Stakeholders in the Nigerian financial markets have called for the use of the nation’s growing alternative finance market for the development of amenable housing schemes in order to bridge the country’s huge housing gap.
Experts said the alternative finance or non interest segment of the capital market has the potential to finance the housing sector which will lead to better well-being of the citizenry as well as general performance of the other sectors of the economy.
Speaking in a webinar on: “the Non-Interest Capital Market as Panacea to Mortgage Financing in Nigeria”, experts said that financing residential and commercial real estate to enhance societal well-being and unlock economic opportunities remains a global challenge.
Director-General, Securities and Exchange Commission (SEC), Mr. Lamido Yuguda, Yuguda said a World Bank study estimated that Nigeria’s housing sector requires an investment of about N59.5 trillion to bridge the 20 million housing deficit that is increasing yearly.
He said the extent of housing deficit shows a huge untapped investment opportunity in the nation’s real estate sector.
He noted that governments at both federal and state levels, and businesses in Nigeria have been tapping various available sources of financing, including capital market products for funding real estate developments. The methods of finance have various associated costs, some which are deemed to be high.
He emphasised that the Nigerian capital market provides a platform for mobilizing long-term funds for real estate investments to complement the mortgage funding sources by commercial banks, primary mortgage institutions, non-governmental organizations, cooperative societies and international finance institutions.
“The capital market creates investment opportunities to enhance the flow of low-cost, long-term funds to the real estate sector through investment vehicles such as Real Estate Investment Trust Schemes (REITs) and Mortgage-Backed Securities. These instruments are usually traded on recognised Exchanges.
“I am delighted to inform you that some corporate entities have started taking advantage of the Non-Interest Capital Market. In 2021, Family Homes Funds Limited, a social housing initiative promoted by the Federal Government, issued a N10 billion Sukuk to finance residential houses across the six geopolitical zones of the country and it was oversubscribed by over 200%. The company also recently raised another N10 billion from the market. This development was a strong indication of the readiness of the capital market and corresponding investors’ appetite for non-interest mortgage instruments.
“We strongly believe that the operationalisation of the Non-Interest Pension Fund (Fund VI) and the recent amendment of the Pension Act to facilitate withdrawals from RSA for down payments of equity contributions for mortgage will increase the quantum of low-cost long-term investible funds to the Mortgage Industry by unlocking the untapped capital in the economy,” Yuguda said.
Managing Director, Federal Mortgage Bank of Nigeria Mr. Madu Hamman said that the non interest financial products have gained a lot of interest by investors in Nigeria and globally and could aid housing finance sources and expand the frontiers of home ownerships through non interest finance sources.
He added that the adoption of non-interest finance would go a long way in giving the capital market the needed boost to unbundle funds that were hitherto not accessible to Nigerians adding that it is obvious that the Nigerian economy is on the verge of experiencing a tremendous transformation in this regard.
According to him, sourcing of non interest funds from the capital is very necessary for seamless operations as funds sourced from interest based facilities cannot be leveraged to deliver on non interest mortgage transactions.
“We are committed to linking the mortgage market with the Nigerian capital market and thereby ensure sustainable long term funding for the housing and mortgage sector. The non interest capital market is therefore one area for such sustainable long term funds that can be assured,” Hamman said.
Managing Director, Nigerian Mortgage Refinancing Company, Mr. Kehinde Ogundimu said there was no way the nation can meet the housing deficit without having the non interest services sector actively participating in it.
He commended SEC for its developmental initiatives noting that continuous engagement among stakeholders would further facilitate the development of the alternative finance.