Nigeria’s Housing Sector Struggles with High Costs, Inequality

Nigeria’s estimated population of 218,514,212, per the World Bank, has an estimated 54% living in urban areas. This urban population is slated to continue to grow, in line with the country’s population. The population growth has led to a housing deficit of over 28 million, as estimated by the Federal Mortgage Bank of Nigeria (FMBN) and the International Human Rights Commission (IHRC). This deficit works in tandem with an unemployment rate of nearly 33% to produce a sizeable number of slum dwellers.   

A major hindrance to the country’s plans to provide housing will be a struggling economy. As of the time of writing, Nigeria is dealing with a 22.79% inflation rate. Insecurity, soil degradation, and reliance on subsistence farming often lead to food shortages, which in turn necessitate food importation. Falling oil production and export have reduced revenue and foreign exchange earnings. The government made an allocation of NGN1.24 trillion, 5.7% of the national budget for Works, Housing, Power, Transport, Water Resources, and Aviation. A further study of the budget reveals that N356.03 billion is appropriated to the Ministry of Works and Housing, with final estimates for housing being set at N45 billion.  

This figure is a far cry from the N21 trillion which the federal government’s Bank of Industry estimated will be needed to close the housing deficit. All of these make it difficult for the country to close the housing deficit, a burden which will then fall largely on the private sector.  This in turn comes with its challenges.  

High costs of land, especially in urban areas, and an escalating cost of building materials lead to often unattainable construction costs for the average Nigerian. A lot of building materials are imported, and the country’s cement industry is a near-monopoly, with only three producers owning the vast majority of the market share. Building a house becomes the preserve of a very small minority, who then proceed to charge exorbitant rents.  

Over 60% of Nigeria’s population is living under the US$2-a-day poverty line, and the major routes to home ownership remain either the outright purchase of homes or the purchase of land and personal construction. These contribute to the country’s low homeownership rate of 25 per cent, per the Association of Housing Corporations of Nigeria (AHCN).  

A mortgage industry exists, along with several housing financing schemes. Over 34 primary mortgage banks and 24 commercial banks operating in Nigeria provide residential mortgage loans. The Federal Mortgage Bank of Nigeria (FMBN) makes 6% mortgage loans available through accredited Primary Mortgage Banks (PMBs). This is only available to people seeking loans through the National Housing Fund (NHF), at a maximum mortgage tenure of 30 years. 

For most people, the only path is through PMBs and commercial banks, where mortgage rates can go as high as 28%. Inequality is rife, and as a result, most Nigerians are often unable to access finance for mortgages. To illustrate this, as of 2019, only 32,260 mortgages had a value of US$2.17 billion. In contrast, Egypt had an outstanding value held in 437,631 residential mortgages. Even when the homes exist, very few Nigerians can own them; residential areas such as the Lekki axis of Lagos State are full of empty houses. 

The country’s government has devised several schemes to tackle the housing crisis. The Federal Government’s National Housing Programme (NHP) was inaugurated in 2016 to construct affordable housing across the nation, a task of the National Social Housing Programme (NSHP). The Family Homes Funds Limited (FHFL) is a loan assistance program targeted at low- and middle-income households. Ineffective policy implementation is a constant setback, a problem the country experiences across many sectors.  

Except the country figures out how to build homes quickly and provide finance to its citizens, slum populations will rise while high-rise buildings sit empty. A concentrated cement/building materials industry and an unregulated housing market leave power in the hands of a few, free to dictate prices at will. Most urban-dwelling Nigerians already spend considerably more than the recommended 30% on rent. With inflation outpacing salary growth, housing is seemingly slated to play a larger role in the country’s cost-of-living crisis.