THE ROLE OF THE CBN IN ENSURING AFFORDABLE HOUSING FOR NIGERIANS

1.1 BACKGROUND TO THE STUDY

Nigeria is the most populous country in Africa and 8^th in the world, with a population of 200 million. Over the past decade the economy has been growing at an average rate of around seven percent yearly and, after Johannesburg, Lagos has the biggest, most liquid market in the region thereby creating the need for massive housing development. A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries. In contrast to a commercial bank, a central bank possesses a monopoly on printing the national currency, which usually serves as the nation’s legal tender (Arthur and Sullivan, 2003). Example is the Central Bank of Nigeria (CBN). The various roles of CBN will however in no doubt have specific impact on housing delivery in Nigeria.

According to Wikipedia.org, Central banks around the world play similar functions some of which may include- implementing monetary policies, determining Interest rates, controlling the nation’s entire money supply, the Government’s banker and the bankers’ bank (“lender of last resort”), regulating and supervising the banking industry, setting the official interest rate – used to manage both inflation and the country’s exchange rate– and ensuring that this rate takes effect via a variety of policy mechanisms and managing the country’s foreign exchange and gold reserves and the Government’s stock register.

Shelter is one of the basic necessities of life. Indeed, the housing sector plays a very critical role in a country’s prosperity as it directly affects not only the wellbeing of the citizenry but also the general performance of other sectors of the economy. Thus, provision of housing has, since the early 1970‟s, engaged the attention of most countries, especially the developing ones, for a number of reasons. First, it is one of the three most important basic needs of mankind. Consequently, programmes of assistance in the areas of finance, provision of infrastructure and research have been designed by governments to enhance adequate housing delivery. The focus on finance has, however, been very prominent for the reason that, housing provision requires huge capital outlay, which is often beyond the capacity of most of the citizens (Akeju, 2007).

Increase in the rate of urbanization has exerted pressure on government and other government agencies like the Central Bank of Nigeria to develop plans for housing development in Nigeria as a result of situation experienced in most cases that the demand for housing units outweighs the supply. To address this gap, individuals, firms, and government must intervene.

The first attempt at institutionalizing housing financing through the apex bank in Nigeria was the establishment of the Nigerian Building Society (NBS) in 1956. Thereafter, regional governments set up housing corporations, savings and loans banks and cooperative banks through the supervision of the Central Bank of Nigeria to provide funds in the form of mortgage credit for housing development (CBN, 2003). Following the Indigenization Act (1972) which aimed, amongst others, at promoting and transferring the ownership and control of foreign enterprises to Nigerians, the Nigerian Building Society, in 1977, was renamed and metamorphosed into the Federal Mortgage Bank of Nigeria, (FMBN) to reflect the 100 per cent ownership of the Federal Government of Nigeria. Within two years of the establishment of the FMBN, its capital base was increased from N20 million when it was bought over by government in 1977 to N150 million in 1979, reflecting an increase of over 600 per cent. The current equity base of the FMBN is about N5 billion, with only 50 per cent of it paid-up (CBN, 2011). Equity in the bank is split between the Federal Ministry of Finance (FMF) and the Central Bank of Nigeria, (CBN). In 1994, the FMBN was granted the status of the premier and apex mortgage institution in Nigeria under the supervision of the Central Bank of Nigeria. However, the researcher is analyzing the role of CBN in ensuring affordable housing for Nigerian citizens (CBN, 2007).

The Central Bank of Nigeria through the FMBN has encouraged the emergence and promotion of the growth of viable primary mortgage institutions to service the need of housing delivery in all parts of Nigeria; mobilized both domestic and offshore funds into the housing sector; linked the capital market with the housing industry by establishing and operating a viable secondary mortgage market to support the primary mortgage market; and distributed the National Housing Fund (NHF) in accordance with the provisions of the NHF Act” (CBN, 2011).

1.2 STATEMENT OF THE PROBLEM

The problem of housing has become a daily discussion in all quarters of the public and private sector of the Nigeria economy and has prompt several government agencies to implements plans for housing development for both their staffs and the general public at affordable cost. It has become increasingly glaring that most of the urban population in Nigeria live in dehumanizing housing environment while those that have access to average housing do so at abnormal cost. According to Onibokun (1986), Nubi (1991), rent in major cities of Nigeria is about 60% of an average workers disposable income. With the high cost of house building and the effort of government and its agencies that has been inadequate in the housing delivery, the researcher will analyze the role of CBN in ensuring affordable housing for Nigerians.

1.3 OBJECTIVES OF THE STUDY

The following are the objectives of this study:

1. To examine the role of CBN in ensuring affordable housing for Nigerians.
2. To ascertain the affordability of housing for Nigerians.
3. To determine the factors preventing Nigerians from getting affordable houses.

1.4 RESEARCH QUESTIONS

1. What is the role of CBN in ensuring affordable housing for Nigerians?
2. What is the affordability of housing for Nigerians?
3. What are the factors preventing Nigerians from getting affordable houses?

1.5 HYPOTHESIS

H_O: CBN has not contributed to the provision of affordable housing for Nigerians.

H_A: CBN has contributed to the provision of affordable housing for Nigerians.

 

 

1.6 SIGNIFICANCE OF THE STUDY

The following are the significance of this study:

1. The findings from this study will educate the general public on the roles that government agencies and Central Bank of Nigeria can play in the provision of affordable housing for Nigerians.
2. This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic.

1.7 SCOPE/LIMITATIONS OF THE STUDY

This study on the role of the CBN in ensuring affordable housing for Nigerians will cover the contribution of the Central Bank of Nigeria towards sustainable housing development in Nigeria. It will also cover the overview of the services rendered by Federal Mortgage Bank of Nigeria FMBN which can be likened to a subsidiary of the CBN.

 

LIMITATION OF STUDY

1. Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
2. Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

REFERENCES

Akeju, A.A., (2007), “Challenges of Providing Affordable Housing in Nigeria” being a paper presented at the 2nd Emerging Urban Africa International Conference on Housing Finance in Nigeria.

Arthur, J and Sullivan, W (2013) “The Cross-Market Spillover of Economic Shocks through Multi-Market Banks” Accessed online at http://www.fdic.gov/bank/analytical /cfr/2011/sept /BRC_2011_68_Berrospide.pdf.

CBN (2003) “Guidelines for Primary Mortgage Institutions”, Publication of the Other Financial Institutions Department Central Bank of Nigeria.

CBN (2011) “Revised Guidelines for Primary Mortgage Banks in Nigeria”

Central Bank of Nigeria (2007), The Financial System Strategy (FSS) 2020

Nubi, T.O. (2002). Financing Low Income Housing in Nigeria Cities: Need for Paradigm Shi. Proceeding of the Faculty of Environmental Design Conference O.A.U. Ile Ife, 340 -345.

Onibokun, P. (1985). Housing in Nigeria. Ibadan University Press.

 

CHAPTER TWO

LITERATURE REVIEW

• INTRODUCTION

 

The Housing Sector plays a more crucial role in a country’s welfare than is always recognized, as it directly affects not only the well-being of the citizenry, but also the performance of other sectors of the economy. In essence, adequate housing provision has since the early 1970s consequently engaged the attention of most countries, especially the developing ones, for a number of reasons. First, it is one of the three most important basic needs of mankind the others being food and clothing. Secondly, housing is a very significant durable consumer item, which impacts positively on productivity, as decent housing significantly increases workers’ health and well being, and consequently, growth. Third, it is one of the indices for measuring the standard of living of people across societies. Consequently, programmes of assistance in the areas of finance, provision of infrastructure and research have been designed by governments to enhance its adequate delivery. The focus on finance has, however, been very prominent for obvious reasons. This is because housing provision requires huge capital outlay, which is often beyond the capacity of the medium income/low income groups. A major area of concern has been mortgage financing, which has often been fingered as one of the most formidable constraints in the housing sector. It is in recognition of the critical importance of finance in housing delivery that I have chosen to speak on “Mortgage Financing in Nigeria: Issues and Challenges”.

 

 

 

2.1 OVERVIEW OF HOUSING FINANCE ARRANGEMENTS IN NIGERIA

The purpose of government policy is to provide affordable and comfortable housing for all Nigerians include the following:

• Credit Policies

In acceptance of the importance of the housing sector, and considering that banks have ready access to cheap sources of funds through retail deposits as well as the infrastructure to process real estate loans efficiently and the skills to manage the risks involved, the Central Bank of Nigeria has encouraged banks to support the development of the housing sector in Nigeria. In particular, the CBN has through its credit policies, required the erstwhile commercial and merchant banks to allocate a stipulated minimum proportion of their credit to the housing/construction sector. In the 1979/80 fiscal year for instance, the minimum stipulated for banks was 5 percent of total loans and advances. The share was raised to 6 percent in 1980 and 13 percent in 1982. Where banks failed to meet the stipulated target, such shortfalls were deducted at source from the defaulting bank’s deposit with the CBN and passed on to the housing/ construction sector through the Federal Mortgage Bank of Nigeria. The financial sector was, however, liberalized in 1993. With the deregulation, the preferred status accorded to the housing and construction sector was discontinued.

• Insurance Companies’ Funds

Insurance companies are well capable to providing housing finance because of their stable base of funding and the long-term nature of their liabilities. They are therefore not only fund mobilizers, but also important source of capital fund for the economy. Funds from life insurance companies also provide resources for the financing of the housing sector in Nigeria. The structure of the loans and advances of the sector indicates that the insurance sector has been active in mortgage financing.

• Specialized Institutions

The main competing institutions with banks and insurance companies in the area of housing have been specialized institutions, such as semi-government agencies, mortgage banks and building societies.

• State/Municipal Government Financing

State and Municipal Governments have also been known to be involved in mortgage financing, albeit, on a limited scale. The sources of such fund usually include budgetary allocation, complemented with facilities from development institutions. Such funds are often channelled through the states’ development finance institutions such as the Housing Corporations or Investment and Property Development Corporations for on lending to individuals for residential building construction. Indeed, the erstwhile regional governments of the 1960s set up the regional housing corporations, with clear mandate to provide long term credit for housing development.

• The Federal Mortgage Bank of Nigeria (FMBN)

The Federal Mortgage of Bank of Nigeria commenced operations in 1978, following the promulgation of the FMBN Decree No. 7 of January 1977 as a direct federal government intervention to accelerate its housing delivery programme. The FMBN is expected to expand and coordinate mortgage lending on a nation-wide basis, using resources from deposits mobilized and equity contributions by the Federal Government and CBN at rates of interest below the market rates. By mid-1980s, the FMBN was the only mortgage institution in Nigeria. However, it is arguable if this mandate has been satisfactorily performed to date.

• Primary Mortgage Institutions (PMIs)

The promulgation of the Mortgage Institutions Decree No. 53 of 1989 provided the regulatory framework for the establishment and operation of Primary Mortgage Institutions (PMI) by private entrepreneurs. The FMBN under the decree became the apex institution, which regulates primary mortgage institutions and was empowered to license the PMIs as second-tier housing finance institutions. The PMIs, under the Decree were to mobilize savings from the public and grant housing loans to individuals, while the FMBN mobilizes capital funds for the primary mortgage institutions. The PMIs were expected to enhance private sector participation in housing finance.

• The Federal Mortgage Finance Limited (FMFL)

The Federal Mortgage Finance Limited was established in 1993 to carry out the retail aspect of mortgage financing and provide credible and responsive housing finance services, while FMBN became the nation’s apex mortgage lending agency. The FMFL is expected to provide long-term credit facilities to mortgage institutions in Nigeria to enable them grant comparable facilities to individuals desiring to acquire houses of their own; encourage and promote the emergence and growth of primary mortgage institutions (PMIs) to serve the need of housing delivery in all parts of Nigeria; and to collect, manage and administer contributions to the National Housing Fund (NHF) in accordance with the provision of the NHF Decree No. 3 of 1992.

• National Housing Fund (NHF)

The NHF was established subsequent to the promulgation of the National Housing Fund Decree No.3 of 1992 as a mandatory contributory scheme to mobilize cheap and long-term funds for housing credits. The Fund represented the financial component of the new National Housing Policy, which was adopted in 1991. The NHF is aimed at encouraging a multiplication of housing finance institutions, enhancing mobilization and growth of long-term funds and making loans affordable to more borrowers. Other objectives of the fund include:

ensuring constant supply of loans to Nigerians for the purpose of building, purchasing and improvement of residential houses, providing incentives for the capital market to invest in property development, encouraging the development of specific programmes that would ensure effective financing of housing development and to provide long-term loans to mortgage institutions for on- lending to contributors to the fund.

It is also expected to insulate the housing finance system from the fluctuations that had characterized its past reliance on government intervention. This is consistent with the practice in other countries especially, as sustainable housing finance operations require the mobilization of private sector. Generally, the strategies for effective mobilization of funds for housing finance in Nigeria had evolved around three areas:

Voluntary schemes, Mandatory schemes, Government budgetary allocation and financial transfers.

Under the voluntary scheme, mobilization is done as

follows:

• Private individuals :government encourages individuals to save to build or buy their houses at low interest rates. Under this scheme, the Primary Mortgage Institutions are to mobilize savings and deposits from the public like the commercial banks. The success of the PMIs in the competitive financial market therefore depends on their management competence.
• Government introduces appropriate fiscal measures to protect the assets and liabilities of individuals, and stabilize individual deposit through contractual savings schemes.
• The Central Bank of Nigeria, through its monetary and financial policies, encourages deposit money banks to set up subsidiaries that would specialize in primary mortgage activities.

Under the mandatory scheme, we have:

• Mandatory contributions of Nigerian workers in both the public and private sectors. Participation in the scheme is required for all workers earning N3,000 per annum or more. The participants contribute 2.5 per cent of their monthly salaries to the housing fund at an interest rate of 4 per cent to each savings/contribution made.
• Contributions of 10 per cent of banks’ loans and advances to the Fund at an interest rate of 1 per cent above the rate on current account. This is subsequently transferred to the FMBN for the housing sector through a properly devised system, thereby liberating deposit money banks from the burden of mortgage loans.
• Contributions by the Nigerian Social Insurance Trust Fund (NSTIF) and the insurance companies, which are expected to invest a minimum of 20 per cent of their non – life funds and 40 per cent of their life funds in real estate development, of which not less than 50 per cent must be channeled through FMBN, at an interest rate not exceeding 4 per cent. Under this arrangement, government now relaxes the existing restrictive provisions as contained in the insurance Decree No. 59 of 1976 and the Trustee investment Act No 13 of 1962 so as to allow the insurance industry and pension funds to invest huge resources in housing development.
• Contributions from the Federal, State and Local Governments- Under this scheme, budgetary allocation is made at all levels of Government to the housing sector to finance low income housing schemes. In this respect, the Federal, State and Local Governments make direct budgetary allocation of a sum not below 2.5 per cent of their revenue to the housing scheme. The Federal Government also expanded the Infrastructure Development Fund (IDF) from which the State and Local Governments can borrow to provide basic infrastructural facilities.
• Cooperative Societies

Cooperative societies pool individual members’ resources together from where soft loans are advanced to their members. They have become very popular especially in land purchase, particularly in semi-urban areas. Cooperative societies are also known to be involved in the provision of credit for housing to their members.

 

2.2 Central Bank of Nigeria (CBN)

The CBN is the peak regulatory authority of the financial system. It was established by the Central Bank of Nigeria Act of 1958 and commenced operations in July 1959. Among its primary functions, the CBN promotes monetary stability and a sound financial system, and acts as banker and financial adviser to the Federal Government. It is the banker of last resort to licensed banks and approves licences to financial institutions, which include Deposit Money Banks, Primary Mortgage Institutions, Microfinance Banks, Finance companies, Bureaus De Change, and Development Finance Institutions. In 2005, the Federal Government in conjunction with the CBN set up the Financial System Strategy (FSS) 2020 Mortgage committee. Four key objectives were spelt out for the committee:

1. Establish a safe and profitable mortgage market by setting up appropriate infrastructure / institutions / processes and remodelling existing ones.

2.Introduce a framework to strengthen property/security rights.

3.Use the mortgage market to make long-term finance available and affordable to all Nigerians.

4.Enhance market mechanisms to improve the housing delivery system

 

2.3 National Housing Trust Fund (NHTF)

The NHTF was established under decree No 3 of 1992, making it mandatory for every Nigerian earning an income of N3,000 (US$20) and above to contribute 2.5% of their basic monthly income or salary to the Fund. The government, insurance companies, pension funds and banks operating in Nigeria also contribute to this fund. It is managed by the FMBN. The accounts are held in the names of the individuals who should receive annual statements. Contributions receive 2% per annum. The contributions plus interest are repayable at age 60 or on death. After contributing to the scheme for six months, workers are entitled to a mortgage loan of up to N5 million ($43,000) at a rate of 6% per annum for 30 years. The loan is for a maximum of 90% of value, so the borrower needs to have a N500,000 ($4, 300) deposit. The loan must be used for house purchase, house expansion or building on a plot that is owned. Loan applications are made through the PMIs established under Mortgage Institutions decree of 1989. The PMI checks the application and forwards all the documentation to the FMBN. The processing time is between four and nine months. If FMBN approves the applicant’s NHTF loan, the funds are disbursed to the PMI at a rate of 4% per annum. The PMI then disburses the loan to the NHTF loan applicant at a rate of 6% per annum. The PMI may make an additional loan at market rate if the borrower requires more than N5million ($43,000). Money from the NHTF is also used by FMBN to make estate development loans to private developers and state housing corporations at a rate of 10% per annum over 24 months. These loans are usually granted to finance construction of properties which are then sold to buyers at 6% per annum from the NHTF. For some of these developers, the land is often provided free by the government as a contribution to its housing provision efforts.

The properties must be sold for no more than N5 million ($43,000). This is an attractive scheme for potential home buyers. After saving just 2.5% of their income for six months they can borrow N5 million ($43, 000) at 6%, in contrast to the average open market rate of 22%, to buy a house. However, in reality the amount raised through contributions is not sufficient to fund loans for more than a tiny proportion of eligible applicants.  The scheme is seen by many workers as a compulsory regressive tax, in that the majority of workers could never earn sufficient income to afford to buy a house, even with the available finance. Over the past two years, the scheme has improved its operations through a new management structure at the FMBN. However, the scheme has other practical difficulties. A loan can only be obtained if the borrower can produce clear title to the property he/she is buying. This often constitutes a major challenge in some States and as a result few loans have been made in those States. Loans can be made only through PMIs and at least 10 states have no PMIs. Many PMIs do not have a large capital base to adequately provide loans to a significant proportion of Nigeria’s population.

The FMBN will not disburse through a PMI more than 25% of the PMI’s capital, and it requires a bank guarantee for the loans it does disburse. Because of the NHTF’s shortcomings, trade unions objected to the scheme and asked workers to stop contributing. This happened, between 2000 and 2007, in all but three States, although this changed in 2007 and contributions are now being made in 27 States. States currently not contributing include Taraba, Borno, Lagos and Kano States.

 

2.4 FACTORS PREVENTING NIGERIANS FORM GETTING AFFORDABLE HOUSES

 

1. Legislation

The Land Use Act of 1978 which vests all land in the government is an obstacle to making land available for housing development. It is heart warming to note that His Excellency President Umar Yar’adua stated during the first few days of his administration that the Land Use Act will be amended to make land transactions easier and make land available for all who want to genuinely invest in the country. I urge the National Assembly and the 36 state governors including their various state legislatures to support the President in the planned land reforms. Nine (9) housing related reform bills were presented to the last legislature unfortunately, the bills were not passed before the end of their tenure. Two additional bills on Securitization and Foreclosure are expected to be added to the initial nine (9) bills. I would like to appeal to the current legislature to pass the bills without further delay. Though we talk of huge potentials in the Nigerian market, we should note that a difficult investment climate where laws to protect the sanctity of contracts are far from adequate hampers private sector participation and foreign investment.

 

2. Registering Property According to the World Bank’s report “Doing Business in 2007 – How to Reform”, Nigeria’s reforms have led to a reduction in the time required to complete the process of property registration from 274 to 80 days, but a lot still needs to be done because it takes only 1 day in some other countries such as Norway and Singapore. We should however note that part of the reduction in time is likely as a result of improvements in property registration which has been implemented in Abuja and in Lagos as well. In fact the “Doing Business” indication of 80 days is based on a test case of property registration in Lagos. I urge other state governments to replicate the improvements achieved in the Abuja Geographic Information System (AGIS) and Lagos State in their various states. Investors are comfortable in environments where registration is automated and procedures are minimal, and will be glad to invest in such places. Automation though important, should be accompanied by changes in work culture in government registries. The time taken to register property must be substantially reduced. The current time taken is definitely unacceptable if we want to attract private investment. The fees paid to register property in Nigeria are extremely high and have some non-transparent components. High fees add to the cost of houses and usually take such houses out of the reach of people in the lower income bracket. We must devise ways of reducing fees paid by families at the lower strata of the income ladder probably by exempting such families from paying fees or instituting a tiered system to make such fees affordable. The procedures required to register properties in Nigeria are numerous and presents many opportunities for corruption. The report states that 16 procedures are required to register property in Nigeria while in countries such as Norway and Singapore only 1 procedure is required.

 

3. Risk Sharing Unfortunately in Nigeria there is no mechanism for risk sharing that will encourage banks and other financial institutions to extend mortgage loans to people at the lower income level. Due to the absence of a credit information database that financial institutions provide information to and can get the credit history of all individuals from, Nigerian financial institutions settle for lending to the rich. A way out of this dilemma will be for government to provide guarantees in the form of mortgage insurance to lenders for loans granted to first time buyers with no credit history and low-to middle income families once such mortgage loans meet prescribed underwriting standards. In the event of default the government indemnifies the lenders to a prescribed level. The present situation we have in Nigeria is similar to what was prevalent in the U.S. until the Roosevelt administration (1933 through 1945) established the Federal Housing Administration (FHA) to provide insurance against mortgage defaults for lenders. This endeavour was taken by both the United States FHA and the lenders and today the U.S housing finance system is used as the model for most emerging mortgage markets. We should start thinking of re-organizing the Nigerian FHA into a government sponsored mortgage insurance institution that will provide this service. My personal opinion is that the Nigerian FHA should not be saddled with the responsibility of building houses because this can be done by the private sector if the enabling environment is created. Such insurance gives mortgage lenders some level of comfort and will encourage them to extend the loans for longer periods to low-to middle income families. To also provide liquidity, such insured mortgages may be securitized, that is, pooled by the FMBN and sold in the domestic capital market to interested investors.

 

4. Absence of a National Credit Database A nationwide credit database that can provide credit information of all individuals that enjoy financial services in any form is not available. Though I have read in the newspapers that one is about to be created with 9 local banks partnering with Dunn and Bradstreet, I believe that it is a first step in the right direction, but all the banks and other financial institutions must be encouraged to participate and share information freely. The behavioural tendency to hoard information should be discouraged. Such database will in no small measure assist lenders in making their lending decisions. This is something the regulators in the financial services industry must start thinking about.

 

5. Stable Macroeconomic Environment A stable macroeconomic environment is necessary to providing affordable housing. Lenders, investors, and borrowers prefer a stable economy where decisions can be taken without any apprehension. Inflation should be kept at manageable levels (preferably single digits), interest rates must tend downwards, and other macro variables should be stable. As inflation and interest rates decline, banks and pension funds will be encouraged to look less toward government securities and more towards the private sector to invest their assets. Thus, mortgages and mortgage-based investments would stand to benefit if the macroeconomic environment can continue to improve. We should however note that the risk of fiscal expansion is still here with us and I encourage cooperation between the fiscal and monetary authorities in sustaining a stable macroeconomic environment. We also need to urge governments at the lower tiers of government to curb fiscal expansion. The planned enactment of both the Public Procurement and Fiscal Responsibility Acts in the 36 states of the federation gladdens my heart.

 

 

6. Knowledge Gap Some call it lack of capacity, but I prefer to call it knowledge gap. The reality is that there is a shortage of skilled manpower that can take the mortgage industry to the next level. Capacity has not been built over the years because the mortgage sector did not really exist and the conditions were not favourable for long-term lending as it would have led to asset-liability mismatch. We need to build capacity in all aspects of the mortgage market and acquire the latest knowledge. We can achieve this by partnering with established institutions in the developed countries such as the International Finance Corporation (IFC), the International Housing Finance Program at the University of Pennsylvania’s Wharton Business School etc. Moreover, when he announced the African Mortgage Market Initiative in Abuja in 2003, U.S. President George Bush offered his country’s assistance in developing Africa’s mortgage markets. In the context of the appropriate market reforms in Nigeria, such assistance will be available from U.S. institutions such as the Overseas Private Investment Corporation (OPIC).

 

7. Dealing with Licenses According to the Doing Business in 2007 report, in getting a licence such as construction permits or approvals in Nigeria it takes 16 procedures which take an average of 465 days. There are usually delays in receiving permits for construction. The procedures are complex and expensive. This encourages illegal construction as well as squatter settlements with its attendant health and environmental issues as we can see all around our cities in Nigeria such as Ijora Badiya and Makoko in Lagos; Nyanya, Mararaba and some satellite towns in Abuja to name a few. Reforming licensing requirements in Nigeria – particularly by reducing the processing time as well as decreasing the costs – would not only increase the size of the formal construction sector but also reduce the costs of housing construction, thereby increasing the availability of homes to a broader segment of Nigerian society.

 

8. Taxes One of the greatest barriers to large-scale provision of affordable housing is the tax burden. The imposition of value added tax (VAT) at various levels of the housing-development process adds significant costs as much as 35 percent to the cost of a house, even before titling fees and stamp duties are taken into consideration. Tax holidays, deferrals or tax exemptions on materials or home sales, or similar tax-related provisions have been used successfully in other countries for low- and moderate-income families. These incentives can be used successfully in attracting investors into the housing sector. Other countries have proven that when they reduce the tax burden on housing, the number of transactions increases, and total housing related fiscal revenues either increase or remain the same.

 

9. Enforcing Contracts According to the Doing Business in 2007 report, there are 23 procedures taking an average of 457 days and account for 27 percent of the claims to be received in enforcing contracts in Nigeria. The absence of a foreclosure law has been cited by some investors and local banks as the reason for not investing in the housing sector. Though the incidence of foreclosure in most countries (especially with regard to low-and middle-income families) is generally quite low, it is important for investors to know that they can take possession of their collateral and recover their loans as quickly as possible. Investors can even live with a lengthy foreclosure process, but they must have confidence that the laws will be enforced fairly and in a transparent manner. Lagos state is establishing special courts for this and should be applauded. Evidence from other countries has shown that implementing “non-judicial foreclosure” used solely for mortgage contracts is a necessity for the establishment of a secondary market.

 

10. High Cost of Building Materials A key factor that has led to the high construction cost in Nigeria has been the restriction on the importation of cement, which by account constitutes about 40 percent of building materials, if not more. While Nigeria does not produce enough cement domestically to meet demand, imports have been restricted and subject to a process of quota allocation. This has led to sharp increases in the price of cement. However, there are signs of positive change in government policy on cement imports, such as the reopening last September of the Ibeto Cement Factory, an importing entity. In order to bring down materials costs and stimulate construction, as well as make housing more affordable to the Nigerian population, the government should continue its reconsideration of restrictions on the importation of cement and other building materials. Another alternative we could explore in the long-run is to conduct more research on how we can use local materials such as clay and other local building materials.

 

11. Infrastructure Another major challenge to providing affordable housing is the lack of primary infrastructure such as roads, water, electricity etc, which accounts for about 30 percent of housing costs. In most cases developers have to provide the infrastructure which invariably increases the cost of the houses they produce thus making such houses unaffordable. The three tiers of government should not shy away from their responsibility of providing primary infrastructure if we must achieve our goal of providing affordable housing. The infrastructure projects could be financed by issuing bonds and will also provide a future income stream for government through municipal fees that will be paid by home owners.

 

2.5 Housing policy

Nigeria’s housing policy has always emphasized that housing must be seen in the context of overall national development including social development, generation of employment opportunities, geographical distribution of population, and location of industrial, commercial and agricultural activities.

Prior to the promulgation of the Mortgage Institutions Act of 1989, the first public intervention in housing delivery was the provision of housing for expatriate officials and for selected indigenous staff in specialized occupations such as the railways and police during the colonial period. At independence in 1960, there was the need to strengthen and boost the economy. This prompted the formulation of a five-year National Development Plan, covering 1962-1968. Although housing was not given much attention in the plan, it recognized the need for urban centres and included a section on town and country planning. The Second National Development Plan was formulated for the period 1970 to 1974. This plan was necessitated by the growth in urban population and expansion of cities such as Lagos, Ibadan, Kano, Port-Harcourt, Enugu, Benin City and Kaduna. The government set a target of 60,000 units during this period and established the Federal Housing Authority (FHA) in 1973 to supervise and manage the programme. The second plan did not achieve its housing targets; however the FHA was created and is still responsible for the supply of affordable housing in Nigeria. A Third National Development Plan was formulated for the period 1975 to 1980. During this period, some important decisions on housing were reached such as establishing a housing unit in the cabinet office; floating the FMBN; setting up a committee on standardisation of housing types/policies; passing the Rent Control Law and the Land Use Act.

In 1979, the new civilian government inherited this plan. This led to the launch of the National Housing Programme by President Shehu Shagari in 1980, which targeted low-income groups whose annual income did not exceed N5,000 ($33) and culminated in Nigeria’s first housing policy in 1982. The policy aimed at resolving the huge housing shortage but little was achieved because the political landscape was in hospitable and eventually less than 15% of the planned dwelling un its were completed.

The period 1981to 1985 gave rise to the Fourth National Development Plan. This encouraged and supported private efforts to build dwellings. It was also aimed at mobilising housing finance from all available sources; providing infrastructural services to facilitate the establishment of new building sites; and improving the quality of rural housing and the rural environment through integrated rural development programmes. Like the preceding development plans, the fourth plan came with little success. In 1989, the Mortgage Institutions Act (No. 53 of 1989) was promulgated to regulate and supervise the operation of PMIs. PMIs were set up with the aim of providing affordability through long-term repayment of housing for low-income groups. The next major policy move was in 1991 when the National Housing Policy was formulated. This was the second housing policy for Nigeria. The policy discussed several issues including availability and accessibility of land, and the challenges of sourcing building materials. The 1991 National Housing Policy was responsible for restructuring the FMBN into a wholesale bank. It also restructured PMIs and deposit money banks to do mortgage business.

 

REFERENCES

Adajumo, A.A.(2008): Social housing in Nigeria: An Imminent mass housing revolution?

 

Adedeji, Y.M.D.(2006): Affordable and functional Housing in a Development Economy; A case study of Nigeria. Journal of land use and development studies Vol, 2 NoI Pp 113- 120

 

Ademiluyi, I.A. and Raji, B.A. (2008): Public and private developers as agents in Urban housing Delivery in

Sub-saharan Africa: the situation in Lagos State. Humanities & Social Science Journal 3(2): 143-150.

 

Adebayo, A.K., Ikweca, C.O. and Uduma-oluya,N. (2009): Infrastructural Development in Urban Cities: An Evaluation of Housing Delivery and Housing Adequacy in Lagos. Compilation of seminar papers in architects colloquium. Pp I-6.

 

Ajanlekoko,J.S. (2001): Sustainable housing development in Nigeria-the financial and infrastructural implication. International conference on spatial information for sustainable development held between October 2nd and 5th 2001 at Nairobi, Kenya.

Andrew, O.N.(1998): Trends in the supply of affordable housing meeting American’s housing needs(AAHD). A habitat II follow-up project.

 

Aribigbola, A. (2008): Housing policy formulation in developing countries; Evidence of programme implementation from Akure, Ondo State, Nigeria. Journal of Human Ecology23(2),125-134.

 

Aribigbola, A.(2009): Housing Affordability as a factor in the creation of sustainable environment in developing World: the example of Akure, Nigeria. Retrieved from www. Faculty.ksu.edu.sa on 20 th May, 2010. Australian Housing and Research Institude(AHURI)(2004). Measuring housing affordability. AHURI research and policy bulletin. Issue 45. Cox,W and Pavletich, H. (2010): 6TH Annual Demographa international housing affordability survey.

 

Diogu, J. and Onyegiri,I.(2006), Cost Reduction Strategies in Residential Design, Environmental Research Journal Vol. I. NOI. P. I Federal Ministry of Housing and Urban Development(FMH&UD)(2003): Sustainable human settlements development; Natural Urban Strategies. Pectral Digital Press, Abuja. Land Use Act, Cap 202 (1990): Law of the Federation of Nigeria.

 

Munonye, C.C. (2009): The Role of Architecture on Nation Infrastructure Development; A case for Housing Maintenance. Architect Colloquium ,Pp 62-75.

 

Ojenuwah, K.E. (2006), Sustainable Housing: Building Materials and Components for Effective Delivery in Nigeria: Aug. 2006 p 4 Okedele, O.S.,

 

Opaluwa, A.I.(2010): Housing Affordability in Lokoja. A seminar paper presented in Department of Geography and Planning, Kogi State University. UN (1996): Strategies to implement human settlement policies on urban renewal and housing modernization. Economic Commission for Europe.

 

CHAPTER THREE

METHODOLOGY

This section covers the methods used to address the objectives of the study. The section discusses the research design, research population and sampling technique, the instrument for data collection, the method of data analysis and the analytical software used for the study.

3.1 Research Design

In this study, a survey research design is adopted. Survey is chosen based on the objective of the study. Survey is defined according to Nworgu (2005) a survey studies the sampling of individual units from an already known population and its associated survey data collection techniques, such as questionnaire construction and methods for improving the number and accuracy of responses to survey.

3.2 Population of the Study

The population of this study comprises all enlightened real estate participants in Nigeria.

3.3 Sampling and Sampling Technique

A simple random sampling technique will be used to select 35 of the enlightened real estate participants in Nigeria.

3.4 Instrument/Method of Data Collection

The study made use of primary and secondary source of data. Concerning the primary source, questionnaire was used to gather the data. The questionnaire was a four-point rating scale (Likert scale), starting from strongly agreed (SA), agreed (A), disagreed (d), and strongly disagreed (SD). The questionnaire was designed in such a way that every question in the questionnaire was related to the research questions and hypothesis of the study. Also the result was used to answer the research questions and test the relevant hypothesis.

 

 

3.5 Method of Data Analysis

A mean score rating method was used to analyses the primary sourced data based on the 2.5 acceptance region format to answer the research question.

CHAPTER FOUR

PRESENTATION AND ANALYSIS OF RESULTS

This section presents the results of the field study; it shows the descriptive information of the respondents, the results of each of the research questions and the test of hypothesis.

Demographic Information of the Respondents

Table 4.1 gender

Distribution based on Gender
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Male	28	80.0	80.0	80.0
	Female	7	20.0	20.0	100.0
	Total	35	100.0	100.0

From table 4.1 above, it is observed that the male respondents for this study are 28 in number making up to about 80 percent of the total respondents, while the female respondents were just 7 which constitute about 20 percent of the total respondents. This is an indication that majority of participants in the real estate industry are male and a proof of the belief that the building industry in Nigeria is dominated by the male gender.

 

Table 4.2: Years of Experience in real estate investment

Distribution based on years of experience
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	3-5yrs	6	17.1	17.1	17.1
	5yrs and above	29	82.9	82.9	100.0
	Total	35	100.0	100.0

Based on the table 4.2 above, the about 17.1 percent of the respondents have spent between 3 to 5 years in the building industry, while about 82.9 percent of them have been in the industry for much over five (5) years. This is an indication that the respondents are experienced and well-grounded in the field of real estate.

 

Table 4.3 Real estate participant  

Are you a real estate participants?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Yes	35	100.0	100.0	100.0

From the demand of the study, all the respondents are real estate stakeholders in Nigeria

 

4.2 Answer to Research Questions

 

 Research Question one:  What are the roles of CBN in ensuring affordable housing for Nigerians?

Table 4.4

S/N	Statement	N	Mean	Std. Deviation	Decision
1	Regulating the Federal mortgage bank of Nigeria	35	4.0000	.00000	Accepted
2	Directing commercial banks to give more housing loans	35	3.7429	.44344	Accepted
3	Supporting state government on housing development	35	2.1343	.32444	Rejected
4	Provision of housing estates for its workforce	35	3.9714	.16903	Accepted
5	Ensuring foreign exchange for the import of building material	35	2.6323	.54333	Accepted
	Valid N (listwise)	35

Based on the responses on table 4.4 above, the respondents agreed with the questions on the table that the roles of the CBN in ensuring affordable housing for Nigerians include but not limited to regulating the activities of the Federal mortgage bank of Nigeria; directing commercial banks to give more housing loans; provision of housing estates for its workforce and ensuring foreign exchange for the import of building material. The respondents also rejected the question that the CBN supports states government on housing development in Nigeria with the lowest mean score of 2.13.

 

Research Question Two: Is housing in Nigeria affordable?

Table 4.5

S/N	Statement	N	Mean	Std. Deviation	Decision
1	housing in Nigeria is very affordable	35	2.1571	1.28207	Rejected
2	the supply of housing in Nigeria is higher than the demand	35	1.6857	.96319	Rejected
3	There are cheaper houses anywhere for people to pay for	35	1.3429	.48159	Rejected
	Valid N (listwise)	35

From the responses on table 4.5 above and based on the 2.5 mean score acceptable score, the respondents disagreed that housing in Nigeria is very affordable. We therefore conclude that housing in Nigeria is not affordable; that the supply of housing in Nigeria is far much lower than the demand for housing and that there are no cheaper houses anywhere for people to pay for. All there were rejected with mean scores of 2.16, 1.69 and 1.34 respectively.

 

 

Research Question Three: What are the factors preventing Nigerians from getting affordable houses?

4.6

S/N	Statements	N	Mean	Std. Deviation	Decision
1	Lack of government attention on the sector	35	2.6571	.48159	Accepted
2	instability of the exchange rate	35	2.5429	.48159	Accepted
3	corruption	35	2.5714	1.26225	Accepted
4	the land use act	35	2.7857	.96319	Accepted
5	poor government regulation of the sector	35	3.0000	.84017	Accepted
6	poor funding	35	2.5434	.43343	Accepted
7	lack of adequate long term housing loan	35	2.6034	.56556	Accepted
8	High cost of building materials	35	2.6545	.85443	Accepted
	Valid N (listwise)	35

 

Based on the responses from the field work as indicated on table 4.6 above, we can conclude that the factors preventing Nigerians from getting affordable houses include but not limited to lack of government attention on the sector; instability of the exchange rate; corruption; land use act; poor government regulation of the sector; poor funding; lack of adequate long term housing loan and high cost of building materials. All these the respondents accepted with mean scores of 2.5 and above.

 

4.3 Research Hypothesis

Ho₁: CBN has not significantly contributed to the provision of affordable housing for Nigerians

Decision rule: Reject the null hypothesis if the Asymp level of significant is less than 0.05. Otherwise, do not reject the null hypothesis.

Table 4.9 Test of hypothesis table

Test Statistics
	CBN has not significantly contributed to the provision of affordable housing for Nigerians
Chi-Square	23.876a
df	3
Asymp. Sig.	.230
a. 0 cells (0.0%) have expected frequencies less than 5. The minimum expected cell frequency is 25.0.

 

Conclusion

Since the Asymp Sig. level of this the test is 0.230 which is far much higher than the 0.05 acceptance region, we therefore do not reject the null hypothesis and conclude that CBN has not significantly contributed to the provision of affordable housing for Nigerians. 

 

 

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 SUMMARY OF FINDINGS

The purpose of this study is to examine the role of the CBN in ensuring affordable housing for Nigerians.

In this study, a survey research design was adopted, the population comprises all enlightened real estate participants in Nigeria, a simple random sampling technique was used to select 35 of the enlightened real estate participants in Nigeria and a questionnaire was the instrument for data collection.

The following objectives were used for the study;

1. To examine the role of CBN in ensuring affordable housing for Nigerians.
2. To ascertain the affordability of housing for Nigerians.
3. To determine the factors preventing Nigerians from getting affordable houses.

The findings of the study revealed the following:

1. The roles of the CBN in ensuring affordable housing for Nigerians include but not limited to regulating the activities of the Federal mortgage bank of Nigeria; directing commercial banks to give more housing loans; provision of housing estates for its workforce and ensuring foreign exchange for the import of building material.
2. Housing in Nigeria is not affordable; that the supply of housing in Nigeria is far much lower than the demand for housing and that there are no cheaper houses anywhere for people to pay for.
3. The factors preventing Nigerians from getting affordable houses include but not limited to lack of government attention on the sector; instability of the exchange rate; corruption; land use act; poor government regulation of the sector; poor funding; lack of adequate long term housing loan and high cost of building materials.
4. The finding from the test of hypothesis proved that CBN has not significantly contributed to the provision of affordable housing for Nigerians.

 

 

5.2 CONCLUSION AND RECOMMENDATION

It is quite obvious from the finding of this study that the CBN has not significantly contributed to the provision of affordable housing for Nigerians; thereby leaving some Nigerians homeless. The Central Bank of Nigeria through the FMBN has encouraged the emergence and promotion of the growth of viable primary mortgage institutions to service the need of housing delivery in all parts of Nigeria; mobilized both domestic and offshore funds into the housing sector; linked the capital market with the housing industry by establishing and operating a viable secondary mortgage market to support the primary mortgage market; and distributed the National Housing Fund (NHF) in accordance with the provisions of the NHF Act” (CBN, 2011). All these policies are not duly implemented.

Based on the findings of the study, the following suggestions are recommended:

1. The roles of the CBN in ensuring affordable housing for Nigerians include but not limited to regulating the activities of the Federal mortgage bank of Nigeria; directing commercial banks to give more housing loans; provision of housing estates for its workforce and ensuring foreign exchange for the import of building material.

 

2. CBN should ensure full implementation of affordable housing for Nigerians.
3. CBN should spell out, as well as educate the public on housing policies, in order for them to be aware of what is expected of them in acquiring houses.
4. Nigeria as a country should develop  housing  policies  and  programmes  in  line  with  the  unique  diversity  of  its cultural  inhabitant  as well as the financial, human and material strength for a systematic implementation over a period of time.
5. There  is  the  need  for  government  to  still  consider  public  housing  as  a  form  of  social  responsibilities considering  the  financial  arrangement  with  the  mortgage  institutions  the required  minimum  deductible amount  which  is  beyond  the  reach  of  a  low  income  earner  in  Nigeria.
6. Housing scholars equally opined that there should be cooperative housing model, simple land allocation system  and affordable finance option.

QUESTIONNAIRE ON THE ROLE OF THE CBN IN ENSURING AFFORDABLE HOUSING FOR NIGERIANS     

Good day sir/ma,

I am ……………………………………… studying the role of CBN in ensuring affordable housing for Nigeria. This study will be of help to the CBN management in ensuring affordable housing for Nigeria. I hope to have a few minutes of your time to fill out this questionnaire as all information u provided on this questionnaire is highly confidential and can only be used for this research purpose. Your identity is not needed in any way.

There are different section questions in this questionnaire with each question to be answered with Strongly Agree, Agree, Disagree and Strongly Disagree response. Please place a tick (“√”) mark on the box for your response.

Please tell me if you have any other questions about the research or in how to fill in the questionnaire.  On completion, please just hand back the form to me.

Thanks for your anticipated corporation.

 

Section A: Demographic Statistics

Section A: Background Information

1. Gender
2. Male [  ]
3. Female [  ]
4. Are you a real estate investor?
5. Yes [  ]
6. No [  ]
7. YEARS OF EXPERIENCE
8. 2-3yrs [  ]
9. 3-5yrs [  ]
10. 5yrs and above [  ]

 

Section B: Research Questions

What are the roles of CBN in ensuring affordable housing for Nigerians?

S/N	Statement	SA	A	D	SD
1	Regulating the Federal mortgage bank of Nigeria
2	Directing commercial banks to give housing loans
3	Supporting state government on housing development
4	Provision of housing estates for its workforce
5	Ensuring foreign exchange for the import of building material

 

Is housing in Nigeria affordable?

S/N	Statement	SA	A	D	SD
1	housing in Nigeria is very affordable
2	the supply of housing in Nigeria is higher than the demand
3	There are cheaper houses everywhere for people to pay for

 

 

What are the factors preventing Nigerians from getting affordable houses?

S/N	Statement	SA	A	D	SD
1	Lack of government attention to the sector
2	instability of the exchange rate
3	corruption
4	the land use act
5	poor government regulation of the sector
6	poor funding
7	lack of adequate long term housing loan
8	High cost of building material

Source: nairaproject