Nigeria: Insights Into The Nigerian National Housing Fund. How Do I Utilize My Contributions?

What is National Housing Fund? The National Housing Fund (“NHF” or the “Fund”), which was established by the NHF Act of 1992 (the “Act”), is a scheme created by the Federal Government to cater for the housing needs of the Nigerian citizenry.

What does the Act say about NHF and who is required to contribute? The Act provides that all Nigerian employees, whether self-employed or in paid employment are required to contribute 2.5% of their monthly basic salary to the Fund through the Federal Mortgage Bank of Nigeria (“FMBN”).

What is the purpose of NHF contribution? The Scheme provides housing loans at an affordable interest rate of 6% per annum.

What is the penalty for not contributing NHF? Section 20 of the Act stipulates the following:

1. An employer who—
   1. fails to make deductions from the basic salaries of his employees as required by this Act; or
   2. deducts any sum of money from the basic salaries of his employees for the purpose of the Fund and fails to remit the money so deducted to the bank, is guilty of an offence under this Act.
2. A person guilty of an offence under subsection (1) of this section is liable on conviction, in the case of—
   1. a corporate body, to a fine of N50,000; and
   2. an individual who is a staff in the employment of an employer and who is authorised to make the deduction or payment to the bank, to a fine of N20,000 or imprisonment for a term of five years or to both such fine and imprisonment.
3. A self-employed person who fails to make deductions or deducts and fails to remit to the bank any money due to the Fund is guilty of an offence under this Act and liable on conviction to a fine of N5,000 or to imprisonment for a term of one year or to both fine and imprisonment.
4. A person who prevents or obstructs the deduction or remittance of the contribution due to the bank under this Act is guilty of an offence and liable on conviction to a fine of N5,000 or to imprisonment for a term of one year or to both such fine and imprisonment.
5. The institution of proceedings or imposition of a penalty under this section shall not relieve any employer or self-employed person from liability to pay to the bank the money deducted by him for the purpose of the Fund.

What else do I benefit from the NHF Scheme asides affordable housing loans? Avoiding penalties should not be the only reason or incentive to make contributions to the Scheme as there are other benefits to be enjoyed by merely making contributions which includes:

• reduction in tax liability as any contribution made to the Fund is tax-deductible;
• easy access to housing loans;
• enjoying lower rate of interest for housing loans; and
• affordable and convenient mode of repayment.

How does a contributor obtain NHF loan? A contributor interested in obtaining NHF loan must have contributed to the Fund for a period of at least six (6) months. Such contributor is required to apply through any registered and duly accredited primary mortgage bank (PMB), who will forward the application to the Federal Mortgage Bank of Nigeria (FMBN). Necessary documents required for this purpose include:

• Completed application forms: An application form for NHF loans must be downloaded from the FMBN official website and duly filled by the applicant.
• Photocopy of title documents: These title documents include: Certificate of Occupancy, registered deed of assignment, deed of conveyance etc. It should be noted that NHF loans are not granted for refinancing of loans.
• Current valuation report on the proposed house to buy or bills of quantities (BOQ) for the house to build;
• Three (3) years tax clearance certificate;
• Evidence of NHF participation: This evidence refers to official NHF receipts for at least six (6) months, which are given by the FMBN upon payment of NHF monthly contributions.
• Copy of payslips for the previous three months: The three months’ payslips is a prerequisite to be eligible for acquiring the loan to determine a candidate’s ability to pay back. It should be noted that a repayment formula is used by the primary mortgage bank to determine the amount to be paid per month.

How much loan can I get from a primary mortgage bank? A maximum loan of N15 million can be given as an NHF loan. This includes an equity contribution or personal stake of 30%, 20% or 10% depending on the loan amount applied for.

How can I be compliant with NHF contributions? The Chartered Institute of Taxation of Nigeria currently has in excess of 1,000 chartered or licensed tax practitioners who are able to assist with NHF compliance requirements. Taxaide®’s professional personnel are among such licensed tax practitioners. Taxaide®’s technology practice, Taxtech® has a revolutionary product, TaxiTPayroll® (www.taxitpayroll.com.ng), which automates the entire payroll process including computations of NHF.