By John Terhemen Ikyaave
Henry Edet Bassey is a senior staff of the Nigerian Nuclear Regulatory Authority (NNRA). He lives in Abuja and has been a consistent contributor to the National Housing Fund (NHF) Scheme since 2013. The Federal Government established the NHF scheme in 1992 to mobilize funds for the provision of affordable residential houses for Nigerians.
The Federal Mortgage Bank of Nigeria (FMBN) administers and manages the fund as a source of long-term finance to power the Bank’s affordable suite of housing products. Contributors to the NHF scheme can apply for FMBN housing loans after six months of consecutive contributions of 2.5 per cent of their monthly income.
In 2021, a happy and fulfilled Mr. Bassey received the keys to a three-bedroom flat at the ABSI Estate, an FMBN funded estate located in Kuje, an area council in the Federal Capital Territory, about 40 km southwest of Abuja. Although the property has a market valuation of about N9million, Mr. Bassey, as a contributor to the NHF scheme, did not need to pay any upfront fees, down payment, or mortgage perfection fees to take ownership of the building.
He is to pay and own the property in monthly rental payments at a seven percent interest rate per annum until he retires from service or hits the 60-year age. He also can liquidate the facility anytime he has the financial capacity to do so.
For Mr. Bassey and his family, participation in the National Housing Fund (NHF) Scheme has made their transition to homeownership possible.
“It is a good experience; I may say it is fantastic.
This is because it provided an unusual opportunity for a Civil Servant like me to own a house at terms that are so convenient. I want to use this medium to thank this government for this unique and wonderful opportunity given me and my fellow Nigerians,” exclaimed an elated Mr. Bassey.
“The process was pretty straightforward for me. FMBN asked me to provide letters from my organisation which I did, and they also prepared a Memorandum of Understanding between my organization and FMBN, which we executed. I feel great. I am a lot more organised now that I live in my own home, and I thank the FMBN for making this possible for me and other Nigerians. I encourage other Nigerians to always be patient in following up things with the FMBN. Patience is a very key point.”
Like Bassey, an increasing number of Nigerians are benefitting from the FMBN Rent-to-Own Housing Product, one of the latest additions to the Bank’s portfolio of affordable housing windows. The innovative, affordable housing product provides an easy and convenient payment plan towards homeownership for contributors to the National Housing Fund (NHF) Scheme.
Another good example is Mohammed Tawakalitu, a grade level 10 civil servant with the FCT Secondary Education Board in Abuja. He is a proud owner of a three-bedroom flat at Anthem Estate, an FMBN funded housing community located in Gwagwalada, an Abuja suburb, under the FMBN rent-to-own window. He started his homeownership journey by registering and consistently contributing to the National Housing Fund (NHF) scheme.
“Although I have been contributing to the NHF scheme for over nine years, I only applied for the FMBN rent-to-own product in 2019. The terms sounded too good to be true, so I was pleasantly surprised that my application went through successfully, and I am now a proud owner of a three-bedroom flat. I feel so good, and I thank the FMBN for introducing this product. The monthly payment terms are flexible and convenient. The worries and troubles of staying in a rented apartment are history now. I advise other Nigerians looking to own their homes to register and contribute to the National Housing Fund (NHF) Scheme to take advantage of this product,” Mohammed explained.
Rent-to-Own: Key to Housing Affordability
One of Nigeria’s greatest long-term development challenges has been providing citizens with access to decent housing. Access to affordable housing can have a significant impact on a person’s well-being. A safe, secure home can improve health, hygiene, and educational opportunities by ensuring access to clean water, safe toilets, electricity, and a respite from heat and disease-spreading insects.
At the core of this challenge is affordability. Experts agree that housing affordability is a function of three things: household income, the price of the house, and the terms of the finance.
Despite rapid urbanisation and increased demand for affordable housing and housing finance, interventions by the government are limited and inadequate. Due to low incomes, most low and middle-income households have minimal resources to spend on housing. Thus, they are forced to spend years living in poor or unfinished houses or renting with little hope of saving enough money to build or buy their own home.
Recent research finds that food expenditures alone account for 50‐60 percent of total monthly spending for many households, which leaves very little housing or other necessities such as fuel, transportation, education, or health care. Housing affordability is a function of three things: household income, the price of the house, and the terms of the finance.
Affordable housing typically means market‐quality formal housing that can be consumed by households that cannot afford the typical market price. In developed countries, housing is considered “affordable” if families spend no more than 30 per cent of income on rent or mortgage service plus other housing costs.
In Nigeria, there are challenges at several levels. From low incomes to housing supply deficits and sub-optimal government interventions, a weak housing finance system, the capacity to afford decent accommodation is a preserve of the top few.
And this is why the FMBN Rent to Own housing window is so significant. It is a timely and necessary intervention to tackle the housing affordability challenge in Nigeria. The housing window enables eligible contributors to the National Housing Fund (NHF) to move into FMBN homes located nationwide as tenants without having to cough out any upfront payments that only a few can afford. It also allows beneficiaries the convenience to pay for and own the properties through monthly or yearly rent payments that could be spread over periods of up to 30-years.
Like other FMBN housing products, the rent-to-own housing window is available to Nigerians who contribute to the National Housing Fund scheme at a single-digit interest rate of seven per cent on the property price per annum.
FMBN: Commitment to Affordable Housing Delivery
The combination of affordable terms, including rental payments, zero equity payments, single-digit interest rates, and the 30-year payment plan, depending on an applicant’s age and the number of years in service, makes the FMBN rent-to-own housing window a great enhancer of housing affordability.
Indeed, the FMBN Management Team developed the rent-to-own housing product as a strategic response to the inability of low-income contributors to the National Housing Fund (NHF) scheme to meet the 10 to 30 percent equity down payment requirement for accessing the NHF Mortgage loan. This included a 10 per cent down payment for loans of up to N5M; 20 per cent down payment for loans above N5M to N10M; and 30 per cent for loans above N10M to N15M.
“We developed the rent-to-own housing product based on the situation we found on the ground when we assumed office in 2017. The results of our operations showed that most contributors to the National Housing Fund (NHF) Scheme and beneficiaries of the NHF mortgage loan could not pay the equity requirement. Even after we reviewed the down payment requirement, which ranged from 10 to 30 per cent when we came on board to a maximum of ten percent, several beneficiaries still could not pay up” remarked Arc. Ahmed Musa Dangiwa, the FMBN MD/CEO.
The rent-to-own product eliminates the need for a down payment. Beneficiaries can move into an FMBN funded home and pay in monthly installments to own their property, thus marking a remarkable improvement in affordability.
“We knew, therefore, that if we are going to make an impact, we would need to be innovative, and the rent to own seemed a perfect fit given the reality of the low earning capacity of the average Nigerian worker. With this product, contributors to the National Housing Scheme can benefit from the strength of their subscription and the fact that they work and earn an income which empowers them to pay gradually over a long time to own their homes,” said Arc. Dangiwa, a firm believer in revamping FMBN’s products to suit the income levels of low to medium-income earners.
The rent-to-own product is an excellent addition to FMBN’s efforts to make access to homeownership easier for Nigerians. It should encourage more low- and medium-income earners in both the formal and informal sectors of the economy to register and contribute to the National Housing Fund Scheme so they too can have a path to becoming landlords.
FMBN: Financing Construction of Affordable Housing Stock
It is also significant that the FMBN has ready and existing housing stock to drive offtake. The Bank is also collaborating with reputable property developers and financing the construction of additional affordable housing units nationwide to boost housing stock availability further to ensure the sustainability of the rent-to-own housing window. Research shows that the houses that the FMBN is financing are specifically designed to fit the income profile of low- and medium-income Nigerians. They comprise one, two-to-three-bedroom apartments and bungalows with prices that range from N4million to N15million.
FMBN’s two-pronged approach to housing delivery touches two key sides to the housing equation: demand and supply. First, by lowering the housing affordability bar using the rent-to-own product, FMBN enhances effective housing demand by Nigerians. Second, by financing the construction of fit-for-income decent and quality housing stock for offtake, FMBN is also promoting sustainable housing supply for those most in need and financially disadvantaged.
This trend reflects the commitment to performance and a renewed drive to create impact in line with the Bank’s mandate by the current Management Team. Over the past four years, the FMBN has leveraged the National Housing Fund (NHF) and empowered about six thousand Nigerians with long-term housing loans to own their dream homes. The Bank provided home renovation loans to over 60,000 beneficiaries and financed over 10,000 affordable housing units.
Powering this positive shift in the narrative of the FMBN is a refreshing spirit of reform. The apex Mortgage Bank, under the leadership of Arc. Ahmed Musa Dangiwa has revamped legacy mortgage products and developed innovative new ones in a bid to ensure that low- and medium-income earners have a good chance to own their homes at a price they can afford.
Given the importance of housing to life, the worrying housing deficit, and the reality that most Nigerians lack the earning power to save and build homes, FMBN’s introduction of the rent-to-own product is a timely social housing intervention. It should be sustained and scaled as an institutional path to homeownership for low and medium-income Nigerians.
*John T. Ikyaave, a housing policy analyst based in Abuja wrote in via
The rent-to-own product is an excellent addition to FMBN’s efforts to make access to homeownership easier for Nigerians. It should encourage more low- and medium-income earners in both the formal and informal sectors of the economy to register and contribute to the National Housing Fund Scheme so they too can have a path to becoming landlords