost, deferred equity loan of up to 40% of the home cost, halving the mortgage repayment. The HTO fund scheme is supported by several mortgage and development finance institutions, including the African Development Bank (AfDB). In 2021, the AfDB approved funding up to ₦24.9 billion (US$60 million) for FHFL through its Home Loan Assistance Programme.[13] With support of the AfDB, up to 3 750 new HTO mortgages will be financed. This will directly create approximately 9 375 jobs and assist at least 18 750 beneficiaries.[14]
As of 2021, FHFL completed over 5 408 homes, had 9 148 under construction, and planned to start construction of an additional 13 543 homes.[15]
[1] Olawoyin, O. (2022). Number of poor people in Nigeria to reach 95 million in 2022 – World Bank. 30 March 2022. Premium Times. https://www.premiumtimesng.com/business/business-news/520849-number-of-poor-people-in-nigeria-to-reach-95-million-in-2022-world-bank.html (Accessed 11 August 2022).
[2] Olawoyin, O. (2022). Number of poor people in Nigeria to reach 95 million in 2022 – World Bank. 30 March 2022. Premium Times. https://www.premiumtimesng.com/business/business-news/520849-number-of-poor-people-in-nigeria-to-reach-95-million-in-2022-world-bank.html (Accessed 11 August 2022).
[3] Utomi, J.M. (2022). Unemployment and a nation’s 40 per cent of hopelessness. 24 March 2022. The Guardian. https://guardian.ng/opinion/unemployment-and-a-nations-40-per-cent-of-hopelessness/ (Accessed 14 August 2022).
[4] Uthman, S. (2021). About 26 million Nigerian Households do not own their Homes. https://www.dataphyte.com/latest-reports/economy/about-26-million-nigerian-households-do-not-own-their-homes-report/ (Accessed 14 August 2022).
[5] World Atlas. (2022). Biggest Cities in Nigeria. https://www.worldatlas.com/articles/biggest-cities-in-nigeria.html (Accessed 14 August 2022).
[6] Moses, O. (2022). Federal Govt Plans to Increase Mortgage Fund for Housing Units. 1 August 2022. Leadership. https://leadership.ng/federal-govt-plans-to-increase-mortgage-fund-for-housing-units/ (Accessed 14 August 2022).
[7] Reall. Project Overview. https://reall.net/data-dashboard/nigeria/grand-luvu-3b/ (Accessed 26 July 2022).
[8] Telephonic interview with Mr. John Olugbami, Miller Fuller Foundation, 6 August 2022, Abuja, Nigeria.
[9] Federal Mortgage Bank of Nigeria. (2022). Rent-To-Own Housing Scheme. https://www.fmbn.gov.ng/documents/rent_to_own.pdf (Accessed 14 August 2022). Pg. 1.
[10] Federal Mortgage Bank of Nigeria. (2022). Rent-To-Own Housing Scheme. https://www.fmbn.gov.ng/documents/rent_to_own.pdf (Accessed 14 August 2022). Pg. 1.
[11] Federal Mortgage Bank of Nigeria. (2022). Rent-To-Own Housing Scheme. https://www.fmbn.gov.ng/documents/rent_to_own.pdf (Accessed 14 August 2022). Pg. 1.
[12] Family Homes Funds. Help to Own. https://fhfl.com.ng/help-to-own/ (Accessed 09 October 2022).
[13] FHFL. (2021). AfDB approves US$60m financing for homes loan assistance programme managed by the family homes funds. https://fhfl.com.ng/afdb-approves-us60m-financing-for-homes-loan-assistance-programme-managed-by-the-family-homes-funds/ (Accessed 15 September 2022).
[14] Uwaegbulam, C. (2022). FHF, mortgage banks launch Help to Own’ housing scheme. 31 January 2022.The Guardian. https://guardian.ng/property/fhf-mortgage-banks-launch-help-to-own-housing-scheme/ (Accessed 20 August 2022).
[15] Uwaegbulam, C. (2022). FHF, mortgage banks launch Help to Own’ housing scheme. 31 January 2022.The Guardian. https://guardian.ng/property/fhf-mortgage-banks-launch-help-to-own-housing-scheme/ (Accessed 20 August 2022).
Housing Supply
Despite the real estate sector contributing 5.34% to GDP growth in the first quarter of 2022,[1] housing supply is still inadequate. With ₦470 billion (US$1.13 billion) budgeted for housing in 2022, the federal government stated that ₦21 trillion (US$50.6 billion) would be required to tackle the 28 million housing deficit[2] across the country.[3]
The rising cost of building materials and the high cost of land in urban centres are two of the factors that impede housing supply. The high dependency on imported building materials allows the construction sector to pass through effects of exchange rate depreciations. In 2021, Nigeria spent over ₦386.3 billion (US$930.2 million) on importing iron and steel.[4] Industry sources suggest that 65% of construction materials is imported.[5]
To reduce building construction costs, the federal government partners with major cement producers (such as Dangote, BUA Cement and Lafarge) to sell cement at a 30% discount.[6] A 50kg bag of Dangote cement is typically sold at ₦4 050 (US$9.75),[7] while the land cost in an urban centre in Lagos State ranges between ₦550 000/m2 (US$1 324) and ₦1 million/m2 (US$2 408).[8] The minimum size of a residential plot in urban areas is 463.6m2.[9] Often, this size of land would be half of a plot.
To increase housing supply, the federal government through the National Development Plan intends to deliver 500 000 to 1 million housing units. The public sector will develop 20% of these units.[10] FMBN issued over 4 985 mortgages and disbursed home renovation loans worth ₦49.3 billion (US$120 million) to 60 500 beneficiaries between 2017 and 2022.[11] Across Nigeria, FMBN has also financed the construction of at least 9 500 affordable houses.[12]
Furthermore, the NHP of the Ministry of Works and Housing have completed at least 4 652 housing units across 34 out of Nigeria’s 36 states.[13] On land supply, the Minister of Works and Housing revealed that 5 000 certificates of occupancy (C-of-O) have been issued since 2017 and a total of 2 738 applications for consent to transfer land approved.[14] Public private partnerships have also played a significant role in housing. For instance, FMBN and several private sector players have been responsible for building 8 700 new homes between 2017 and 2020.[15]
To implement the federal government’s social housing programme, all states have been encouraged to contribute land for affordable housing. As a result, over 2 000ha of land with titled documents was donated by 24 states in 2021. The social housing programme is aimed at providing 1.5 million houses for low income earners.
[1] Abiola, O. (2022). Real estate sector’s GDP grows by 10.84% in Q1 2022.
https://nairametrics.com/2022/05/23/real-estate-sectors-gdp-grows-by-10-84-in-q1-2022/ (Accessed 31 August 2022).
[2] Nnodim, O. (2022). N12tn required to bridge 28m housing deficit-FG. 8 August 2022. Punch. https://punchng.com/n21tn-required-to-bridge-28m-housing-deficit-fg/ (Accessed 16 August 2022).
[3] Nnodim, O. (2022). N12tn required to bridge 28m housing deficit-FG. 8 August 2022. Punch. https://punchng.com/n21tn-required-to-bridge-28m-housing-deficit-fg/ (Accessed 16 August 2022).
[4] Trading Economics. (2022). Nigeria Imports of Iron and steel. https://tradingeconomics.com/nigeria/imports/iron-steel#:~:text=Nigeria%20Imports%20of%20Iron%20and%20steel%20was%20US%24930.41%20Million,updated%20on%20August%20of%202022. (Accessed 16 August 2022).
[5] Ugochukwu, S. (2014). An Appraisal of the Sources, Quantities and Prices of Imported Building Materials in Nigeria. https://www.researchgate.net/publication/307607318_An_Appraisal_of_the_Sources_Quantities_and_Prices_of_Imported_Building_Materials_in_Nigeria (Accessed 22 September 2022).
[6] Angbulu, S. (2022). FG has built 19,478 out of 300,000 homes for Nigerians — Osinbajo. 11 February 2022. Punch. https://punchng.com/fg-has-built-19478-out-of-300000-homes-for-nigerians-osinbajo/ (Accessed 16 August 2022).
[7] Nigerian Price (2021). Current price of cement as of today. https://nigerianprice.com/current-price-of-cement-in-nigeria-today/ (Accessed 16 August 2022).
[8] Oladunjoye,O., Elegushi, E., Babade, D. and Agboola, O. (2022). Real estate costs and pricing. 5 May 2022. Chambers and Partners. https://practiceguides.chambers.com/practice-guides/real-estate-2022/nigeria/trends-and-developments (Accessed 26 July 2022).
[9] Real Estate In Lagos. (2021). Land Measurement Units in Nigeria 2022: Everything You Need to Know. Real Estate In Lagos. https://realestateinlagos.com/land-measurement-units-in-nigeria-2021/#:~:text=There%20is%20no%20standard%20definition,square%20feet%20%3D%20900%20square%20meters (Accessed 26 July 2022).
[10] Nnodim, O. (2022). FG plans N712bn mortgage to fund 100,000 houses. 2 August 2022. Punch. https://punchng.com/fg-plans-n712bn-mortgage-to-fund-100000-houses/ (Accessed 15 August 2022).
[11] Olukova, S. (2022). Forward Steps Required for Affordable Housing – Coronation Merchant Bank. https://investorsking.com/2022/08/11/forward-steps-required-for-affordable-housing-coronation-merchant-bank/ (Accessed 15 August 2022).
[12] Olukova, S. (2022). Forward Steps Required for Affordable Housing – Coronation Merchant Bank. https://investorsking.com/2022/08/11/forward-steps-required-for-affordable-housing-coronation-merchant-bank/ (Accessed 15 August 2022).
[13] Daniel, E. (2021). How Buhari administration performed in housing in six years, by official. 10
May 2021. The Guardian. https://guardian.ng/property/how-buhari-administration-performed-in-housing-in-six-years-by-official/ (Accessed 16 August 2022).
[14] Fashola, B. (2022). This is Part of the Change We Promised. 15 August 2022. This Day. https://www.thisdaylive.com/index.php/2022/07/29/this-is-part-of-the-change-we-promised/ (Accessed 16 August 2022).
[15] Vanguard Newspapers. (2022). Federal Mortgage Bank Disburses N265B housing fund.11 November 2020. https://www.vanguardngr.com/2020/11/federal-mortgage-bank-disburses-n265bn-housing-fund/ (Accessed 28 August 2021).
Property Markets
Weak ownership rights under the Land Use Act, lack of secure access to land, limited access to finance and poor macroeconomic performance remain key challenges in Nigeria’s property market. For many Nigerians, obtaining property titles is seen as a daunting task. The cost, duration and process vary across states. For example, obtaining a C-0f-O and registering a property in Lagos state will cost approximately 15% of the transaction value and will take at least six months with seven phases involved in the registration process. In Abuja, the process and time is similar to Lagos, but the cost is approximately 12% of the property value.[1]
Building on last year’s performance, the real estate sector in the first quarter of 2022 grew by 10.8%, a 7.3% percent increase compared to the last quarter of 2021.[2] Between January and March 2022, the housing sector has contributed positively to the country’s GDP.[3] This performance is largely related to increased investments from the diaspora community, as the dollar continues to gain strength locally.
Business Day Newspaper reported a more than 50% increase in monthly rent for houses in major Nigeria cities such as Lagos, Abuja, and Port Harcourt. For example, in the affordable areas of Lagos, a three-bedroom apartment previously renting at ₦400 000 (US$963) rose to ₦600 000 (US$1 445), while a two-bedroom apartment increased from ₦350 000 (US$842) to ₦550 000 (US$1 324).[4] In Ikoyi area of Lagos State, depending on the location, the cost of land ranges between ₦550 000/m2 (US$1 324.4) and ₦1 million/m2 (US$2 408).[5] According to the Roland Igbinoba House Price Index (RI Index), while house prices have continued to maintain the post COVID-19 growth trend, rental yield in the market has remained low at an average of 5%.[6]
As campaign activities gain momentum in this pre-election year, politicians and interested stakeholders will sell their real estate assets for liquidity. This may affect house prices in the short run as there will be an increased supply of resale assets.
[1] Ifeanyi, E.O. (2022). How to Acquire and Register Your Title to Landed Property/Real Estate in Nigeria. 23 June 2022. https://www.tekedia.com/how-to-acquire-and-register-your-title-to-landed-property-real-estate-in-nigeria/ (Accessed 16 August 2022).
[2] Odutola, A. (2022). Real estate sector’s GDP grows by 10.84% in Q1 2022. 23 May 2022. Nairametrics. https://nairametrics.com/2022/05/23/real-estate-sectors-gdp-grows-by-10-84-in-q1-2022/ (Accessed 17 August 2022).
[3] Odutola, A. (2022). Real estate sector’s GDP grows by 10.84% in Q1 2022. 23 May 2022. Nairametrics. https://nairametrics.com/2022/05/23/real-estate-sectors-gdp-grows-by-10-84-in-q1-2022/ (Accessed 17 August 2022).
[4] Naijahouse. (2022). Rising Costs Shifts Investment Interest to Low-Income Housing Market. https://www.naijahouses.com/news-details/rising-costs-shifts-investment-interest-to-low-income-housing-market (Accessed 18 August 2022).
[5] Oladunjoye,O., Elegushi, E., Babade, D. and Agboola, O. (2022). Real estate costs and pricing. 5 May 2022. https://practiceguides.chambers.com/practice-guides/real-estate-2022/nigeria/trends-and-developments ( Accessed 26 July 2022).
[6] Roland Igbinoba Real Foundation for Housing and Urban Development. (2022). Roland Igbinoba House Price Index (RI Index) Q2 2021. Unpublished.
Policy and Legislation
Nigeria has no shortage of policies to tackle the challenges of the housing sector. Affordable housing goals remain unmet partly due to lack of effective implementation and coordination of housing polices, security challenges in select locations, and a difficult macroeconomic environment influencing demand dynamics. Nevertheless, both government and private sector stakeholders continue to find ways to close the affordable housing gap, build industry capabilities and capacities and ensure professional values and ethics are upheld in the industry.
Recently, the national assembly introduced a bill to establish a Chartered Institute of Mortgage Bankers and Brokers of Nigeria (CIMBBN). The objective is to increase opportunities for home ownership by training and building a knowledgeable mortgage industry.
Similarly, FMBN has continued to lobby the national assembly to review both the NHF and FMBN Acts to include an increment in the bank’s share capital. There is also the case to amend the NHF Act to add more contributors to the funds. Currently the NHF Act No. 3 of 1992 requires all Nigerian workers earning ₦3 000 (US$7.2) and above to contribute 2.5% of their basic salary.
Stakeholders and industry practitioners have also continued to demand the implementation of the Model Mortgage and Foreclosure Law (MMFL). NMRC is at the forefront of this. The MMFL will help boost investor confidence in the market as there are now no specific provisions for the foreclosure of mortgages in the Land Use Act.
Opportunities
Investor interest is gradually moving from Nigeria’s high income to low income housing market segment. This shift is in response to increasing building costs, a double-digit inflation rate, local currency depreciation, and high housing demand from low and middle income households, especially in urban centres with a high population. To attract investors, housing experts have engaged the government on the need to strengthen statutory requirements. These requirements include ease of obtaining construction approvals and permits; availability of power and electricity; and better property registration processes. Others are protection of minority investors, ease of accessing credit facilities, friendly tax regimes, enforcement of contractual agreements, and creation of a strong foreclosure law to protect investors and funders.
The Nigerian Exchange Group (NGX) Plc has in the last 10 years raised over ₦72 billion (US$170 million) for real estate companies such as UPDC Real Estate Investment Trust, Abbey Mortgage Bank, and UACN Property Development.[1] The NGX also intends to launch an impact board — a platform for listing, issuing and trading sustainability debt instruments.[2] The “platform would also support the listing of social bonds that would raise capital to meet the needs integral to the housing sector, whilst helping Nigeria meet its sustainable development goal commitments.”[3]
Furthermore, the use of commercial papers (CP) by industry players also presents enormous opportunities. CPs are short-term debts with tenors up to 270 days and are listed on the FMDQ Exchange.[4] The incentive for raising CPs include lower interest rates compared to banks. Lekki Gardens Estates Limited recently signed a ₦25 billion (US$60 million) CP at a discounted rate of 14.5%[5] to be listed on the FMDQ Exchange.
Property technology (proptech) solutions are being developed and deployed by young proptech startups and founders. Some are real estate investment platforms like Keble and Propcrowdy, that offer investors opportunity for fractional ownership of rental income-generating properties. Others include Spleet, Rent Small Small, and Haap Living who have extended the concept of sharing economy to rental living and helped many Nigerians to pay their rents monthly instead of the traditional one to two years upfront payment. Many more, such as Propertypro and Buy Let Live, are in the property listing space. Homerunner, Liveizy and Gatepass are helping to solve problems associated with property management. Venture capital firms had invested over ₦830.4 million (US$2 million)[6] in Nigeria proptech startups as at the end of 2021. The Nigeria Proptech Association reports that there are over 147 proptech startups but approximately 70 of them are active.[7]
[1] Tokede, K. (2022). NGX Unveils Plan to Address Housing Deficit, Raises N72bn in 10 years. 28 July 2022. This Day. https://www.thisdaylive.com/index.php/2022/07/27/ngx-unveils-plan-to-address-housing-deficit-raises-n72bn-in-10-years/ (Accessed 18 August 2022).
[2] NewsDirect. (2022). NGX to launch impact board to address housing deficit. 27 July 2022. News Direct. https://nigeriannewsdirect.com/ngx-to-launch-impact-board-to-address-housing-deficit/ (Accessed 16 September 2022).
[3] NewsDirect. (2022). NGX to launch impact board to address housing deficit. 27 July 2022. News Direct. https://nigeriannewsdirect.com/ngx-to-launch-impact-board-to-address-housing-deficit/ (Accessed 16 September 2022).
[4] FMDQ is “a financial market infrastructure group warehousing, a securities exchange and self- regulatory organisation licenced by the SEC to provide a platform for, inter alia, the listing, quotation, registration, and trading of securities” See Law Insider. FMDQ definition. https://www.lawinsider.com/dictionary/fmdq#:~:text=FMDQ%20means%20a%20financial%20market,Sample%201 (Accessed 25 September 2022).
[5] FMDQ. (2022). Lekki gardens estate limited n25.00bn commercial paper program. https://fmdqgroup.com/exchange/programme/lekki-gardens-estate-limited-n25-00bn-commercial-paper-programme/
[6]Real Estate. (2022). Real Estate 2022 – Nigeria, Trade and Development.5 May 2022. Chambers and Partners. https://practiceguides.chambers.com/practice-guides/real-estate-2022/nigeria/trends-and-developments (Accessed 31 August).
[7] Ikpoto, E. (2022). Proptech industry growth will hit $23bn, says group. 8 August 2022. Punch. https://punchng.com/proptech-industry-growth-will-hit-23bn-says-group/ (Accessed 22 September 2022).
Green Applications for Affordable Housing
Government has engaged in several advocacy programs highlighting that green buildings are 20% more energy efficient than conventional buildings and have a water saving rate of 20%. The government is also seeking ways to encourage private investors to look beyond the initial high of cost of green construction to consider the broader, longer term benefits. Yet over dependency on imported building materials, continuous depreciation of the local currency, and high construction cost have discouraged real estate developers from investing in green buildings.
The Green Building Council of Nigeria (GBCN) is responsible for creating a rating framework for the economic evaluation of buildings. GBCN uses the Green Star SA rating tool (Green Star SA-Nigeria) to certify green buildings. To improve the rating scheme, various policies and controls were put in place including the National Environmental Guidelines and Regulations Enforcement Office (NESREA); National Policy on the Environment (NPE); and Environmental Protection Organization Act 1988. The GBCN is also a member of the World Green Building Councils (WGBCs).
The NMRC has partnered with the IFC to promote green buildings through the EDGE certification programme. Alpha Mead Development Company (AMDC), an EDGE pioneer company, reported an energy-saving of 47%, water savings of 32%, and 50% savings on the embedded energy in materials during construction. AMDC also revealed that its EDGE-certified greenhouse estate delivers an average 32% utility cost saving. Another EGDE pioneer, KARMOD, recently announced an EDGE-Advanced certification for its 90-housing unit estate in Abuja. Over 370 homes have been EDGE certified in the country. The small number of EDGE-certified buildings in the country is partly due to the initial cash outlay for green buildings being significantly higher than that of conventional buildings. The Development Bank of Nigeria, FCSL and the NCIC have signed a memorandum of understanding to fund green projects in Nigeria.
For a country where only 64% of its population have access to basic drinking water, and 160 million (77.6%) of its population lack basic sanitation services, the need for a sustainable design approach that reduces water usage and promotes rainwater harvesting gives green buildings the prospect of occupying a larger share of Nigeria’s real estate market. More importantly, the ability for green buildings to generate their own electrical power would reduce dependence on the country’s power generation source, which is 80% thermal and 20% hydro.
Availability of Data on Housing Finance
The Housing Market Information Portal (HMIP) of the NMRC is the designated data repository for the housing industry. Other data sources for housing development and related information include: the National Bureau of Statistics (NBS) with data on socio-economic activities; Statista, which publish Nigeria market trends and market data; Focus Economics, which publishes data on inflation rates; The International Comparative Legal Guides (ICLG) which publishes information on real estate laws and regulations; and the Nigerian Property Centre (NPC), which publishes data on property listing, housing prices and market trends.
Data quality and integrity have been a major issue. This is largely due to non-uniformity of data, reducing its utility and value. Reluctance in the private sector to share data due to competition concerns also influences data consistency and uniformity.
Websites
National Bureau of Statistics: https://www.nigerianstat.gov.ng/
Central Bank of Nigeria: https://www.cbn.gov.ng/
Real Estate Developers Association of Nigeria: https://www.rirfhud.org/
The Housing Market Information Portal: https://hmip.nmrc.com.ng/nmrc/
Focus Economics: https://www.focus-economics.com/
The Nigerian Property Centre: https://nigeriapropertycentre.com/for-rent/lagos
Green Building Council of Nigeria: https://gbcn.org.ng/
Haggai Mortgage Bank. https://www.haggaibank.com
Nigeria mortgage Refinance Company. https://www.nmrc.com.ng
Federal mortgage Bank of Nigeria. https://www.fmbn.gov.ng
EchoStone PLC https://www.echostonehousingnigeria.com
Family Homes Fund. https://www.fhfl.com.ng
International Housing Construction Show. https://www.ihsabuja.com
