As inflation shaves off savings of many low and middle-income class Nigerians amid rising construction costs, homeownership plans are being deferred as untamed food prices continue to bite deeply into household incomes. With currency devaluation and stubborn inflation that sees many homes spending over half of their incomes on food, many households are falling off the eligibility ladder for mortgage.
Nigeria’s food inflation rate in February 2024 quickened to 37.92 per cent on a year-on-year basis, which was 13.57 per cent points higher than the rate recorded in February 2023 (24.35 per cent). In recent years, food prices have been on the rise across Nigeria but got worse in the last few months following subsidy removal and naira devaluation. The upward trend in the prices of these staples and other products has weakened the purchasing power of many citizens, making it difficult for many households in the country to afford daily meals.
The naira has tumbled across both the official and unofficial markets on several occasions in recent times amidst an increased forex demand and a significant spike in the prices of goods and services across the country. Though the National Housing Fund (NHF) Act 2004, states that all Nigerian employees and income earners, whether in paid employment or self-employment, are entitled to the NHF scheme and can register as long as they’re 21 years of age and whose salaries are more than N3,000 per annum, there are worries that the housing gap between the high- and low-income earners may widen as contributions become inadequate for mortgage requirements.
The long-standing housing crisis has reduced new constructions that prompted inflated property prices and soaring rents. The combination of a growing urban population, poverty, increasing construction costs, high inflation and declining household income, have also made access to decent and affordable housing difficult for many Nigerians. The Guardian gathered many NHF contributors; especially civil servants earning N100, 000, who could not afford to build individual houses as result of the rising cost of building materials and inability to get allocation, have also been disenfranchised in different government housing schemes and mortgage products.
Even the Federal Government’s housing programme is beyond their reach. According to UN-Habitat, housing is not affordable if it costs more than three yearly household incomes to buy or more than 30 per cent of monthly income to rent. With current statistics, there is a global housing affordability crisis that the formal private housing market alone is failing to confront. The affordability crisis cannot be addressed unless it considers all segments of the housing stock-including public housing and informal housing that are now the only housing affordable to large segments of the urban population – while creating conditions for the private housing sector to reach further down market.
Currently, the units range from one, two to three-bedroom bungalows and blocks of flats across 34 states and the Federal Capital Territory. For instance, the one-bedroom house type costs between N7, 222,404 and N9, 268,751; two-bedroom bungalow sells for N9, 148,378 and N12, 398,460, while that of a three-bedroom range between N13, 241,074 and 16,491,155. There are fears that the government may raise current home prices in its scheme due to the high exchange rate and inflation in the country.
If that happens, it will further worsen the woes and affordability of the low-income earners, who before now could not secure a mortgage, as their monthly salaries have been affected by the devaluation of the naira. The Federal government established the NHF scheme in 1992 for Nigerians above 18-years of age, especially those working in public, private and informal sectors are eligible to register and participate by contributing 2.5 per cent of their monthly incomes towards owning a home.
The loan amount is determined by the applicant’s affordability and income level that will enable repayment of the loan. A prospective applicant who wishes to obtain a loan to build a house is expected to have his/her land, as well as an acceptable title to the land prior to the application for an NHF loan. In many states, land prices have skyrocketed beyond the means of low-income earners, while land owners find it difficult to obtain titles due to the exorbitant rate. Also, a contributor is eligible to access a maximum loan amount of between N5million to N15 million repayable over a maximum period of 30 years at an affordable interest rate of 6 per cent.
The applicant can also apply as an individual for an NHF loan to develop a land or buy directly from government sponsored estate or private estate developers. The contributors’ base of the scheme as of July 2023 according to figures obtained by The Guardian from the FMBN revealed that in about 31 years of the scheme covering 1992 to July 2023, N656.12 billion was received as contributions from the NHF scheme. Data further shows that 24,322 mortgage loans were created, N92.41 billion was disbursed as Home Renovation Loan to 113,948 beneficiaries, N225.96 million was disbursed as NHF Individual Construction Loan, which was introduced recently by the bank.
Also, N67.41 billion was refunded to NHF retirees. The refund figure is for 440,222 retirees. real estate The Guardian gathered that factors affecting civil servants from owning homes are that not many civil servants earn 100,000 per month, except Grade level 12 and above are those earning such monthly salary. Secondly, the tenure of mortgage is limited to the length of service remaining before retirement and civil servants are required to retire at the age of 60 years or expiration of 35 years in service whichever is earlier.
Therefore, tenure of mortgage is based on length of service remaining for a civil servant as mortgage facilities are not extended beyond date of retirement. Also, another issue is mortgage finance interest rate as mortgage repayment includes the principal and interest – Federal mortgage charges six per cent yearly, while the Federal Government Staff Housing Loans Board charges three per cent yearly.
Given the above limiting factors, the question is how much mortgage can be advanced to a civil servant earning N100, 000 per month and assuming at 30 years tenure? Another factor is the equity requirement, which is payable in advance before mortgage approval. In some cases, equity requirements are waived.
The Managing Director, Nigeria Integrated Social Housing (NISH) Affordable Housing Ltd, Yemi Adelakun, explained that there is a civil service rule that limits servicing of mortgage to not more than 30 per cent of monthly salary. “Hardly can one find a two-bedroom home in a decent location for less than N10 million even those built by government institutions like Federal Housing Authority (FHA) and Lagos State Development and Property Corporation (LSDPC),” he said.
He said that many eligible civil servants contributing to NHF have no hope of securing mortgage finance while in service in view of their limited resources and other impediments. He called for increased capitalisation/subvention of FMBN and FGSHLB, saying, institutions that have not contributed to NHF as required by law should be made to pay up. While FMBN Act needs urgent review, FGSHLB should consider securitisation of its funds and transformation to Federal Civil Servants Mortgage Bank.
Adelakun said the apex mortgage institution should concentrate on their core mandate of mortgage finance and desist from developers’ loan exposure and ensure civil servants have easy access to 25 per cent of their pension contributions for housing purposes, as well as encourage cooperative housing among civil servants and other housing off takers including those in the informal sector. He stated that the government should incentivise developers to embark on affordable housing development through bankable off takers guarantee, land equity by governments, public, private, and people partnerships, as well as promote use of innovative technology for scale and cost effectiveness.
The Executive Director, Housing Development Network, Mr Festus Adebayo, said although some people have benefited from the NHF scheme, the bad news remains that many contributors have not benefited. Adebayo emphasised that there is still a problem regarding how much a worker who earns N30,000 monthly can afford to buy a house. “That is the biggest problem threatening the NHF. It needs to be overhauled. The law setting up NHF…
[GNN], [DPNG]
