2019 started off with the presidential and gubernatorial elections across Nigeria. The incumbent president, Muhammadu Buhari returned for a second term and a lot of stakeholders prompted him to act urgently on certain issues that would improve the country’s housing sector, but given the pace at which the government had moved in the preceding years, expectations are that performance levels will be more of the same.
The government stalled for months before appointing a cabinet. The 2019 budget was passed at ₦8.6Trn, less than the 2018 budget in both nominal and real terms. More will be required to solve the nation’s critical problems. Borrowing remains the leading option of choice in strengthening the economy. The reappointment of the Central Bank Governor was believed to be what the market needed – a stabilising pair of hands.
The Nigerian economy continued to struggle as recoveries from an earlier recession suffered setbacks that were caused by some protectionist policy decisions, including the closing of land borders in 2019.
But the supply side of the residential real estate market continues to show signs of life. Tenants, yet to recover from the weak economy pushed for better rents to Landlords who conceded – but only negligibly. Middle income ‘work, live and play’ projects were announced by developers. And land values have appreciated with frontier land investments in Lagos offering impressive rates of return. Also, the real estate sector came out of recession in Q1, growing by 0.93%.
Green buildings continue to feature in conversations, waiting for a generally traditionalist market to catch up. Projects as the Recycle Pay project, which allow school fees payments in plastic bottles join the list of sustainability initiatives. Still, long term profitability through sustainability, when compared with current systems, remains a more complex calculation. Land values have continued to appreciate and the Grade A office markets struggle with unhealthy vacancy rates remains the case. Coworking models are also evolving and, for the first time, we will be including properties prices from emerging cities for your investment consideration.
Nigeria’s commercial real estate market is going green. Most ongoing prime office developments – or those that have been delivered in recent years are a testament to the fact that green buildings have come to stay. The US government acquired about 50,000m2 of land in Eko Atlantic City for the Consulate’s new head office. A 21-storey smart office tower is being constructed in Uyo, Akwa Ibom state at an approximate cost of 19Bn, funded via a PPP. Upon completion, it is expected to house leading oil services firms.
We shall now specifically look at the issues, individual agencies and institutions in the sector and the impact they have made.
FMBN Disbursed N75.5bn NHF Loans since 2017, Increased Processing Speed by 45%
In the year, the Federal Mortgage Bank of Nigeria (FMBN) re-stated strong commitment to the speedy processing of qualified housing loan applications in line with its mandate to boost the provision of affordable housing to Nigerian workers that are registered contributors to the National Housing Fund (NHF) Scheme.
The FMBN MD/CEO, Arc. Ahmed M. Dangiwa stated this while assessing results of the bank’s strategic efforts to clear backlog of housing loan applications; tackle longstanding issues of delays in the treatment of loan applications and disbursement of funds by subscribers to the NHF scheme.
He explained that the pro-active efforts of the current management of the bank have led to a 45% increase in FMBN’s speed of processing NHF housing loan applications and as a result the bank has been able to reduce substantially the huge backlog of loan applications that they met when they assumed office two years ago.
“I am pleased to note that we have recorded unprecedented improvement in the turnaround time of NHF loan applications. While before now it used to take an average of two years to process an NHF loan, we have been able to bring this down to four months. This is a significant improvement. Of course, we are still not where we want to be, but at least we are now moving in the right direction and intend to do more.
“From day one, improving the turnaround time of housing loan applications has been the priority of our management because we understood quite early that it has been a big issue over the years, which has led to the accumulation of huge backlog. When we came on board, we set out clear strategies to reduce it. And we have made decent progress”
“From 2017 when we came on board to date, we have been able to successfully process and disburse loans totaling N75.5billion. This includes 3,541 mortgages and 25,242 home renovation loans. We have also financed the construction of over 7,286 housing units within this period”
These figures represent a marked improvement in the performance of the scheme since it was established 27 years ago.
Speaking on the backlog of housing loan applications, the FMBN boss, Arc. Dangiwa said FMBN will continue to prioritize the 100% clearing of all qualified housing loan applications that have gone through the various stages. He added that the bank is aware that though it has made significant progress in reducing the backlog and disbursing loans to beneficiaries, efforts would be sustained to ensure that everyone is attended to.
Arc. Dangiwa seized the opportunity to appeal to its Partner Primary Mortgage Banks to key into the efforts of the FMBN to improve turnaround time for NHF mortgage loans by ensuring speedy treatment of applications and prompt forwarding to FMBN for approval and disbursement.
He however added that the bank’s weak financial capitalization remains a major handicap to its ability to deliver on its social housing mandate of affordable housing. He therefore re-stated his call on the Federal Government to increase the Capitalization of the bank from the meagre N5billion – with only N2.56billion fully paid up – to N500billion as a necessary first step to strengthening the capacity of the bank to meet the housing demands of Nigerian workers.
According to him, a stronger capital base for the bank will put the institution in a better place to leverage more finance from the private sector, capital market and international development agencies for deployment towards the provision of affordable housing to Nigerian workers.
He applauded the support and recent calls from the National Assembly Leadership, industry leaders and stakeholders for the government to empower the FMBN so it can play a stronger and wider role in tackling the spiraling housing deficit.
Decline in the funding of Nigeria’s Real Sector
Financial analysts at CSL Research, a member of the FCMB Banking Group, have expressed concern over the decline in the funding of Nigeria’s real sector.
The National Bureau of Statistics, NBS, had earlier published that commercial banks’ credit to the real estate sector dropped by 17 percent year-on-year, YoY, to N588.7 billion in the third quarter of 2019, Q3’19 from N710.2 billion in Q3’18. The data also revealed that the real estate share of banking sector credit fell to 3.62% in Q3 2019 from 4.56% in Q3 2018.
The analysts stated: ‘‘We believe the decline in the credit channelled to the real estate sector is reflective of the underlying weakness in the sector- since the economy witnessed recession in 2016, the performance of the real estate sector has been uninspiring with the sector recording just one positive growth (0.93% in Q1 2019) over the past 15 quarters (Q1 2016-Q3 2019). “We believe the decline in the credit channelled to the real estate sector is reflective of the underlying weakness in the sector- since the economy witnessed recession in 2016, the performance of the real estate sector has been uninspiring with the sector recording just one positive growth (0.93% in Q1 2019) over the past 15 quarters (Q1 2016-Q3 2019). “In our opinion, the chief contributor to the lacklustre performance in the sector is weak disposable income among consumers, which has continued to undermine the demand for housing. The impact of this is evident in the growing number of unoccupied houses in high-brow locations across the country particularly in Lagos and Abuja. Consequently, the attendant reduction in rental income would mean that real estate developers will be unable to recoup their investment, hence the relcuctance of banks to extend credit for property development,” it said.
On the other hand, the high cost of obtaining mortgage financing has also been a major deterrent to middle income earners, majority of whom now opt for rented apartments. Looking ahead, we believe commercial banks will continue to limit their exposure to the real estate sector considering the bottlenecks hindering the sector’s performance. That said, we believe the reduction in the cost of credit triggered by CBN’s regulatory actions may spur significant demand from the upper echelon of the middle class consumers who currently opt for expensive rental payments.
Affordable Housing: CBN Addressing High Mortgage Interest Rate, Other Issues
Central Bank of Nigeria (CBN) Deputy Director and Head of Nigeria Housing Finance Program, Adedeji Adesemoye revealed the several interventions by the apex financial institution in increasing home ownership in Nigeria through regulations, funding, mortgages, policy frameworks, partnerships and many more initiatives so far.
According to him, the bank is currently addressing the country’s high level of inflation which has a direct effect on mortgages.
‘’The National Bureau of Statistics has given an inflation figure of about 11.2, and for you to encourage real investment you must be able to have a rate that is above the inflation. That floor rate is already set by monetary policy statutory committee responsible for this.
‘’However, the CBN and the bankers committee are making interventions in this area. They have been able to put money together from the profit of the bank in order to be able to set up what we call mortgage interest drawback. So if you get mortgage loan at 16.5 in the bank today, that loan can actually be drawn back by 40% so that you will be paying 9.9% or below. So it comes back to single digit.
‘’That is to make those who wants to raise money particularly in the area where we have the gap, that is the people who wants to raise just about 5 million and below where we have the deficit, they can raise money today and be able to pay at that single digit than 9%.’’
On the contributions of CBN to ensuring affordable housing in Nigeria, he said that the contribution of the apex bank has been growing over the years.
‘’One of the components of this is the fact that CBN is partnering with key partners in the industry like NMRC for the creation of Nigeria Mortgage Guarantee Company, which is addressing the creditor.
‘’In that particular program, also as part of the advocacy, CBN collaborated with the industry players including NMRC in developing the mortgage model and foreclosure act that focuses on providing enabling legal framework for states to be able to use the opportunity given to them in the constitution as trustees of the lands in the states.
‘’This is also to enable developers to have access to land. That enables mortgages that have been created to be foreclosed if it is not performing. That provides title to people who wants to build their home and use this particular land as a security to get mortgage in the financial institutions.
‘’We want the mortgage model and foreclosure act to go through legislative processes in the states to be passed into law. Today, they are active in states like Lagos, Kaduna, and Ogun, while it is on the way in many other states including Cross-River and Plateau.
‘’We will be working with the Nigeria Governors’ forum to see this is scaled up because for mortgage to thrive we need enabling legal framework that everybody will recognise. It will enable states to have electronic lands registry system and a working mortgage system, so that it will be easy to conduct searches and then when there is need for banks to realise the collateral for non-performing loans, it will be timely.
‘’We need to streamline all these approval processes. And the fee that is being spent needs to be at the rate than you can do business with,’’ he said.
The latest CBN intervention according to him is the mortgage interest drawback scheme which the CBN governor introduced to bring the current double digit interest rate on mortgages to a single digit. This, he said, is in collaboration with the bankers committee.
Giant Strides by Family Homes Funds
Most government housing projects in the past have focused mainly on the elite class. When the housing projects are completed, they are often unaffordable for those who truly needs them the most – the low to middle income earners. This has further worsened the housing crisis.
It is against this backdrop that the current administration under the leadership President Muhammadu Buhari introduced new policy measures to address the housing challenges in the country, especially to help the poor own homes.
The Family Homes Fund Limited is one of such new initiatives. The Fund is a partnership between the Federal Ministry of Finance and the Nigerian Sovereign Investment Authority as founding shareholders. The Fund is the largest affordable housing-focused fund in Sub-Sahara Africa, leveraging its significant capital (in excess of N1trn by 2023) to facilitate access to affordable housing for millions of Nigerians on low to medium income groups. Through strategic partnerships with various players in the sector and some of the world’s main Development Finance Institutions, the Fund has an ambitious commitment to facilitate and supply 500,000 homes and 1.5million jobs for the low income earners by 2023.
With its many social housing rental and home ownership schemes like Help To Own, Rent To Own among others, the impact of Family Homes Funds is already being felt by Nigerians after its take-off.
The Fund has completed the construction of 400 homes with an average cost of N3.5million in Grand Luvu, Nasarawa State. Another 650 have been completed in Delta state and given to low income earners.
In Borno, the Fund is developing 4,900 housing project for civil servants and Internally Displaced Persons (IDPs).
Developments put at least 30, 000 which will benefit low income earners in Lagos, Ogun, Kano, Adamawa, Yobe and Kaduna are currently ongoing. As the Fund builds capacity through the ongoing recruitment campaign, its goal is to achieve a program of 80,000 homes by December 2019.
They have also provided over 15,000 direct and indirect jobs through their numerous projects, with many more jobs to be provided as more projects take off.
The other thing that excites many about Family Homes Funds is its partnership with other housing sector institutions like the NMRC, REDAN, FMBN, AIHS, Nigeria Building and Roads Research Institute and others.
Major Achievements by REDAN
On the 7th of May 2019, the Real Estate Developers Association of Nigeria (REDAN) launched the National Real Estate Data Collation and Management Programme (NRE-DCMP), which is designed to help tackle housing problems in Nigeria, including that of deficit.
NRE-DCMP was initiated by REDAN, in collaboration with the Central Bank of Nigeria, the Federal Ministry of Power, Works and Housing, Federal Mortgage Bank of Nigeria, Nigeria Mortgage Refinance Company, The German Society for International Cooperation, National Bureau of Statistics, National Population Commission, Mortgage Banking Association of Nigeria, World Bank, Growth and Empowerment in States, Pison Housing Company, Building Materials Producers Association of Nigeria, Association of Housing Corporations of Nigeria and FESADEB Media to collate property price index nationwide to solve housing problems in the country.
As part of continuous professional development program, the Real Estate Developers Association of Nigeria (REDAN), organized a training on emerging trends in real estate development in Nigeria. The body is also working with EFCC, SCUML to curb sharp practises in real estate sector. They also honoured former minister of works, Lateef Jakande with Annual Lecture on Housing.
Abuja International Housing Show
The biggest housing and construction industry fair in Africa – Abuja International Housing Show held its 13th edition in 2019.
The event was attended by international housing finance experts like the MD of OPIC, Debra Erb, Kecia Rust of AUHF, Andrew Chimphonda of Shelter, Lew Schulman of iBuild Afrique and many more.
The show hosted over 40, 000 local and international guest, companies and professionals to deliberate on the most effective strategies for improving the housing sector on the continent.
The show continued its legacy of contributing not only to the housing sector but to the local economy because of the calibre of businesses and investors it brings to the country.
It has also become the prime destination for industry stakeholders – both public and private sector – to connect and work out modalities for collaboration.
AIHS has created an international platform for international experts meet annually. This no doubt has been creating great exposure and adding a lot of value to local practitioners, as they are interact and exchange ideas with international counterparts.
The AIHS has also given birth to a couple of other conferences and exhibitions in Nigeria.
Camey & Rocks acquired major shares at Resort Savings & Loans
Camey & Rocks Business Consulting Limited acquired the majority shares in Resort Savings & Loans Plc.
The current authorized share capital of the bank is 20 billion units of shares amounting to N10bn at N0.50k per share; the bank has over 13,000 shareholders.
At a briefing in Abuja in November 2019, the Chief Executive Officer of Camey and Rocks, Mr. Peter Adejoh, said the Board and Management of Resort Savings & Loans Plc at its Board of Directors Meeting held on 24th October 2019 approved the acquisition of the 43.35 percent which makes the business consulting firm the majority shareholder in the mortgage bank.
He said the investment is aimed at taking the bank to the next level in mortgage banking services in Nigeria and beyond.
VFD Group invests N2.37bn in Abbey Mortgage Bank
The shareholders of Abbey Mortgage Bank Plc at the company’s annual general meeting held in July 2019 resolved among others to raise additional capital of N2.37billion by way of Private Placement of the company’s ordinary shares.
The shareholders resolved that subject to obtaining the requisite regulatory approvals, the Private Placement shall be by way of sale of 2,261,538,462 ordinary shares of the Company at the rate of N1.05kobo per share to the VFD Group Plc, a financial services-focused proprietary investment company.
Abbey Mortgage Bank Plc is listed on the mainboard of the Nigerian Stock Exchange under the “Mortgage Carriers, Brokers” subsector of the Financial Services Sector.
Abbey Mortgage Bank Plc is a Primary Mortgage Bank (PMB) which operates under the supervision of the Central Bank of Nigeria (CBN).
The company’s business is providing banking services in personal savings and investments, cash management, specialized banking, deposit and funds management, children and school account services, real estate and mortgage services, amongst others.
It is also an accredited Primary Mortgage Bank for the National Housing Fund (NHF) and a subscriber to the recently created Nigerian Mortgage Refinance Company Plc (NMRC).
The shareholders of Abbey Mortgage Bank Plc also resolved that subject to the approval of the Nigerian Stock Exchange (the NSE) the Placement shares shall be listed on the NSE upon conclusion of the Private Placement.
Construction Artisans Awards
One must also acknowledge the contributions of the Construction Artisans Awards in promoting excellence in craftsmanship. C-STEMP is leading wave in training of artisans for construction industry development that is steadily redefining the landscape.
Housing Development Advocacy Network
The Housing Development Advocacy Network was also very busy in the year through stakeholders’ engagement and policy advisory responsibilities. The group has also approached the national assembly with outstanding Bills that are housing related and will foster development. The advocacy is set to collaborate with many individuals and professional bodies to advance the course of the sector.
Impact of professional bodies
The contribution of various professional bodies such as Nigeria Institution of Estate Surveyors and Valuers, Nigeria Institute of Architects, Nigeria Institute of building, Nigeria Society of Engineers, Nigeria Institute of Town Planners and Nigeria Institute of Quantity Surveyors, Nigeria Institute of Surveyors among others in promoting professionalism in the just concluded year is worthy of note. But much more needs to be done by them as there is influx of foreigners into their various professions. The government must also lead the way by patronizing Nigerian professionals.
Nigeria Mortgage Refinance Company
The NMRC equally caught the admiration of many stakeholders with its data collation system which has been widely commended as a great step towards mining and accessing reliable data in the Nigeria mortgage sector. Such initiative should be continuously updated and centralized.
The NMRC also in the year signed a landmark agreement with the Kaduna state government to enable the provision of houses for workers in the state. This is highly commendable and one would hope that more states will create such an enabling environment that Kaduna state has created which enables institutions like NMRC to invest.
Mortgage Banking Association of Nigeria
The Mortgage Banking Association of Nigeria organized a 3-day Mortgage Banking Sub-sector CEOs’ annual retreat in Lagos which held from November 29 – December 01, 2019. According to the association’s President, Niyi Akinlusi, the yearly event is intended to review the industry and see what needs to be done.
This year’s retreat had the CBN, NDIC, NMRC, FMBN, key stakeholders of the mortgage banking industry, secondary mortgage financial institutions and all other important stakeholders in the sub sector
This year’s retreat focused on three major things: digitalisation, capacity building and management succession.
A lot of participating stakeholders commended them for the retreat and hoped it will improve the sub sector significantly especially in the coming years.
2019 was quite a busy year in the sector with a couple of partnerships developed and some housing institutions changing their leadership. The hope of many is that these developments turn into affordable housing for those who needs them the most.
