Nigeria’s housing sector faces a severe, multi-dimensional crisis marked by an estimated deficit of close to 15 million units. This critical shortage disproportionately affects low-income and majority of working-class citizens, resulting in widespread overcrowding, escalating rents and the proliferation of unplanned settlements (slums). In the Federal Capital Territory (FCT) alone, there are over 240 slums and squalid settlements requiring upgrade or total overhauling. The importance of adequate housing in the well-being of citizens cannot be overemphasised. Yet, procuring homes to live, strategise and raise a family is a Herculean task. Acquiring land and securing clear, legal titles remains a slow, expensive and bureaucratic process.
Nigeria has one of the lowest mortgage penetration rates in the world. Traditional mortgages are generally limited to the elite class and require documentation that excludes a vast majority of the population operating in the informal economy. High interest rates and a lack of long-tenor financing pools make homeownership a distant dream for most. Urban migration has fuelled the rapid expansion of metropolitan areas without corresponding infrastructure development. Many new and developing areas lack basic amenities like reliable power, paved roads, and sewerage systems. This forces private developers to spend heavily on providing their own infrastructure, costs that are ultimately passed on to buyers.
Successive government initiatives and housing schemes have struggled to achieve their goals. These policy failures are frequently attributed to inconsistent policies, poor planning and a disconnect between the types of houses built (which are often aspirational, futuristic or luxury) and the actual economic realities of the mass market. Most traditional mortgages usually provide short-term loans of 3 to 5 years because of the way our mortgage banks are structured. The average gestation period of a 3-bedroom building in Nigeria is 12 years due to irregular cash flow. Like the housing market in Nigeria, the mortgage institutions are highly underfunded!
The N128 billion Ministry of Finance Incorporated (MOFI) Real Estate Investment Fund (MREIF) has provided long-term mortgages to 1,859 families across 25 Nigerian states, unlocking N284 billion in property value. It gives working-class citizens an affordable pathway to home ownership, transforming endless rent payment into lasting generational wealth creation. Experts have warned that to achieve affordable housing in Nigeria, we need an active mortgage system with single-digit rate in the country. This is exactly what MREIF was designed to achieve.
In the UK, about 23 percent to 26 percent of adults own their home with a mortgage. Among households that own their homes, roughly 45 percent own with a mortgage, while the majority (55%) own theirs outrightly.
Unfortunately, the conventional mortgage institutions in Nigeria are not adequate in that the deposit to qualify for loan is unaffordable by the majority of the people and the amount of loan is too low to make a meaningful impact in bringing our housing deficit down. In the conventional mortgage system, beneficiaries of mortgage loans are expected to contribute 10 percent of the total fund to be accessed and to have remained a customer for at least six months. MREIF provides reduced equity contribution by prospective beneficiaries. There are reports from beneficiaries who got their loan within three months after application.
MREIF is a successful intervention in housing provision in its own right compared with other schemes designed to assist citizens in owning their own houses. It enabled beneficiaries access to affordable and long term finance with an interest rate of 9.75 percent, the lowest interest rate on housing loans in Nigeria. Beneficiaries access mortgages with tenor of up to 20 years, a significant improvement over the short-tenor, high-interest loans traditionally offered by commercial banks. This is a response to the large affordable housing shortage in Nigeria. The processing time of the loan is shorter and the interest rate lower than for any other loan in Nigerian commercial banks.
The low interest rate which it offers, due to the fact that the loans are offered at a highly subsidised, fixed interest rate of 9.75 percent per annum means that it can be afforded by the majority of the masses. The loan has reduced the financial barrier to entry. Homebuyers are only required to make a 10 percent minimum equity (down payment) contribution, making it easier for average professionals — with an average beneficiary age of 42 — to qualify. There is widespread inclusivity of all Nigerians. The fund serves beneficiaries across all six geopolitical zones, ensuring the benefits are equitably distributed nationwide. This serves a political point as no region will agree it does not require a loan for the residents to get accommodations.
Patricia Hillebrandt stated in her book, “Economic Theory and the Construction Industry”, published in 2004 by Palgrave McMillan, that the construction industry has the ability to stimulate the economy. It can be used to kickstart the economy through provision of jobs and infrastructure for the people. In developed countries, the construction industries contribute as high as 10 percent to the gross domestic product (GDP), while it only contributes a paltry three percent to the GDP of developing nations including Nigeria. The construction of a 3-bedroom bungalow will directly engage about 15 people as tradesmen and artisans and indirectly, about 10 people who work in the housing supply chain selling foods, drinks and building materials to the workers.
Beyond the families that the houses built with MREIF will accommodate, the fund has stimulated a construction boom by providing developers with guaranteed off-takers, unlocking greater liquidity in the Nigerian housing sector and assisting the building materials sellers to earn income. According to reports, the N128 billion has created capital growth to the tune of N284 billion in less than a year. In the coming years, expectations are high that double the number already served will be served next year. With this, MREIF will live up to its ambition of being a one trillion housing platform in Nigeria.
business a.m. commits to publishing a diversity of views, opinions and comments. It, therefore, welcomes your reaction to this and any of our articles via email: comment@businessamlive.com
Olufemi Adedamola Oyedele, MPhil. in Construction Management, managing director/CEO, Fame Oyster & Co. Nigeria, is an expert in real estate investment, a registered estate surveyor and valuer, and an experienced construction project manager. He can be reached on +2348137564200 (text only) or femoyede@gmail.com
