SEC, FMBN move to break housing access barriers with non-interest mortgage model

Onome Amuge

Nigeria’s bid to close its estimated 28-million-unit housing deficit is taking a new turn, not just through construction plans or federal schemes, but through the creation of an entirely new asset class that could reshape how long-term housing finance works in Africa’s largest economy. The Securities and Exchange Commission (SEC) and the Federal Mortgage Bank of Nigeria (FMBN) recently announced a partnership to build a full-scale Non-Interest Mortgage (NIM) ecosystem, a move analysts say could unlock billions of naira in ethical capital while redefining financial inclusion for low- and middle-income households.

While the initiative has been considered a social inclusion project, its significance lies in its potential to transform Nigeria’s housing finance landscape by formalising Sharia-compliant mortgage-backed instruments and integrating them into the capital market. The partnership comes at a time when the country’s mortgage penetration remains among the lowest globally, rated below 1 percent of GDP, due largely to affordability constraints and limited access to long-term funding.

Speaking at the signing meeting in Abuja, Emomotimi Agama, SEC director-general, positioned the collaboration as a structural intervention aimed at attracting institutional capital into the housing market. By creating a regulatory framework for Sukuk-backed and other non-interest mortgage securities, SEC hopes to mobilise both local and international ethical investors, a segment whose investment appetite has steadily expanded across the Middle East, Southeast Asia, and parts of Africa.

“Our collaboration with FMBN is pivotal to unlocking long-term financing for the housing sector,” Agama said. “A clear regulatory pathway for non-interest mortgage-backed securities will draw ethical capital into the market and set off a cycle of funding, construction, and ownership,” he said.

Experts say this could be a turning point. Unlike government budget allocations or short-term bank loans, capital market funding, particularly via Sukuk and structured non-interest instruments, is expected to give the housing sector a reliable stream of long-term liquidity similar to what mortgage markets in Malaysia, Saudi Arabia, and Indonesia enjoy.

FMBN Managing Director/CEO, Shehu Osidi, described the development as a long-awaited solution to a systemic exclusion challenge. Millions of Nigerians, especially in the North, have historically opted out of the National Housing Fund (NHF) and commercial mortgage options due to their interest-based nature. By offering Sharia-compliant alternatives such as Musharakah, Ijara, and Murabaha, Osidi said the bank is aiming to widen access and strengthen NHF participation.

“This partnership is a strategic response to a gap that has persisted for decades. We are committed to developing mortgage products that are ethical, inclusive and financially sustainable,” Osidi noted.

L-R: Emomotimi Agama, director general, Securities and Exchange Commission (SEC); and Shehu Usman Osidi, managing director/chief executive officer of the Federal Mortgage Bank of Nigeria (FMBN), during a meeting in Abuja, recently.

Housing finance specialist, Ebilate McYoroki, described the collaboration as long overdue, noting that the non-interest segment remains one of the most underdeveloped areas in Nigeria’s financial system despite strong demand. He argued that effective implementation could help transform the construction sector, deepen investor participation, and speed up housing delivery nationwide.

“This is a masterstroke in financial inclusion. It taps into a vast pool of potential homeowners and investors who were previously excluded,” McYoroki said.

Beyond enabling homeownership, analysts say the SEC–FMBN initiative could spur macroeconomic benefits. A functioning non-interest mortgage market would stimulate building materials demand, create thousands of jobs, expand the capital market’s product base, and attract long-term foreign investment, particularly from Islamic finance hubs seeking African exposure.

Under the proposed structure, mortgages will rely on asset-backed, risk-sharing models instead of conventional interest-based lending. These include the Musharakah diminishing partnership, the Ijara lease-to-own arrangement, and the Murabaha cost-plus deferred sale. After issuance, the mortgages will be packaged into non-interest mortgage-backed securities and offered to ethical investors, pension funds and institutional buyers seeking Sharia-compliant investment opportunities.