Yesterday, the local newswires reported that Nigeria’s Vice-President Yemi Osinbajo disclosed that the Federal Government (FG) is working on a social Housing programme called the Family Home Fund. According to the VP, government is partnering with key stakeholders including local and international funds to raise about N1trn (US$3.2bn) required to kick start the fund. Although it was not explicitly stated, we believe the Family Home Fund is the vehicle meant to drive the FG’s initial plans to build 360 houses in three pilot states under a “Rent to Own” scheme.
Relative to other countries, Nigeria’s mortgage finance as a percentage of GDP is extremely low at around 0.5%. This compares with around 2% for Ghana and 31% for South Africa. Similar ratios for the more advanced economies such as the USA and the UK are 77% and 80% respectively.
The fund will be deployed to drive mortgage finance via a model by which developers will build special houses to the FG’s stated specifications. Nigerians with monthly disposable incomes as low as N30,000 will be able to benefit from the scheme.
Assuming an initial 30% equity contribution by prospective homeowners and an average price of around N5m per housing unit, we estimate that the fund will be able to provide almost 670,000 housing units over a 3 to 5 year period.
Although this falls well short of the estimated housing deficit of 17 million units, it is a significant addition to the annual housing production of 100,000 units.
Already about nine states are supporting the scheme by giving land and certificate of occupancy. Other states are expected to follow suit as the fund gathers momentum.
On the international front, one of the outcomes of the MOU between the FGN and the People’s Republic of China which was signed in July is the working partnership between the FG and a Chinese firm, the One Belt–One Road Fund management, on the provision of mass housing.
Apart from creating affordable housing, the initiative will also help in the government’s job creation efforts. We believe that fiscal injections combined with social intervention programmes and “helicopter money” such as tax reductions to SME’s and low income earners will go a long way to return Nigeria to the growth trajectory.