The Nigerian government is planning to inject 500 billion naira into its own low-cost mortgage lender over the next five years, in an effort to address the 17-million unit housing deficit. According to Bloomberg, “Nigeria is seeking to improve access to home loans in an economy that vies with South Africa as the continent’s biggest.” Currently, they note, there are only 50,000 registered mortgages, a figure which can be attributed to poverty, high interest rates and a lack of land deeds. Five years ago, Reuters had already expressed the problems caused by a lack of housing. “In many ways Nigeria represents the perfect storm for real estate investment; huge population, rapid urbanization and a growing middle-class,” said Michael Chu’di Ejekam, Director of Nigerian Real Estate at a London-based private equity firm.” Real estate professionals are reporting larger-than-ever demands for homes from the burgeoning middle class, which makes up around 23% of the population.
Why are Low Cost Mortgages so Vital in Nigeria?
Investing in the real estate sector is necessary not only because of the demand for homes but also because, as noted by housing expert, Festus Adebayo, doing so can help reduce Nigeria’s unemployment rate by 50%. At a conference held recently in Abuja, Adebayo noted: “housing is the new way to gear up Nigeria’s economy,” since real estate employs workers from a vast number of sectors, including architects, engineers, land surveyors, artisans, transport specialists and even food suppliers for these workers. The rising costs of rent in the nation’s capital are another reason. As noted recently by journalist Cornelius Essen, rising rental prices are causing many Abuja residents to seek accommodation in the outskirts: “The biggest drops in rental affordability over the past five years are in areas like Asokoro, Maitama, Wuse I and II, Wuye, Jabi, and Garki, where two bedroom flat goes for between N1.8 million and N2 million per annum… Areas traditionally seen as some of Abuja’s most affordable – also recorded a significant decline compared to the rest of Federal Capital Territory.”
Real Estate an Important Source of Economic Stability
A third reason for boosting low cost mortgages is the stability afforded to homeowners, especially as they age. Older homeowners can use home equity to free up cash through refinancing options that nevertheless do not demand that they leave the homes. As noted in a study by V Animasahun et al, one of the primary factors affecting the psychosocial health statues of elderly Nigerians, is economic stress. Since lifespans are increasing and the number of elderly Nigerians is growing, it is vital that this segment of the population have investments they can rely upon in tough economic times.
A Surge in Mortgages Planned over the Next Two Years
Nigeria’s low cost mortgage lender plans to increase its capital from 5 billion naira at a rate of 100 billion naira per year, reports Bloomberg, which means that the number of yearly mortgages it grants could potentially increase from 2,500 to 100,000 over the next couple of years. This extra cash is expected to attract interest from other investors. The Federal Mortgage Bank of Nigeria (FMBN) will also launch around 1,500 ‘rent to own’ homes that will hopefully result in a significant number of new mortgages and purchases.
Investing in real estate in Nigeria makes sense considering rising demand, rising rental prices, and the need to be competitive against countries like South Africa. By providing more low-cost mortgages and attracting further investment in real estate, the FMBN will encourage employment across a plethora of sectors. It will also ensure that future senior populations are more secure, with many Nigerians being able to free up equity from their property if required.