Nigeria’s housing deficit currently stands at between 17-22 million units. In order to fulfill it, 700,000 houses would need to be built every year over the next 20 years, however, less than 100,000 a year are currently built. The deficit has grown by about 6 million houses in the last 10 years due to the extremely quick population growth in Nigeria and rising urbanisation.
This means that although there is a housing gap in rural areas the housing challenge in the country is mostly situated around the urban areas. According to the World Bank, it would cost about 59.5 trillion Naira (USD 145 billion) to fund the housing deficit as it currently stands which just proves the untapped potential of the real estate market in Nigeria. The government has the goal of bridging the gap by 2033 if the average annual population growth continues at 3.5%.
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The home ownership rate in Nigeria is about 20% with affordability being one of the most prohibiting factors due to low household incomes. Furthermore, lack of access to funding means that much of the housing deficit is centered among the lower class and middle class of people.
Neither the private sector nor government provide enough housing for the masses so the question does remain, is the issue a housing deficit or housing affordability? The cost of building a house in Nigeria is higher than the global average while the income is lower than said global average. This means that even if houses are available, they are not affordable for the average Nigerian.
Government Interventions
Until 1975, the government in Nigeria did not explicitly accept any social responsibility for supplying houses for the masses and therefore did not consider it necessary to participate actively in mass housing programmes. However, there have been initiatives by the government since then to improve the provision and funding surrounding housing in the country.
In 2016, the Lagos State government created a rent-to-own housing scheme to provide accommodation for state employed low- and middle-class officers. Lagos is the most urban state in the country, and it has a deficit of 3 million houses with a population of 20 million.
Another initiative is the Family Homes Funds (FHF) Help-to-Buy scheme that was created in 2018. The scheme provides loans of up to 40 percent of total cost of a newly built house for low-middle income individual subscribers. The structure of the loan comes with a 5-year moratorium with a monthly interest rate of 3 percent in the first year, rising to a maximum of 15 percent in the 20th year. In 2018 following the pandemic, the Federal government recently announced the Economic Sustainability Plan (ESP) which aims to ensure that Nigeria is self-sustainable in the production and consumption of goods. One of the pillars of the ESP is to deliver up to 300, 000 homes on an annual basis which is a very ambitious plan.
Funding
The federal Mortgage Bank of Nigeria (FMBN) is the most affordable housing finance window in the country for loans up to ₦15,000,000 (USD 36, 586). The FMBN allow banks to provide mortgages to qualified workers at a rate of 6% whereas without subsidy mortgage loans interest ranges from 17% – 25%. The loans from the FMBN are only available to workers who contribute to the National Housing Fund Scheme which is designed to gather funds from the population to increase access to affordable housing.
Final thoughts
The untapped potential of the real estate market in Nigeria is undeniable and the focus on affordable housing by the Nigerian government as well as private players needs to increase as population growth and urbanisation does not seem to be slowing down. Access to more affordable loans for all Nigerians as well as the lower cost of construction would enable more Nigerians own homes which would improve their quality of life.
