The Need to Strengthened Mortgage Banks for Sustainable Housing Solutions

ESV Nkeiru Arum, FCA,FICA ANIVS,

In this opinion article, Nkeiru Arum, a multidisciplinary professional, argues from the professional point of view on the need to strengthen mortgage banks for optimum housing solutions. Amongst other professional affiliations, she is a fellow of the Institute of Chartered Accounts of Nigeria (ICAN), and an Associate member of the Nigerian Institution of Estate Surveyors and valuers (NIESV).

Nigeria’s housing deficit remains a significant challenge, with an estimated shortage of over 20 million housing units. Despite government interventions and private sector involvement, homeownership remains a distant dream for many Nigerians, primarily due to affordability constraints and limited access to long-term financing. Mortgage banks, theoretically positioned as key players in bridging this gap, have struggled to fulfill their mandate due to systemic challenges. Yet, they remain a crucial component of Nigeria’s journey toward a sustainable housing sector and even the overall real estate development in Nigeria.

Mortgage banks in Nigeria provide long-term loans to individuals seeking homeownership, usually requiring repayment over 10 to 25 years. These institutions operate under the regulation of the Central Bank of Nigeria (CBN) and the Federal Mortgage Bank of Nigeria (FMBN), which oversees the National Housing Fund (NHF). The NHF is designed to offer affordable mortgages at single-digit interest rates, funded by compulsory contributions from workers earning above the minimum wage. Beyond individual home financing, mortgage banks also facilitate funding for real estate developers, enabling large-scale housing projects across Nigeria, especially the developing cities. However, their impact has been limited by structural inefficiencies and a lack of liquidity in the housing finance market.

Despite their huge potentials, mortgage banks in Nigeria face several barriers. High interest rates, often ranging between 15% and 25%, make home finance inaccessible for most citizens. Even NHF loans, which offer interest rates as low as 6%, are bureaucratic and slow to access. Limited long-term funding also poses a significant challenge, as the lack of a robust secondary mortgage market means banks struggle to provide long-term loans at affordable rates. Unlike developed economies where mortgage-backed securities provide liquidity, Nigeria’s mortgage industry is largely underfunded. Additionally, the cumbersome and expensive process of acquiring and registering land titles discourages investment in housing finance. Economic volatility, including high inflation, currency devaluation, and unstable income levels, further complicates mortgage accessibility, making it difficult for borrowers to commit to long-term mortgage payments.

To strengthen mortgage banking as a sustainable solution for Nigeria’s housing crisis, several reforms are necessary. Strengthening the National Housing Fund would ensure that NHF contributions translate to faster and more accessible mortgage financing for low- and middle-income earners. Developing a secondary mortgage market by encouraging private investment in mortgage-backed securities could increase liquidity and expand access to home loans. Land reform is also crucial, as simplifying land registration and reducing costs would facilitate property ownership and encourage investment in housing development. Interest rate subsidies, particularly for first-time homebuyers, could make mortgage financing more accessible, while public-private partnerships between mortgage banks, real estate developers, and the government could help create more affordable housing schemes.

Mortgage banks have the potential to drive homeownership in Nigeria, but their impact remains stifled by systemic inefficiencies. Without significant reforms, they may continue to serve only a fraction of the Nigeria’s over 200 million population. A sustainable housing solution requires not just financial institutions but a holistic policy shift that addresses affordability, accessibility, and economic stability. The congenial economic and political environment must also be created by the government at all levels. Until then, the dream of widespread homeownership in Nigeria remains a mere wishful thinking.