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Forward Steps Required for Affordable Housing – Coronation Merchant Bank

Housing supply remains inadequate in Nigeria. Official records place the country’s housing deficit at 28 million units.

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Housing - Investors King

Housing supply remains inadequate in Nigeria. Official records place the country’s housing deficit at 28 million units. According to the latest national accounts, the real estate sector grew by 5.3% y/y in Q1 ‘22 and has averaged a growth rate of 5.6% over the past eight quarters.

Housing finance remains in its infancy. Nigeria’s mortgage/GDP ratio of 0.6% compares with South Africa’s 23%, Tunisia’s 10.6% Kenya’s 2.1%, and Ghana’s 0.8%.

According to the FGN’s national development plan (2021-2025), the FGN intends to improve access to affordable housing by constructing between 500,000 – 1 million houses per year. The goal is to boost the real estate to GDP ratio to 8.4% y/y by 2025. It is currently 4.4%.

Coronation Merchant Bank noted that there are several priority sectors and so the FGN has competing claims for its limited budgetary funds. In the 2022 budget, the FGN allocated N12bn to the national housing program, compared with N11.9bn allocated last year.

Additionally, N10bn was allocated to social housing scheme (family homes fund), N2.1bn for new social housing in Iponri Lagos State and N1bn for new prototype housing scheme in Niger and Lagos states.

In July ’22, the MPC/CBN raised the policy rate to 14% in an attempt to combat rising inflation. The headline inflation is currently 18.60% y/y. As at June ‘22, prime and maximum lending rates were 12.9% and 27.6% respectively vs 11.96% and 27.37% in the previous month. According to the CBN, mortgage loans to the private sector by primary mortgage banks (PMBs) stood at N198.3bn in June ’22 vs N187.8bn in the corresponding period of 2021.

The Federal Mortgage Bank of Nigeria (FMBN) is the principal public financing institution, tasked with addressing housing challenges in the country. The bank provides national housing fund (NHF) loans at 4% interest to accredited PMBs for on-lending at 6% to NHF contributors over a maximum tenor of 30 years.

This is in addition to providing estate development loans to private developers, state housing corporations and housing cooperatives.

Furthermore, the bank provides a rent-to own mortgage scheme whereby the period for rental payment is 30 years with an interest rate of 7% of the property price. Other mortage products offered by FMBN include; home renovation loans, construction loans and diaspora mortgage loans.

Since 2017, the FMBN has issued c.4,985 mortgages and disbursed home renovation loans valued at N49.3bn to 60,500 beneficiaries. We understand that the construction of at least 9,500 affordable housing units across the country were financed by FMBN.

Similarly, the Nigeria Mortgage Refinance Company (NMRC) is expected to deepen the primary and secondary mortgage markets by providing liquidity to the mortgage market and enhancing the maturity structure of the industry’s loans. As at December ‘21, NMRC disclosed that it had refinanced mortgage loans totaling N21.1bn compared with N17.4bn in 2020.

Public-private partnerships (PPPs) targeted at mass housing schemes should be encouraged. Although there are commendable steps with regards to this collaborative effort, there is still vast room for improvement. The Federal Housing Authority (FHA) recently completed 1,016 affordable housing units in select locations across the FCT, Bayelsa and Cross River. To expand this project to other states such as Imo, Rivers and Lagos, the FHA has considered leveraging PPPs.

On a separate note, it is worth highlighting that the Nigerian Exchange Group (NGX) recently raised c.N72bn (USD167.9m) for real estate companies quoted on its platform. Furthermore, NGX intends to launch an “impact board” to support the listing of social bonds that would raise capital to meet housing sector needs.

Funds held by pension fund administrators (PFAs) can be channeled towards providing affordable housing. As at June ’22, assets under management (AUM) totalled N14.2trn. However, funds allocated to the real estate and real estate investment trust (REIT) asset classes account for less than 2% of total AUM.

PFAs could consider increasing their exposure to funds or companies in the housing value chain, pursuant to PENCOM investment guidelines. Bespoke instruments such as mortgage-backed securities would also assist in capital formation and reduce the housing deficit.

Another challenge faced by the housing sector, is the lack of a robust housing database. There is a silo-working approach regarding data gathering within the sector. Developers, real estate agents and financers tend to build their respective in-house database but seem reluctant to share publicly due to concerns around market share expansion.

Meanwhile, data collected by regulators with oversight on investment, urban development, and participation in property markets is not readily available in the public domain. The dearth of data contributes to the sluggish pace in homeownership and affordable housing initiatives.

The rising cost of building materials poses as another challenge impacting housing supply and affordability. The heavy reliance on imported inputs (such as, building materials) used for construction exposes the sector to passthrough effects that emerge from exchange rate depreciations. Industry sources suggest that c.55% of building materials are imported.

Given its importance in driving socio-economic development, affordable housing remains at the front burner not just in Nigeria but across other African countries. Prior to the coronavirus outbreak, housing shortage in Ghana was recorded at c.2 million housing units.

The government proposed several affordable housing interventions, including resuscitating initiatives that were stalled at various stages of development. However, given the current macroeconomic environment – rising inflation, a depreciating local currency and high public debt, fiscal prudence is required, and this could affect projects geared towards affordable housing initiatives. Ghana plans to trim its 2022 national budget by c.30%.

We note that the housing deficit in Kenya is also estimated at 2 million units. However, given the steady pace of urbanization, the housing deficit is expected to widen. Based on local newswires, at least 500,000 affordable housing units are expected to be delivered in 2022 (i.e. c.1% of Kenya’s total population).

The construction sector posted growth of 6.4% y/y in Q2 ’22 and is regarded as one of the country’s green shoots. Meanwhile, South Africa continues to struggle with adequate and affordable housing. The housing deficit is estimated at 3.7 million units, and this can be partly attributed to relatively high poverty and unemployment levels. South Africa’s unemployment rate has hit 34.4%, rural-urban migration has contributed to rising unemployment rate.

In Nigeria, there is no shortage of policies with regards to tackling challenges across economic sectors, the housing sector inclusive. Affordable housing targets remain unmet partly due to security challenges in select locations, structural issues contributing to supply-side constraints and the current hazy macroeconomic environment which is also affecting demand dynamics. According to the Bank of Industry, N21trn (USD48.9bn) is required to close the current housing gap in Nigeria.

Forward steps with significant progress require partnerships with the private sector. We hope to see increased activity across the property market (both demand and supply) as the economy continues on an upward growth trajectory.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economy

Nigerians Pay N210 Billion For Electricity in Three Months

Nigerian electricity consumers pay N210 billion to power distributors in three months

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Nigerian electricity consumers pay N210 billion to power distributors in three months.

Nigeria Electricity Regulatory Commission (NERC) disclosed that Nigerians used N210 billion to buy electricity from distribution companies (Disco) between October and December of 2021. 

According to the 2021 fourth quarter (Q4) report of the commission which was released yesterday, electricity distribution companies otherwise known as “Discos” released a bill of N303.11 billion to consumers in Q4 2021 while a sum of N210.17 billion was retrieved. This means that N92.94 billion were left uncollected within the period under review.

NERC further stated that total billing by Disco increased by N30.12 billion if Q4 2021 is compared with Q3 2021. This represents an increase of 11.03 percent. Similarly, revenue collected in Q4 2021 increased by N16.64 billion when compared with Q3 2021. 

Although there was a slight increase of N16.64 billion in the revenue collected in Q4 2021, the increase in revenue did not however match up with the increase in electricity billing which was N30.12 billion, leaving a difference of N13.48 billion. 

Meanwhile, Nigeria Electricity Regulatory Commission (NERC) conceded that there is a huge metering gap for end-user customers. The commission acknowledged that metering deficiency is a perennial challenge that has critically hampered revenue generation in the industry.

The commission, therefore, disclosed a decrease in the number of meters installed in Q4 2021. 

“A total of 81,084 meters were installed in 2021/Q4 as compared to the 288,154 meters installed in 2021/Q3. The reduction in the number of meter installations in 2021/Q4 was largely driven by the winding down of the NMMP phase zero (0). The Commission’s records indicate that, of the 10,514,582 registered energy customers as at December 2021, only 4,773,217 (45.40%) have been metered compared to 42.93% metering as at September 2021” the report stated.

On electricity generation capacity, NERC noted that the average generation capacity for Q4 2022 was 5,465.72MW, with 4,294.02MWh/h generated per hour while the total power generated in Q4 2021 from 25 generating plants across the country was 9,480.21GWh.

 

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Economy

Severe Flood Ravage Farmlands in Nigeria, Experts Raise Concerns of Looming Food Shortage

The persistent rain being recorded in Nigeria lately has resulted in severe flooding that has ravaged farmlands as experts warn about food shortage in the coming months.

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The persistent rain being recorded in Nigeria lately has resulted in severe flooding that has ravaged farmlands as experts warn about food shortage in the coming months.

Due to torrential rainfall in recent weeks, with no sign of slowing down, almost all 36 states of the federation have experienced one form of flooding or the other.

The Nigeria Hydrological Services Agency (NIHSA) had recently warned that flooding will persist till the last quarter of 2022, which will take a great toll on farming.

In the North-Eastern part of the country, more than 150,000 hectares of land have been destroyed. Farmers in the region have expressed concerns over the large-scale destruction of produce, stating that the damage caused by the rainfall could be estimated at N30 billion.

They have therefore called for urgent interventions to mitigate the effects of the flooding, so as to reduce hunger and enhance food security.

Kenechukwu Onuorah, an expert at Global Rights, an international human rights capacity-building non-governmental organization, stated that one major consequence of persistent flooding is the huge impact it will have on agricultural output.

According to him, persistent flooding will make basic foodstuff scarce and expensive if nothing is done urgently to mitigate it.

His words, “The persistent rain may be good because it creates swampy lands that are good for the plants but flooding is a disaster.

“It comes with erosion, especially in the South, and washes away the plants. It destroyed the crops and even livestock will have nothing to feed on.

“There is so much we could do that we are not doing. We must ensure appropriate urban planning and drainage systems.

“Government at all levels must work to set Nigeria on the path towards greener renewable energy in order to reverse the effects of climate change. Unfortunately, the government is not working in that direction yet”.

Also speaking on the issue, The  Nigeria Hydrological Services Agency (NIHSA), an agency that provides services required for the assessment of Nigeria’s surface and groundwater resources, disclosed that flooding would persist, noting that the River Niger and Benue system had started building up.

The agency said, “As we are aware, Nigeria is located within the River Niger Basin, which is occupied by nine countries, namely: Benin, Burkina Faso, Cameroun, Chad, Cote D’Ivoire, Guinea, Mali, Niger, and Nigeria. Our country is at the lowest portion of the Basin.

“This means that once the upper catchment of the Basin gets flooded, Nigeria should be prepared to experience flooding”.

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Economy

Nigerian Lawmakers Express Concerns As Crude Oil Theft Increases Nation’s Debt

Lawmakers in Nigeria have expressed concerns over the incessant crude oil theft witnessed in the country as Nigeria’s debt reaches an all-time high of N42.84trn.

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Oil prices - Investors King

Lawmakers in Nigeria have expressed concerns over the incessant crude oil theft witnessed in the country as Nigeria’s debt reaches an all-time high of N42.84trn.

The Speaker, of the House of Representatives, Hon. Femi Gbajabiamila, while delivering his welcome remarks after the house resumed from a recess, stated that the continuous oil theft witnessed in the country has so far sabotaged Nigeria’s economy as there is a massive decline in the volume of crude oil exports.

He further stated that this act carried out by unscrupulous people is nothing but treason against the country, for which they must be severely dealt with.

He described those who carry out such dastardly acts as not being different from terrorists and insurgents.

In his words: “Due to theft and various acts of economic sabotage, we are experiencing a massive decline in the volume of crude oil exports.

“Our crude oil export of 972,394 BPD for August is the lowest we have recorded in the last two decades. 

“At a time when we are already experiencing severe financial constraints, there are mechanisms in place to prevent these sorts of bad actors, and the government spends significant amounts of money each year to protect oil and gas resources in the country. 

“Evidently, these existing arrangements do not suffice. As such, there is an urgent need to review them and make the necessary improvements. 

“It is also of particular importance that the perpetrators of these crimes against the state are identified, prosecuted, and subjected to the stiffest penalties the law allows. 

“Those who seek to impoverish our country in this manner have declared war against the Nigerian people. The government’s response must be sufficient to convince them of the error of their ways and deter others who might be tempted to join in their treason.   

“I met with the Finance Minister and the DG Budget and made it clear to them that enough of crude oil theft. Nigerians don’t want to hear that again. What do you intend to do about it? That’s the important question.” 

According to the managing director of the Nigerian National Petroleum Corp. (NNPC) Mele Kyari, he had disclosed that thieves from all levels in the country steal 200,000 barrels of crude oil per day.

It should be recalled that in 2021, Investors King reported that Nigeria lost $3.5 billion to crude oil theft.

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