Nigeria’s housing market has suffered from the persistent macro challenges. Affordable housing seems unobtainable and given the squeeze in consumers’ purchasing power, demand has remained soft. Mortgage financing in the country is still underdeveloped and for income-earners engaged in homeownership schemes via mortgaging, the process can be expensive due to volatile high interest rates. We struggle to see how the FGN will bridge the country’s housing deficit over the medium-term.
Data from the Nigeria Deposit Insurance Corporation suggest that as at February, c.55% of mortgage loans were non-performing. Given the volatility of the labour market, there is a high possibility that more defaulters will be recorded as job losses rise. According to the NBS, the unemployment rate stood at 14.2% in Q4 2016.
We believe that the high average cost of mortgages of above 20% is also a contributory factor to the weak asset quality positions of mortgage firms.
On a brighter note, the FGN recently launched a N1.3bn refinancing loan in collaboration with the Nigerian Mortgage Refinancing Company for civil servants.
The first phase is expected to capture 5,635 civil servants. Effective implementation of this scheme will also depend on state governments for swift land approvals.
Furthermore, last month the World Bank set aside a US$300m fund to assist with Nigeria’s mass housing projects. The fund will be facilitated by the Nigeria Housing Finance Programme.
A recent market intelligence report projects an annual expansion of 14.6% in mortgaged households in Nigeria this year. The same report estimates expansion of 16.3% y/y and 18.9% y/y for Algeria and Egypt respectively in 2017.
Efforts from the private sector include the “Easy Home” initiative of Lafarge Africa. Over the past three years, 30,000 nationals have benefitted from this scheme.
Lagos State has keyed into the scheme and aims to deliver 200,000 housing units over the next five years; the housing deficit in Lagos is estimated at three million.
In addition to the increased prices of building materials, property developers have cited the lack of skilled labour in construction as a major issue.
In anticipation of the capital releases from this year’s budget, we expect a pickup in activities within the construction sector as well as visible results from the FGN’s housing projects. According to the budget, N57bn has been allocated for capital expenditure to the housing sector.