The federal and state governments are not folding their arms. The private sector is contributing too. But the truth remains that all these efforts are insignificant, making many wonder what will happen in the next ten years when an estimated 60 per cent of Nigerians will live in cities. Failed and unimplemented policies, including very weak institutions, have been identified as why Nigerians are daily becoming destitute, writes MUYIWA LUCAS
As a young artisan, John Essien left his home in Ikot Ekpene, Cross River State, for greener pastures. His destination turned out to be Lagos State, the commercial nerve centre of Nigeria. But his hopes soon turned into nightmare, when after six weeks of squatting with three other friends in a one-room apartment in Ajegunle, a suburb in the state, he was evicted. Frustrated, after several failed attempts to get accommodation on his own due to financial constraint and unavailability of room space, he returned to Ikot Ekpene.
On the part of Musa Ibrahim, a resident of Okene, Kogi State, coming to Lagos for him was influenced by the ‘sweet stories’ he heard about the coastal city. But his sojourn was cut short after only two weeks. He had no shelter to retire to after roaming the streets all day. He returned to Okene.
Shelter, going by Abraham Maslow’s hierarchy of needs, ranks among the topmost needs of man. It is, therefore, understandable why the desire of man owning his own house remains a priority in his life ambition. However, considering the harsh economic environment in the country, achieving this dream has become elusive for most Nigerians. And for a country whose average citizen lives on less than $1 a day, this dream of home ownership may remain a tall order.
Various states and the Federal Government are making efforts to solve housing problems, with an estimated deficit of 17 million deficit. From the LagosHoms scheme of the Lagos State government, to the various private initiatives, housing solution seems to be on the front burners of every stakeholder. For instance, the Minister of Lands, Housing and Urban Development, Mrs. Akon Eyakenyi, through the Federal Ministry of Lands, Housing and Urban Development (FMLHUD), explained it has made tremendous effort in solving the housing needs of the country. In the last four years, the FMLHUD has built 43,126 housing units nationwide. A breakdown of this figure shows that 710 housing units were built under the Prototype Housing Scheme; 7,869 housing units under the Public Private Partnership; 3,302 units through the FHA; 5,007 units from the FMBN; 17, 240 through estate development loans provided by FMBN, and 8,998 units through contractor finance initiatives. The ministry also generated N8, 110,389, 817.79 as internally Generated Revenue (IGR). The IGR, which showed a tremendous improvement across the years, were generated through tender fee, ground rent, premium on land, title registration fee, consent fee, Certificate of Occupancy processing fee and survey fee respectively.
One of such efforts to reduce the problem is the setting in motion of a process that brought about the development of a roadmap for the housing and urban development sector. This, it is hoped, would give effect to the National Housing policy and the National Urban development Policy. This policy includes the restructuring of the Federal Housing Authority (FHA) for the effective and efficient discharge of its mandate; supporting the implementation of the mortgage liquidity facility through the operationalisation of the Nigerian Mortgage Refinance Company (NMRC), and the recapitalisation of the Federal Mortgage Bank of Nigeria (FMBN).
With the recapitalisation of the FMBN, a new product targeting the provision of housing finance to an estimated 17 million Nigerians in Diaspora has been developed by the mortgage institution. This scheme will target one million Nigerians within the first year of the launch of the “Nigerians in Diaspora Mortgage Scheme” and provide $100 million (at $100 per person per year) to FMBN as monthly contributions. Another product the recapitalisation will birth is the opportunities for Nigerians to own a home on a “Rent-To-Own” basis. Under this scheme, rents paid by occupants of a house will be converted to mortgage and when the amount for the house has been paid up, the occupant becomes the owner. This does not involve any initial deposit for the house.
The restructuring will also make the institution attractive to international lenders, whose credit line facilities are needed to enable the FMBN achieve greater feat in the country’s housing sector. The FMBN is also to engage with key partners, such as the Central Bank of Nigeria (CBN), the Federal Ministry of Finance and international development partners to address its challenges and explore opportunities for intervention funding for social housing aimed at redressing the national housing deficit.
With the huge capital requirement of the sector, stakeholders are of the opinion that an effective national development tools are needed to actualise the dream of adequate housing in the country. To this end, government, it is believed, is now considering the use of additional sources of funding for housing delivery. This may come in the form of deploying pension funds, unclaimed dividends, and dormant accounts for this purpose. Besides, the FMLHUD is said to be planning an adoption of various housing delivery models for mass housing development. This will include new towns development, cooperative housing, public-private partnership, public-public partnership, regeneration (including completion of abandoned houses) rental housing and sites and services schemes.
The FMLHUD is also said to be championing the African urban Agenda, in collaboration with UN-HABITAT, in view of the need to deal decisively with the rapid population growth and deteriorating living conditions of human settlements in the continent. This, it is believed, is very fundamental going by the estimation that by 2025, more than 60 per cent of Nigerians will live in cities. This belief is also influencing the designing and implementation of a national programme aimed at making slums become history in the country by 2020.
To make this achievable, Eyakenyi revealed that the Federal Government, through the ministry, has put in place a social and affordable housing scheme. Under this scheme, estate developers are being enjoined to embrace the concept of mixed development in housing delivery and also ensure that at least, 20 per cent of the total number of housing units built in projects sites is allocated to low-cost housing ranging between N1.5 million to N5 million for one to three bedroom houses. Moreover, she explained that the ministry is also collaborating with domestic producers for the supply of building materials to estate developers at factory prices.
A boost for housing delivery also comes with more contributors now joining the NHF under a new e-collection system. This is now ensuring an efficient, more transparent and accountable system of fund collection and remittance. Also, mortgage access for informal sector workers has been put in place since December 2011 under the informal sector cooperative housing scheme. The FMLHUD has also developed a framework for conducting a National Housing Survey with the aim of ascertaining the authenticity of the 17 million housing deficit figure being bandied in the country instead of relying on forecasts. This will also give an insight into the quantum of the investment needed to meaningfully address the housing gap, as well as the requirements for transforming the housing and urban development sector on a sustainable basis. Already, a ministerial committee under the minister’s chairmanship, including stakeholders, such as the National Population Commission (NPC), National Bureau of Statistics (NBS), and the Central Bank of Nigeria (CBN) as members, is carrying out the survey.
The launch of the NMRC on January 16 gave hopes that the estimated 17 million housing gap may soon be filled. And with this, the President is convinced that his administration is creating the “enabling environment for primary mortgage banks and other financial institutions to offer real mortgage facilities to Nigerians at affordable rates.”
Interestingly, when the NMRC launched its first application for 10, 000 housing units about two months ago, over 60, 000 applications were received, forcing the government to direct the company to accommodate all the applicants. The mandate given to the NMRC is to provide mortgage-lending institutions with access to long-term finance at an affordable interest rate, which in turn will enable mortgages to be issued by these institutions to Nigerians at longer tenors and affordable rates. Simply put, NMRC though is government inspired, is a private sector-led effort to provide affordable housing for Nigerians through loans accessed from mortgage and commercial banks. It is being implemented as a component of the Nigeria Housing Finance Programme, an initiative of the Federal Ministry of Finance in collaboration with the CBN, the Federal Ministry of Lands, Housing and Urban Development (FMLHUD) and the World Bank/International Finance Corporation (IFC).
The NMRC scheme, a vehicle set up to bridge the funding cost of residential mortgages and promote the availability and affordability of good housing to working Nigerians, is to provide mortgage lending banks with increased access to liquidity and longer term funds in the mortgage market. It is designed to be an integral part of the country’s financial system, with special focus on housing finance and/or the mortgage system. Also, it has the mandate of resolving access to affordable housing finance and, more importantly, as a focal point for creating an enabling environment for housing finance by playing a strong developmental role in supporting the improvement of land, legal framework, housing development and construction. Thus, it is the latest hope for low-income earners who cannot afford the cost of a mortgage loan. As a take-off for the scheme, the World Bank approved a concessional $300 million 40-year interest free International Development Association (IDA) loan to facilitate the execution of the Housing Finance Programme. About $250 million of the IDA loan will be disbursed in instalments to NMRC as Tier 2 Capital based on key performance indicators – it will be retained on NMRC’s balance sheet to provide credit support for NMRC’s bond issuances. The balance of $50 million will be allocated to other components of the Housing Finance Programme as follows: $25 million for the establishment of a Mortgage Guarantee Facility for lower income borrowers and $25 million to support the development and piloting of Housing Microfinance Products. This is where the Federal Mortgage Bank of Nigeria (FMBN) will benefit from a $25 million facility to improve its mass housing programme and empower some of its microfinance partners. This measure is also believed to be a major step that will reposition the Federal Housing Authority (FHA). It is hoped that the introduction of NMRC will reduce the cost of mortgage loan by improving market efficiency, lowering cost of funds and allowing for longer repayment tenor period by financial institutions.
But such efforts are yet to have the desired effect. Laudable as these feats are, stakeholders are concerned that Nigerians are yet to feel the full impact, at least, going by the high demand for accommodation and the high cost of rents. They fear that these policies may be all talks and no results. They, therefore, canvass for a reduction in the cost of building materials, even as they want an early implementation of the housing roadmap. The roadmap, it is expected, will drive housing and urban development in the country for the next 30 years.
One point generally agreed on by stakeholders and participants at the validation is that the country is not short of having good plans, but implementation of such plans remains the problem.
The roadmap draft seeks to achieve nine strategic goals. They include the annual provision of one million housing units over the next 10 years to enebale the country tackle the housing deficit in the country headlong. The housing units are to be delivered by the government and the private sector. The private sector is to deliver 800, 000 units and the remaining 200, 000 by the government. till date, no government agency has delivered 300, 000 housing units in a year. The strategy to achieve th feat will include collaboration with the Ministry of finance to promote a private sector-led housing and infrastructure fund institution; collaboration with the Nigerian Mortgage Refinance Company (NMRC) to promote group mortgage as a strategy to ease access to housing for household not currently qualified for individual mortgages; and promotion of local production of high quality critical building materials. The collaborating agencies to actualise these goals include the Federal Ministry of Finance, Stock Exchange Commission (SEC), states’ ministry of housing and urban development, developers, insurance firms, international development partners, and financial institutions.
The former minister of the defunct federal ministry of works and housing, Mamman Kotangora had earlier estimated that there were about 4, 000 uncompleted or abandoned projects worth about N300 billion across the country. Therefore, to meet up with delivering of its 200, 000 housing units share of the estimated one million units, the Federal Government, through the FMLHUD, will adopt legal/policy instrument for completion of abandoned projects, establish a Task Force for completion of abandoned projects, develop and implement a national programme for completion of abandoned project phased over 10 year period.
Other goals in the roadmap include; to establish an information management system for planning, implementation, monitoring and evaluation of projects and programmes; establishment and enforcement of building standards based on the national building code to ensure quality, functionality, aesthetics, and safety; making serviced land with secured tenure easily available, accessible and transferable and at an affordable price for housing development; building adequate capacity of professionals and artisans in the built environment; making cities and human settlements inclusive, productive, safe, livable, resilient, and sustainable; transforming the way FMLHUD is structured and operate as the industry regulator and facilitator; and promoting research and development.
Prof Bade Falade, a former United Nations (UN) Habitat Representative in Nigeria, reckons that the roadmap is a measure of filling a long gap in the operation of the FMLHUD.
“There is a need for proper planning. In the UN that I come from, there is always a five- year plan. So with the ministry putting in place two robust policies- national housing policy and urban development policy, then we are on course. Nigeria became the first African country to have a housing policy in 1981. Others came to borrow from us,” he told The Nation, regretting that the country achieved nothing with the 1981 policy until it lapsed.
Therefore, he contends that there is a need for the roadmap to drive the implementation of those policies that are put in place. This, he said, will give the country a vision for the future, substantive things to achieve and also contribute to the transformation agenda.
As the largest economy in Africa, Prof. Falade explained that there is a lot for the economy to benefit from the sector. “This sector holds a lot of solutions to our economic problems because the city is the vehicle for growing the economy. The business is in the city – everybody lives in the city -and that is where the demand is and that is where services are required and where people are willing to pay. If you plan the cities very well, then the gross domestic product (GDP) of the country will go up. It can also contribute to huge employment as several people are employed in building sites,” Falade said, adding that urban planning is the preventive arm of deadly sicknesses as it will eliminate sicknesses such as malaria, cholera, amongst others.
Eyakenyi believes that the revalidated Draft Roadmap, once approved, will provide the pathway for navigating through the housing and urban development sector over the next thirty years.
The former Minister of Information, Mr. Labaran Maku, showed an understanding for these concerns when at an interactive session on the housing sector issues he noted that “the housing sector is a sleeping giant that has just woken up.” For him, the housing sector has now moved on because it is being driven by policies that are feasible. “In the next two to three years, Nigerians will get the full benefits of what is being done now,” Maku assured.
Maku’s optimism, some say, may just be viewed as political talks. This is because salient issues affecting the delivery of houses have remained unresolved. Prominent in this is the Land Use Act, which several stakeholders have blamed as constituting a clog in the desire to have an efficient housing finance system; bureaucracy; high cost of building materials, amongst others.
This is because despite several efforts by government, through its mortgage institutions, to encourage or improve on housing finance, its own policy on the Land Use Act, has remained its albatross in achieving this goal. Stakeholders insist that except a review is done on the Act, the problem of housing finance would linger. The Act, promulgated in 1978, was to allow the government access to land for developmental purposes. This was because in the past, land owners proved to be a hinderance to government’s developmental plans as they constituted bottlenecks; therefore, the creation of this Act vested land ownership in government, and also made it easier for government to lay claim to land ownership in order to develop the country and create infrastructure.
Lending credence to this belief, the chief executive officer, 3Invest, a firm of Real Estate consultants, Mrs. Ruth Obih said that as a growing nation, there is the need for a reformation of the Land Use Act, considering that it has caused lots of the problems in the country as it does not allow the housing finance sector to kick-start.
“A major reason why our housing finance cannot take off is because of the foreclosure law in the Land Use Act. There is a foreclosure law, and what does it say? First of all, the Land Use Act does not allow you to own a property until you transfer title. That means if you haven’t transferred or perfected a title, you don’t own that property,” Obih explained.
Besides, she identified red-tapism and bureaucracy, as enshrined in the process of perfecting land title documents. The process, which she said involves over 56 procedures, takes about two years to perfect. Within this period, she argues, a lender, usually a financial institution, cannot foreclose on such property in the event of a default in payment by the borrower because both parties cannot lay claim to the ownership of the land since the title document may not have been perfected with government.
“That is the reason why we don’t have a housing finance sector in Nigeria. The banks that have actually done it in the past have been banned. So, you see them trying to foreclose illegal forecloses because legally they don’t own the property as a result of non-perfection of the property title in anyone’s name. That is one problem,” Obih said.
Legal issues have also been identified as being a factor militating against effective housing delivery. she disclosed the trend has always been a global phenomenon in real estate business. For instance, after the 99 years lease period on land, the land refers back to the government, for which renewal of ownership is always difficult.
Mr. Ola Aluko, of the Department of Urban & Regional Planning, Faculty of Environmental Sciences, University of Lagos, in his research on “The Effect of land Use Act on Sustainable Housing Provision in Nigeria: The Lagos State Experience”, submitted that land is the main component of housing problem in urban areas. The problems surrounding availability of land in urban areas, he identified to include the various policies and regulations that were formulated by governments at all levels to tackle the problems of housing; the fees payable and the procedure of obtaining Certificate of Occupancy and the Governor’s consent, which he said, is about 15 per cent and in some areas up to 45 per cent of the cost of the land.
“This creates a problem in housing delivery especially if these documents are required to secure financial assistance from banks. It also leaves room for fraud and compromise. The long time it takes to obtain consent (from six months to eternity) has made reliance on properties as collateral security for loans quite unattractive, as the process of perfecting a legal mortgage is cumbersome,” Aluko submitted.
According to Aluko, the present land policy in the country is faced with many problems that make land acquisition difficult for corporate estate developers.
The high interest rates have also not made procurement of capital for housing development through mortgage finance attractive to developers.
An Lagos-based estate developer, Mr. Kayode Oyedele, contends that the Land Use Act as it is, constitute a clog in the housing development effort. This is because of the financial constraint that has come with the policy, as financial institutions remain reluctant to lend a hand to land owners who have no C of O. “The Act should be modified or repealed,” he canvassed.
Stakeholders in the sector have since charged lawmakers to transform the Land Use Act, reform the foreclosure law, and help to make the people understand how they can key into the process for better result as it obtains in modern day. This would stimulate a robust real estate industry from the legal perspective.
Another major problem for the attainment of efficient housing delivery in the country has to do with the operational capabilities and efficiency of government agencies saddled with such responsibilities. Recently, Eyakenyi had to dissolve the management of the FHA, citing years of below par performance as reason.
The FMBN has also not fared better. Its much talked about “Nigerians in Diaspora Mortgage Scheme” which the Bank’s managing director, Mr. Gimba Yau Kumo, said would be launched before the end of this year has not seen the light of the day. The FMBN, which is seeking international cooperation with other financial bodies to finance its projects seem to have been hitting a brickwall in its efforts. This is because until recently, for four years, beginning from 2010, the mortgage bank did not have an audited account. The Nation gathered that at one of the bank’s Board meetings, the management was embarrassed when asked by the CBN for its audited accounts.
The Chairman of the FMBN Board, Chief Bisi Ogunjobi, however, told The Nation that the 2011 audited account of the bank has been published; while that of 2012 has been awaiting CBN approval and that of 2013 has been completed. Ogunjobi, a former Vice President of African Development Bank (AfDB), said the auditing had to be done as a way of enshrining transparency in the institution.
“We try to build the internal transformation and capacity for effective utilisation of the resources that will be put at the disposal of the bank, like external resources from international organisation. This lays emphasis on transparency as a base for preparing the ground for resources we might be given,” Ogunjobi explained. He added that the FMBN is a goldmine for the country. Experts say that the financial muscle of the FMBN is nothing to write home about when compared to that of Ghana, in spite of the bigger demands on the former.
But the unaudited account of the bank is not its only albatross. The Nation discoveredthat the bank is bogged down by huge debts, said to be in excess of N50 billion. Part of this debt was incurred from loan facilities granted defaulting property developers. The primary mortgage institutions (PMIs), that are supposed to drive mortgage in the country are relatively weak. This is evident in the inability of most of the PMIs to meet the recapitalisation as only less than 50 per cent of the banks have met the recapitalisation, whose deadline and further extension ended on July 31.
Ogunjobi said the bank has recorded progress in its debt recovery efforts, while it is also taking further measures, including exploring options for addressing non performing loans, enhancing the credit review process and streamlining project monitoring. He expressed satisfaction at the over 75, 000 housing units that the mortgage bank has delivered nationwide, adding that efforts would be intensified to deliver 15, 000 units in the next two years.
But this is not the only bane to affordable housing. Stakeholders in the sector stressed the need to have a mortgage system, which encourages a longer time period to buy and pay for houses, say for a 20-30-year tenor and at single digit interest rate. This is the practice in other developed countries. Ogunjobi agrees with this position, saying that long term funds is required for this type of regime to be put in place. But he regrets that this is not easily available because institutional investors such as the pension funds’ managers, have not really been very active in the mortgage and the housing sectors, blaming their seeming inactivity on the limit placed on the ammount of resources they can invest in such projects. The issue of foreclosure is another problem that needs to be addressed in the industry. Stakeholders are of the opinion that foreclosure is not favourable because of the delay in getting debts sorted out. “The attitude of Nigerian businessmen not paying back their loans is also a disservice to mortgage in the country. Somebody is owing you and you have no opportunity to take over possession of the property,” Ogunjobi explained. The high cost of building materials is also a problem for effective housing delivery. And much as the government has promised to look into this, it has remained all talks and no action.
However, experts and stakeholders say all hope for a better housing finance is not lost. They based their hope on the establishment of the NMRC, for which they hope government may have realised that the housing sector will bring out a better economy. For now, Nigerians can only live on hope.
