Housing affordability and accessibility are largely dependent on the cost and availability of housing credit, both short-term and long-term. The benefits of mortgages cannot be overstated, whether they are for an individual, a business or the government.
It is no longer up for argument that the housing sector in Nigeria is being hindered by numerous issues. The list of difficulties is seemingly never-ending and includes a deficiency in infrastructure, a weak legal and regulatory framework, expensive land and building material costs, high inflation, a weak value of the naira, and a lack of crucial investment in the industry.
Homeownership is regarded as a fundamental component of livelihood, and it enables people, families, and low-income earners in particular to accomplish the goal of living in a conducive, free and secured atmosphere,
As it stands, owning a home in Nigeria typically requires the ability to pay for it outright, but the statistics show that only 10% of Nigerians who want to own a home can afford it.”
Top on the list of the daunting challenges bedeviling the dream of Home ownership for Nigerians, is the absence of an effective mortgage and credit system that can assist low-income earners in being able to finance a property.
Currently, the majority of Nigerians who want to own a property must be able to pay for it outright, according to the statistics, although just 10% of the country’s population possesses this ability.
A mortgage enables borrowers to access substantial amounts of money that can be used for a variety of purposes, including starting a business, consolidating debts, upgrading their homes, among other objectives .
Basically, the real estate business and property transactions are more effectively driven by an efficient mortgage system.
Homeownership in Nigeria is a daunting challenge due to our poor mortgage system, which has made many to depend on personal savings to build a house. Even with the introduction of public private partnership to shelter the teeming population, homeownership has remained a herculean task for Nigerians, and a solution seem far from sight.
The current housing deficit of 28 million units has grown progressively from 2 million housing units in 2007 to 14 million in 2010, 20 million in 2018, and more recently, 28 million housing units. Since housing constitutes a critical social demand, improving access has become an urgent priority. This is also corroborated by the fact that the country’s population is projected to double by 2050; this will predictably lead to a proportionate increase in the housing gap and potentially an increase in the number of homeless Nigerians.
Additionally, the current rural-urban migration, currently growing at 4.3 percent, is expected to double by 2037, leading to more demand for housing in urban centres. If we must meet this demand, access is key, especially in finance, which comes in the form of mortgages and credit. This would not be far different from the practice globally, everywhere in the world. Because of their nature as capital-intensive assets, houses are purchased on mortgage, with sometimes people paying for the rest of their lives, and it is imperative that Nigeria cannot be left behind if we must put an end to the current level of homelessness.
The challenge with mortgage and housing finance in Nigeria is that it is not only inaccessible; it is also expensive, with very short tenors, sometimes less than 10 years. How can a low-income earner secure a mortgage, with interest rates usually ranging from 18 to 27 percent? With the current realities, it is simply out of the reach of many Nigerians.
However, in fairness to the banks and other lenders, the high cost of borrowing does not exist in isolation; it is in part the result of the country’s monetary policy rate (MPR), set by the Central Bank as part of efforts to ease inflation.
For example, in February, the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) raised the Monetary Policy Rate (MPR) by four hundred basis points to 22.75 percent from 18.75 percent, making it the highest increase in MPR in over two decades. The effort was to stem the growing inflation, which currently stands at an average of 31 percent. Simply put, when MPR goes up, the bank lending rate to consumers also goes up, including mortgages. These are the key issues.
Consequently, Nigeria must reform the mortgage and consumer credit sector immediately to make it accessible, optimal, and affordable, preferably at a single-digit interest rate and with a longer tenure. This might require some form of government intervention and arrangement with lending institutions for people to access mortgages at a special rate, other than obtaining an interest rate at any time.
Conclusively, Improving mortgage accessibility in Nigeria, has become a matter of urgency. The government must immediately work with private sector players, especially the banks and key players in the housing sector, to draw up a plan consistent with global practice, for creating an efficient mortgage system for the people.
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