Bennett Oghifo
Nigeria’s mortgage as it stands today is incapable of supporting a housing policy that will deliver houses for all Nigerians.

This was the conclusion of an address delivered at the National Built Environment Conference (NABECON) 2017, which began on November 8 at the Ahmadu Bello University, Zaria.
In a speech titled “Housing for all Nigerians: The Big Vision Test”, Agele Alufohai, Managing Partner Costec Consultants, one of the keynote speakers, suggested Nigeria imitate other countries with mortgage systems that have delivered housing for both the rich and poor.

According to Alufohai: “The most efficient aim of housing policy is for the government to assist millions of Nigerians obtain lower-interest mortgages; this is how most citizens are helped to acquire houses in many countries with successful housing policy such as Singapore, South Africa and Malaysia.”

The theme of the conference was “Positioning the Construction Industry in Nigeria for National Economic Growth”. Professor Mike Kwanashie, Vice Chancellor, Veritas University Abuja was the second keynote speaker.
High mortgage rates at short tenures, a difficult business environment, high inflation, and unstable policies have hampered the growth of the housing sector in Nigeria. As a result, there is an estimated deficit of 18m housing units. The country needs to build 720,00 units per year at an annual cost of N56 trillion to bridge this gap, according to the Federal Mortgage Bank of Nigeria.

Explaining the link between what he called a “transformational” housing policy and the economy, he noted that a “housing policy that works for all Nigerians – the rich, the poor, civil servants, small business people, artisans, informal sector workers and entrepreneurs, young graduates, young people with limited formal education, banks, construction companies etc. – will boost construction activities and make a significant contribution to economic development.”

The former president of the Nigeria Institute of Quantity Surveyors (NIQS) also noted that “because a house is the single biggest investment for an overwhelming majority of people will ever make in their lives, an efficient mortgage system is critical to proving accommodation for most Nigerians.”

Less than 3% of Nigerians acquire their homes through mortgages. Yet millions of Nigerians invest in building houses of different costs and quality without any help whatsoever from the government.
Alufohai proposed a modeling of Nigeria’s mortgage system after that of Singapore where its citizens obtain 20 to 30-year low interest mortgages to acquire houses through a pool of funds into which all workers must contribute 20% of their salary.

He said: “The clear solution to me is the Singapore model – creating a pool of funds into which everybody contributes monthly and from which everybody borrows to buy a flat or house. The Federal Government ‘tops up’ contributions into this remodeled National Housing Fund (NHF) with at least N10 billion every year and it’s perfectly alright if it spends every kobo on its intervention in housing on this.”

Singapore, the once poor island in Southeast Asia, evolved from a third to first world economy between 1965 (when it gained independence from the British) and 2000. Under Lee Kuan Yew, the country’s first Prime Minister, the government transformed huge swathes of urban sprawls and slums into well-planned cities that spurred economic dynamism and growth.

Nigeria’s NHF attempted the Singapore model, but it failed. “One of the key reasons for the failure is contributors couldn’t access the loans because they couldn’t afford the deposit for the houses,” said Alufohai.
The NHF also failed because one effect of inflationary policies is high interest rates charged on mortgage loans. A non-inflationary fiscal policy, flexible, sustainable exchange rates and hence, low interest rates are important to attaining a mortgage system that will also attract foreign investment into mortgage market.
On the role of government in the remodeled system he said, “it could provide a subsidy on the interest on mortgage loans by investing or contributing funds into this pool of ‘forced savings’ – this would have been an excellent use of the petrol subsidy.”

According Prof Ikem Mbamali, chairman of the organizing committee, the aim of conference was “to bring together scholars, industry professionals/practitioners and senior public service officials/administrators, to explore current developments and advances in the re-organisation of the construction industry for effective contribution to national economic growth.”

Since Nigeria exited the recession, the construction industry is expected to spur the economy to recovery. Power, housing and infrastructure have been allocated the lion’s share in the last two national budgets. Construction is critical to bridging the infrastructure gap which in turn generates employment.
Sub-themes included: Policy and regulatory framework, Economic Growth Metrics, Housing and Economic Growth, The Manufacturing Sector, Education and Training.