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.
Nigeria’s GDP Grows by 3.46% in Q4 2023, Driven by Services
Nigeria’s Gross Domestic Product (GDP) grew by 3.46% in the fourth quarter (Q4) of 2023 on the back of robust performance of the services sector, according to data released by the National Bureau of Statistics (NBS).
The GDP expansion though slightly lower than the 3.52% recorded in the same period of 2022, reflects a positive trajectory for the Nigerian economy amid ongoing challenges.
The growth rate surpassed the 2.54% recorded in the preceding quarter, indicating a rebound in economic activity.
The services sector emerged as the key driver of growth expanding by 3.98% and contributing 56.55% to the overall GDP.
This sector’s resilience underscores its pivotal role in Nigeria’s economic landscape, encompassing diverse industries such as telecommunications, finance, and real estate.
Also, the agriculture sector experienced growth, expanding by 2.10% compared to the same period in 2022.
Meanwhile, the industry sector recorded a notable improvement, growing by 3.86%, a stark contrast to the -0.94% contraction observed in the fourth quarter of 2022.
On an annual basis, Nigeria’s GDP expanded by 2.74% in 2023 compared to 3.10% in the previous year, reflecting sustained but moderated growth.
The positive trajectory in GDP growth reflects resilience in the face of various economic challenges.
However, sustaining and accelerating growth will require continued efforts to address structural bottlenecks, foster investment, and promote inclusive economic policies across sectors.
Nigeria’s Oil Sector Growth
During the fourth quarter of 2023, Nigeria’s oil sector posted a real growth rate of 12.11% year-on-year, signifying a significant improvement from previous periods.
This was driven by the surge in average daily oil production to 1.55 million barrels per day (mbpd), a positive shift in the sector’s performance.
Despite challenges such as global market fluctuations and production constraints, the oil sector contributed 4.70% to the nation’s total real GDP in Q4 2023.
Nigeria’s Non-Oil Sector
Nigeria’s non-oil sector sustained growth momentum, posting a 3.07% real growth rate in Q4 2023.
This growth was primarily attributed to key industries including finance, telecommunications, agriculture, manufacturing, and construction.
Accounting for 95.30% of the nation’s GDP in the same quarter, the non-oil sector continues to drive economic diversification efforts and reduce dependence on oil revenues.
Despite facing challenges, such as infrastructure deficits and regulatory bottlenecks, the sector’s resilience underscores its pivotal role in fostering sustainable economic development and inclusive growth agendas.
Senate Rejects Ministry of Power’s Proposed Electricity Tariff Hikes
The Nigerian Senate has firmly opposed the Ministry of Power’s proposed electricity tariff hikes, emphasizing the need to alleviate the burden on citizens amidst prevailing economic hardships.
The rejection comes as a response to the Ministry’s consideration of increasing electricity tariffs and removing subsidies in the face of escalating economic challenges across the nation.
During a recent plenary session, Senator Aminu Abbas moved a motion urging the Senate to retain electricity subsidies to mitigate the impact of rising living costs on Nigerians.
The motion garnered unanimous support, with senators expressing concerns over the implications of tariff hikes on an already financially strained populace.
The Senate’s resolution also directed the Committee on Power to conduct a comprehensive investigation into the N2 trillion required for electricity subsidy payments, outstanding debts within the sector, and the state of metering nationwide.
This decision reflects the Senate’s commitment to ensuring transparency and accountability in the power sector’s financial management.
The rejection underscores the Senate’s stance against policies that could exacerbate the financial burdens faced by Nigerian citizens.
The move aligns with the Senate’s broader efforts to prioritize the welfare of the populace and advocate for measures that promote economic stability and affordability.
Nigerian Oil Transporters End Two-Day Operation Suspension After Government Intervention
After a two-day suspension of operations by the Nigerian Association of Road Transport Owners (NARTO), oil transporters have resumed operations following government intervention.
The suspension had caused fuel queues in many states and the Federal Capital Territory, raising concerns among motorists.
The resolution came after talks mediated by the Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, in Abuja.
Representatives from NARTO, government officials, and stakeholders from the downstream oil sector were present at the meeting.
The agreement reached includes an adjustment in the freight rate for petroleum transporters and a commitment to address other concerns raised by NARTO members.
The decision to resume operations aims to alleviate the challenges faced by Nigerians in accessing petroleum products.
Yusuf Othman, the President of NARTO, confirmed the end of the suspension, urging members to return to work.
The association had initially suspended operations due to the high operational costs, particularly the escalating price of diesel needed to power their trucks for product transportation across the nation.
With operations now back on track, it is hoped that the resumption will help stabilize fuel distribution and prevent further scarcity, ensuring smoother access to petroleum products for consumers across Nigeria.
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