How FMBN is Leveraging Affordable Housing Delivery to Boost Social Inclusion

John M. Agbo

Access to decent, affordable, and quality shelter is a fundamental human right. It is a vital part of the Universal Declaration of Human Rights, which states that everyone has the right to a standard of living adequate for his family’s health and well-being, including food, clothing, housing, medical care, and necessary social services.

The International Covenant on Economic, Social, and Cultural Rights (ICESCR), a multilateral treaty adopted by the United Nations General Assembly with Nigeria as a signatory, also guarantees the right to housing as part of an adequate standard of living. This does not only mean having a roof over one’s head, but it also includes the right to live in safety and dignity in a decent home. It also means affordability, the security of tenure, protection against forced evictions, and availability of services, such as access to drinking water, energy, or transportation.

Furthermore, as a party to the Covenant, Nigeria is expected to ensure that all enjoy all components of the right to adequate housing, including the security of tenure, access to services and infrastructure, affordability, habitability, accessibility, and location in proximity to services.

In section 16 (2) (d), the Constitution of Nigeria provides that the State shall direct its policy towards ensuring that suitable and adequate shelter for all citizens.

Despite being a signatory to these noble treaties and constitutional provisions, few people in Nigeria enjoy this right while millions live in substandard housing and informal settlements. The United Nations Special Rapporteur on adequate housing notes that housing conditions remain grossly inadequate for millions of Nigerians living in poverty and excluded from the formal housing sector, leading to informal settlements while luxury developments remain vacant.

At the heart of the problem is the extreme shortage of affordable housing. The cheapest houses built by private developers cost about N15M in Lagos and N7-8M outside Lagos. The majority of housing developments target the rich instead of the needs of the majority of the population.

While the debate over the statistical basis for the estimated housing shortfall of over 22million housing units persists, the truth is that the country has a housing crisis that might balloon out of control. Nigeria’s faulty social protection cover, including lack of decent housing to the majority of its citizens, as evidenced by the increasing insecurity and vulnerability to recruitment by subversive elements, requires fixing a fundamental human right and a political, economic, and social imperative.

FMBN as Catalyst for Mass & Inclusive Housing

Against this background, efforts to turn around the Federal Mortgage Bank of Nigeria (FMBN) are noteworthy. FMBN, as the country’s foremost government-owned mortgage institution, possesses the structural resilience to catalyze affordable housing delivery and drive social inclusion.

FMBN prides itself as an institution that believes everyone deserves a home. The Bank subordinates the profit motive in designing and delivering its housing products. It provides the lowest cost construction finance to developers to provide purpose-built homes that fit the incomes of low- and medium-income earners and packages 30-year mortgage loans at single-digit interest rates of seven percent per annum. Other convenient terms include zero equity contribution for loans N5million and below, 10% equity for home loans above N5million to N15million, and options for rent-to-own for properties that the Bank finances. These unique conditions position FMBN as a leading government driver of inclusive and affordable housing delivery to most Nigerians.

“It is tempting to say that the Government has done nothing since the problem rather than go away has worsened. However, this will be grossly unfair. There have been responses and achievements over time. As the head of a major government agency established to help deal with the housing problem, I can say we are indeed making a mark in reducing the housing deficit in Nigeria,” notes Arc. Ahmed Musa Dangiwa, the FMBN MD/CEO at the FMBN since 2017 at the recent Roundtable on Social Protection Cover in Nigeria organized by the Nigeria Labor Congress (NLC) in Abuja. Arc. Dangiwa spoke on the contributions of the FMBN towards boosting affordable housing delivery to Nigerians within the low – medium income brackets as part of the labor advocacy to government leaders and stakeholders for the expansion of the social protection cover as a means of tackling the insecurity in the country.

“… despite the limited resources at FMBN’s disposal, the National Housing Fund (NHF) Scheme has performed creditably well. FMBN has leveraged funds accruing to the NHF to provision affordable housing loans totaling over N297.7 billion under its various windows while creating 30,719 new homes and 22,416 mortgages for Nigerians in the process. Cumulatively, FMBN has made refunds totaling N41.1b to 353,519 beneficiaries who have exited the NHF Scheme due to retirement from service. A sum of N50b has also been disbursed under the FMBN Home Renovation Loan window to 67,448 beneficiaries as of May 2021. We currently have a contributor base of 5.2m while 34 of the 36 States of the Federation are compliant regarding workers’ contributions,” he added, highlighting the Bank’s achievements.

“We have done a lot to deepen homeownership in Nigeria but are constrained by limited finance. We are advocating for a N500bn re-capitalization which will help us scale our affordable housing interventions” notes Arc. Dangiwa.

Overcoming the Housing Finance Challenge

FMBN requires more funds to ensure more low-income Nigerians own their dream homes. The Bank has a N5billion capitalization, with the Federal Government (FG), the majority shareholder, having a 50% capital subscription valued at N2.5billion. The FG has fully paid it up. Another FMBN owner is the Central Bank of Nigeria (CBN), with a 30% capital subscription valued at N1.5billion. The CBN has only made a part payment of N60M. The third shareholder is the Nigeria Social Insurance Trust Fund (NSITF). NSITF has a 20% capital subscription valued at N1billion and is yet to pay up. Overall, only 51.2% of the N5bn (N2.56bn) FMBN capital base is paid up. This is grossly inadequate and undermines the Bank’s capacity for financial leveraging in the local and international markets.

Besides the weak capitalization, FMBN’s primary source of funds, the National Housing Fund (NHF) Scheme, is also constrained by systemic issues. The Government set up the NHF Scheme in 1992 to pool long-term funds for affordable housing development. Sources include:

• Contributions of 2.5% of the monthly income of Nigerian workers

• 10% of loan portfolio investments from commercial banks (10% of loan portfolio).

• 40% & 20% of life and non-life funds’ investments from insurance companies.

• Contributions of the Federal Government (through direct intervention)

However, compliance has been weak and limited. More than 90% of the Bank’s housing interventions come from workers’ contributions, thus limiting its financial capacity to make a significant dent in tackling the housing deficit that experts estimate would cost N60trillion to fix. The FMBN Management is driving a robust government and stakeholder advocacy for the Government to recapitalize the Bank from N5billion to N500billion while also working with the National Assembly to review the legal framework for enforcing compliance by financial institutions. The actualization of these two measures would put the Bank in better stead to deliver on its mandate.

Optimizing Available Resources for Impact

Despite the clear institutional and systemic limitations, the current FMBN Management has done a remarkable job of mobilizing funds to the NHF and ensuring optimal deployment for impact. Statistics show that over the past four years, FMBN grew NHF collections from N232b to 449b, an increment of about 92%. Housing loan disbursements grew by more than 85% to N297.7 from N152b in 2017, while the housing stock increased from 20,435 to 30,719. Refunds to retired contributors grew by 275% from N10.8b to N40.7b. As a result of the teams’ transparent operations and strategic engagement with stakeholders based on value, the number of participating states increased from 28 to 34.

A Commitment to Workers

FMBN has also re-purposed the National Housing Fund (NHF) to impact Nigerian workers who contribute the most to the fund. In 2018, FMBN commenced the implementation of the National Affordable Housing Delivery Program in partnership with the leading Labor Unions in Nigeria to tackle the rising shortfall for workers. The unions include the Nigeria Labor Congress (NLC), the Nigeria Employers Consultative Assembly (NECA), and the Trade Union Congress (TUC). The housing program aims to build and deliver decent, safe, and quality housing for Nigerian workers at a price they can afford. In line with this goal, the house types under the program are based on proven social housing models and comprise one-bedroom, two-bedrooms, and three-bedroom units with prices ranging from N3.1M to N8.3M.

According to the FMBN MD/CEO, Arc. Ahmed Dangiwa, “The National Housing Delivery Program, is a noteworthy development. It marks the first time FMBN, and the labour unions have worked closely with experts and industry stakeholders to develop a realistic and acceptable framework for delivering affordable housing to Nigerian workers. The collaborative spirit which this program has fostered gave room for Labor leaders, who understand the realities and financial challenges that Nigerian workers face, to make constructive inputs to the housing designs, pricing range, and other relevant conditions for delivering this project.”

Unlike in the past, where poor financing and delays plagued projects, FMBN has demonstrated speedy implementation of this housing collaboration with the labor unions.

A significant proportion of the 1,400 housing units planned under the first phase have been delivered in 2 states, each in the six (6) geopolitical zones.

The second phase of the program has already commenced. FMBN and the labor unions have secured project sites of about 10 hectares each from 12 states to construct a total of 2,172 houses at 181 housing units per site.

FMBN’s involvement of labor leaders makes the National Affordable Housing Delivery Program a fit-for-purpose tool that will deliver houses that workers can afford.

Like many governments owned institutions, FMBN has had its fair number of challenges over the years. However, the past four years have seen a remarkable improvement in its operations. The positive shift is thanks to a focused and reform-minded executive management team. To enable the Bank to scale its operations, Government should approve the Bank’s framework for re-capitalization to N500bn. Additionally, Government and housing industry stakeholders should support the review of the legal framework for the operations of the Bank so it can deliver on its philosophy that everyone deserves a home. The raging insecurity across Nigeria now shows that ensuring adequate housing for all Nigerians is no longer just a fundamental human right; it is a social, economic, and political imperative. The FMBN is well-positioned to deliver with an increased financial war chest.

*Agbo is a housing industry analyst based in Abuja.

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The National Housing Delivery Program, is a noteworthy development. It marks the first time FMBN, and the labour unions have worked closely with experts and industry stakeholders to develop a realistic and acceptable framework for delivering affordable housing to Nigerian workers