Leading Efforts to Deliver Affordable Housing

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John M. Agbokpile
To tackle the housing crisis, a concerted and collaborative approach is required. This explains the multi-layered efforts of housing development institutions such as the Federal Mortgage Bank of Nigeria (FMBN), the Federal Housing Authority (FHA), which are wholly government-led and private sector-driven housing programs such as the Nigeria Mortgage Refinance Company (NMRC), Family Homes Fund (FHF), Nigeria Mortgage Warehouse Fund Limited (NMWFL), wherein government also holds substantial interest amongst others.

Ideally, the collective programs of these national housing schemes along with those at state levels should result in the massive development and delivery of decent, quality and affordable housing. While many have recorded some progress and newcomers such as the NMRC and Family Homes Fund inspire hope for better days, overall, the practical state of housing delivery in the country is depressing.

Year on year, the housing deficit is rising, not decreasing as the national population grows and demand for housing spirals.
To make a difference going forward, a more transformational approach is required. As the Buhari administration re-strategises for its second term, the government should consider anchoring its housing sector development strategy on two key planks. The first is to take bolder and far reaching policy actions that are designed to expand the capacity of government housing institutions to do more. The second plank would be to encourage private sector-led housing programs to deepen investment in the housing sector.

A strategic start point would be the Federal Mortgage Bank of Nigeria (FMBN). Chiefly because of the central role that it plays in the industry. The bank is wholly owned by the government and is unarguably the oldest mortgage institution in the country. More so, despite several challenges that have over time hobbled its growth, a careful analysis of FMBN’s track record show that its performance – in actual terms- remains unmatched by other similar players in the industry.

Consider these statistics released by the bank recently. As at March 2019 the bank had processed and disbursed housing loans totaling over N112 billion.
In all, 43,271 Nigerian workers have benefitted from its housing loans. The bank has also deployed a total of over N98billion towards the construction of 26,973.
The current management led by Arc. Ahmed M. Dangiwa has also delivered record-breaking results in the last 24 months of stewardship on the back of innovative reforms and a more business-driven attitude.

The bank surpassed earlier performance metrics by disbursing housing loans totaling over N58 billion. This implies an average annual housing loan disbursement of about N29 billion. About 23,600 Nigerian workers benefitted from these loans.

Also, FMBN’s mortgage financing activities underpin Nigeria’s housing and mortgage industry at many levels. In relative terms, the bank is the single largest source of low-interest, long-term mortgage finance to mortgage lending institutions. As a wholesale mortgage lender, FMBN provides mortgage finance to Primary Mortgage Banks (PMBs) at a four per cent interest rate for on-lending to individuals at six per cent interest rate. Besides the FMBN, no other institution – public or private – is playing this important role as a provider of low-cost, long-term liquidity to mortgage lenders and empowering them to make 30-year mortgage loans possible. The ripple effects of a financially stronger FMBN would therefore be felt across the mortgage industry through increased mortgage financing of PMBs.

Equally important is FMBN’s strategic role in the implementation of several innovative government housing programs. This includes the Ministerial Pilot Housing Scheme (MPHS), a Public Private Partnership that is designed to speed up housing delivery Nigerian workers. The bank is playing a major role under the scheme as a provider of affordable housing finance. The bank has so far committed over N18 billion for the building of 2,938 housing units.
Another notable government program that FMBN supports is the Federal Integrated Staff Housing Scheme (FISH), an inter-agency initiative of the Office of the Head of Service of the Federation to deliver affordable houses to federal public servants. In the fourth quarter of last year, FMBN delivered a fully built estate in Kuje 2, Abuja comprising 83 housing units of 2-bedroom apartments to the Head of Service as its flagship contribution to the FISH project for handover to beneficiaries.

How to strengthen FMBN
A good place to start will be for the Buhari administration to break the jinx on the long-standing plan to re-capitalise the apex mortgage institution to the tune of N500billion. Given the size and importance of the bank’s mandate to national affordable housing delivery, it’s current N5billion capital base is grossly inadequate – only N2.56bn is paid up. Doing so will scale up affordable mortgage finance in the industry and ignite growth of housing development in the country.

The second action is to lead a stakeholder-wide effort to rebuild and reinforce the National Housing Fund (NHF) as a provider of sustainable long-term finance. The NHF was established in 1992 to create a pool of cheap, long term funds to drive housing development. To achieve this, the scheme required workers to contribute 2.5% of income, commercial and merchant banks to invest 10% of their loans and advances to the fund. Insurance companies were also required to invest in the scheme while the federal government was expected to periodically inject funds into the scheme to enable the scheme to fulfill its mandate of providing affordable housing.

Sadly, over the 27 years of the scheme, the NHF has relied largely on contributions from Nigerian workers. Commercial and merchant banks have invested next to nothing along with the insurance companies. Injections of funds from the government have also been marginal and insignificant. Analysts suggest that investments from the financial institutions in the past 27 years would have added over N500billion to the fund leading to the creation of more mortgage loans for Nigerian workers. This, amongst other reasons, drove the push to review the bill that culminated in the passage of the NHF establishment Act by the National Assembly last year.

It is important not to see the refusal of the president to assent to the reviewed NHF Act as a bad omen. In fact, it presents another opportunity for addressing industry concerns and including even more innovative and acceptable provisions to boost the scheme’s ability to generate larger pool of funds for mortgage development. A stronger role of government and other key figures in the industry will create the necessary synergy required for speedy action. A successful and acceptable amendment of the NHF will help to increase the flow of sustainable finance to the scheme and strengthen FMBN’s capacity create greater impact.

To make a significant dent on the massive housing deficit will no doubt take several years of sustained investments in the housing sector. It will also require all institutions, agencies and special purpose vehicles set up to grow the sector to be firing on all cylinders. While the next four years might not result in the halving of the national housing deficit, bold actions such as the N500billion recapitalization of the Federal Mortgage Bank of Nigeria (FMBN) will help to stimulate unprecedented growth in affordable housing delivery and serve as a strong legacy for the Buhari administration. It deserves to be a key priority item on the second-term to-do checklist.

Agbokpile is a housing policy expert and analyst based in Lagos