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OPINION: Growing the Economy through Efficient Mortgage Financing System

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By Godwin Ewulu

Financing Homes plays a very critical role in the life of every economy. More often than not, this role is poorly acknowledged and therefore less emphasized. Owning Homes  are not just about the well being of the citizens, it is also key to the growth of other sectors of the economy. We cannot underemphasize the role owning ones home plays in the Society and expect harmony and growth in our economy. Apart from being one of the basic needs of man, homes also play very direct role to the productivity of the working population from Construction to Manufacturing, Civil Service to Oil and Gas. A descent home means a healthy worker and healthy worker means increased productivity which in turn translated to improved economy. In every economy, housing is one of the indices for measuring standard of living. Poor homes poses health risks and health risks are economic risks. When you take care of the home, you have taken care of many issues of the economy. Descent houses do not come easily; they require huge capital investment projects to actualize hence the importance of Mortgage Financing.

Mortgage Financing has been one of the most poorly managed services in Nigeria since its introduction in the late 50s. Nigerian Building Society was the first mortgage institution established in 1956; it collapsed in the 70s and the then federal government injected N20 million to revitalize it and changed its name to Federal Mortgage Bank of Nigeria (FMBN). Established in 1977, the FMBN was charged with the responsibility of providing long term credit facilities to other primary mortgage institutions which includes: Building Societies, Housing Associations and Credit Unions. FMBN struggled to keep up with the demand for facilities but was never able to meet up. This led to the closure of some of the primary mortgage institutions. Not having a standardized sustainable mortgage system has made mockery of the system itself; and instead of being the backbone to home ownership in Nigeria, Mortgage Financing system has become one of the major problems facing the Government of Nigeria. As the Mortgage system rise and fall, housing problems in Nigeria grow in triple fold. As population increases, the demand for housing increases and this demand has never been met in the entire history of Nigeria. Rural-urban migration has also increased the demand for housing in the major cities. The 2006 population estimates showed that there were 5 to 8 persons per room in Lagos.  Ten years down the line, that must have increased tremendously. Other factors compounding the problem of housing in Nigeria include:

  • Land acquisition and documentations

The bureaucratic process involved in land acquisition and documentation in Nigeria is on its own a serious monster. Aside the bottle neck process, the cost of land documentation sometimes appears to be greater than the cost of the land itself.

  • High cost of building materials

Some of the most expensive items in the market today are building materials. Even when some individuals have succeeded in acquiring land, they sometimes abandon it due to inadequate fund for developing the property. Others a times resort to using substandard materials whose consequence become very devastating at the end of the day.

  • Lack of skilled and qualified builders

Just like the quality of other professionals, the quality of civil engineers, architects, planners, surveyors and builders keep dropping each day. This has resulted in increased cases of buildings under construction being collapsed.

  • Use of non professionals in implementing housing policies

If you go to different Ministries of Land and Urban Development, you will discover that only very few individuals are real estate professionals. This has caused a serious set back in police implementations.

There factors go a long way to affect the effectiveness of Mortgage Financing in the Housing Sector.

Is there any solution in sight to housing problems in Nigeria?  Yes! There must be a way out since these problems are easily identified.

First and foremost, we must adopt a holistic approach in tackling housing problems in Nigeria. Mortgage Financing is key; but it is not the only way out. The issues of land acquisitions, training of builders, encouraging the production of quality building materials through tax incentives, transparency in policy implementations must all be brought to bear in addressing housing deficits in Nigeria. For effective Mortgage Financing System to thrive, we must:

  • Stick to Plans:

We have had national housing policies since independence and majority of them have failed woefully in meeting the needs of housing in Nigeria. This is due to the fact that we do not follow plans as stated. In 2017 budget, there is what is called Family Homes Fund of N1tn out of which N100b is provided as seed money, the plan is to kick start mass development of affordable housing units across the country. This plan will change the situation on ground.

  • Revitalize the Existing Mortgage System:

The FMBN is empowered to be the apex manager of the Nigerian Mortgage System. The FMBN will be adequately funded so that it could fund existing primary mortgage institutions and establish new ones that will be accessible to the citizens. The National Housing Policy preaches affordable housing for the poor and low income earners; to achieve this, programmes must be put in place as a framework to ensure that the houses built are affordable. The policy must ensure that tenants who pay rents should, after a period of time, own the house. In line with this the Federal Government through the Ministry of Finance has come introduced the Family Homes Fund, which not only ensure that the houses built are affordable for low income earners, it will also ensure that after a period of time the tenants own the homes. The FMBN should empower and regulate registered Cooperative Societies and Credit Associations so that their members can easily access funds for home financing.

  • Involve Private Organizations:

As a way of improving the mortgage Financing System, it is important to involve private organizations. They can build estates for their staff and have them pay over time. It is also important to get real estate organizations involved. Rather than trying to provide housing units, the government can allow private organizations to access funds and build estates thereby contributing to the growth of the economy.

  • Involve Pension Fund Administrators:

Mortgage Financing is not be left to FMBN alone. Federal Ministry of Finance has keyed into the mortgage system and is financing homes through the Family Homes Fund. The contributors’ funds are judiciously used, homes are provided for contributors and economic indices are improving.

We are yet to see the benefits of contributing to pensiosn over the years only  to cash the money after retirement and the value is almost nothing. Let the fund be put to good use here also. Let the pensions fund be converted to homes.

Mortgage Financing as being introduced by the Federal Ministry of Finance initiative(FHF Ltd) can improve the economy in achieving set goals by reaching the poor and low income earners from this perspective.


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