Affordable housing: From dream to reality

By Ngozi Okonjo-Iweala Exactly fourteen months after convening the Housing Retreat in November 2012, President Goodluck Ebele Jonathan is launching the Nigeria Mortgage Finance Company (NMRC), signaling the beginning of a process that would finally increase opportunities for Nigerians to own their homes at an affordable price. Today’s event will also involve the reinvigoration of mass housing initiatives which will, along with the NMRC, give the housing sector the necessary fillip to start realising its great potential for the good of the country. The country as a whole will gain significantly from the unleashing of a sector which has the capacity to transform the entire economy through millions of direct and indirect jobs as well as many other ancillary benefits. To appreciate the significance of this, let us consider a few facts. Nigeria’s significant housing demand has been estimated at 17 million, with an additional 2 million units needed every year. Labour impact assessment studies in countries with similar demographics and economies as Nigeria, estimate that at least 5.62 direct jobs can be generated with every new home, and 2.48 indirect jobs in housing related expenditure. So far, our country is yet to realise this potential. In 2012, housing, construction, and real estate accounted for only 5.54 percent of our GDP. This figure is low in comparison to many other developing countries. Addressing the housing deficit will have a game-changing impact on our society and our communities. Globally, there is a strong consensus that the development of the housing sector is important for stimulating economic growth and job creation in any economy. Indeed, housing construction is one of the most used indices for gauging the economic situation in most developed countries. The Case-Schiller index used to monitor housing starts in the US is a good example. Likewise, in Malaysia, one of the main contributors to the country’s 8 percent per annum three-decade long GDP growth was the housing and construction sectors. New home construction is a major generator of jobs through direct employment in the construction industry with significant multiplier effects on other sectors of the economy. This is the kind of potential that the launch of the NMRC and related initiatives is set to unlock. This explains why the President made housing a priority sector in the Transformation Agenda. As a practical expression of this focus, he directed in May 2012 the convening of a major presidential retreat on the housing sector that brought all stakeholders together to discuss issues of land titling and land administration foreclosure policies, access to affordable housing finance and cost of construction materials among others. The second event was a Roundtable on Housing Finance which the President instructed me to convene in November 2013. This was attended by banks, development finance institutions, private sector players, and public sector partners like the Ministry of Lands, Housing and Urban Development, and the Federal Mortgage Bank – to review and analyse the potential for housing finance in Nigeria, and see how to overcome trenchant obstacles. A major outcome of the Roundtable was the setting up of a housing finance committee chaired by the Federal Ministry of Finance, and comprising the Federal Ministry of Lands, Housing and Urban Development, the Central Bank of Nigeria, mortgage and commercial banks, supported by the World Bank and the IFC. The committee was mandated to take forward the work of developing a facility that would significantly scale-up access to affordable mortgages for the Nigerian people. The outcome of the committee’s work was the recommendation to set up the Nigeria Mortgage Refinancing Company to significantly increase the liquidity available to mortgage organisations such as Primary Mortgage Institutions (PMIs), banks, Housing Microfinance Institutions and other financial actors. The NMRC is a public-private sector initiative with majority shareholding by the private sector. The federal government is a sponsor and also a shareholder. It is backed by a World Bank zero interest credit of $250 million with a 40-year tenor and 10 years of grace, a very attractive facility. The NMRC will further float an additional N50 billion in bonds as soon as it is operational to which institutional and other investors can subscribe. Further bond issuances will take place in a phased manner to significantly boost NMRC’s resources and liquidity for purchase of bundled mortgage products from the PMIs and other institutions. The launch of the NMRC and the initiative to open up the housing sector also involves efforts to improve land titling and land registration, speed up governors’ consent, and improve foreclosure policies all presently impediments to the proper functioning of the housing sector. Many states are active in housing development and have put in place supportive policies. However, the advent of the NMRC hugely expands the horizon of what can be achieved. As such, 14 pilot states including the FCT are working closely with the federal government on this initiative. Once they fulfill laid down criteria in putting in place appropriate policies, their citizens stand to benefit from greater access to affordable mortgages. The Governors of Abia, Anambra, Bauchi, Bayelsa, Delta, Gombe, Kano, Kaduna, Lagos, Edo, Enugu, Ondo and Ogun States and FCT have signed on to work on the Housing Initiative. The launch of NMRC and enhanced housing initiative will have significant multiplier effects on many sectors of the economy unleashing jobs for architects, builders, plumbers, welders, carpenters, painters, interior decorators, furniture manufacturing and other allied small scale industries. •Dr Okonjo-Iweala, Coordinating Minister for the Economy & Minister of Finance, gave the speech at the launching of NMRC in Abuja