Three Things Nigeria Can Do to Improve Access to Affordable Homes 

Kalim Shah

Millions of Nigerians struggle to access affordable housing – a growing housing need that is only getting worse. Left unchecked, the housing gap will widen as Nigeria’s population doubles to an estimated 400 million by 2050 and urbanisation rises.

Nigeria’s housing sector will need an average of 700,000 homes to be built annually over the next 20 years to close the housing gap. Amid higher inflation, rising interest rates –and other economic challenges, house prices and rents have been on the rise.

While there are several issues affecting the country’s ability to meet its housing target, there are three things Nigeria can do to address the major issues bedeviling the sector and deliver more affordable housing to its citizens. These are to prioritize mortgage financing, reduce the cost of construction and ease land ownership and means of acquisition.

High interest rates on mortgages and low wages are among the major factors making it difficult for most Nigerians to access mortgage finance to own a home. Most people cannot afford mortgage financing amid interest rates that are up to 25 percent per annum for a tenor of up to 20 years. With the home ownership rate in Nigeria at 25 per cent, the demand for mortgage financing across the country is estimated between N15-20 trillion.

Reducing mortgage interest rates and strengthening mortgage policies and procedures, especially the cost and time needed to apply for a mortgage, could help more aspiring homebuyers to purchase homes. For instance, supporting commercial and primary mortgage banks to engage in long-term financing, particularly for low-income earners, would be a positive step.

Getting interest rates on mortgages to single digit rates is linked to Nigeria’s macroeconomic performance; and attainable over time as the economy recovers and attains sustainable economic growth and development in the medium to long-term.

The current economic challenges have also impacted the cost of construction. Potential homeowners and developers are struggling with the rising cost of building materials, which account for about 80 percent of the cost of a building. Most building materials on the market have an imported component with the foreign exchange rate volatility priced in by developers. The situation drives the cost of homeownership and rents higher, further affecting affordability.

Local production would be ideal for building materials that can be produced competitively compared to imports. The development of bulk procurement programs to support building at scale can improve efficiencies in the value chains and drive down the cost of building materials such as cement and granite – and this can feed into affordability. This process should also support efficiencies and innovation in affordable housing, including designs to maximise space and layout, modern construction methods, and new technology that would contribute to reducing building and maintenance costs. Green building techniques will be key to reduce operating costs and support Nigeria meet its Nationally Determined Contributions (NDCs) to reduce greenhouse gas emissions.

Inaccessibility of land is another major hindrance to the development of the housing sector. Land acquisition and title registration procedures in Nigeria are among the most cumbersome, expensive, and lengthy in the world. Costs range from 20 per cent to as high as 30 per cent of the value of the property – two to three times as high as the average cost in Africa – making formal acquisition and titling simply beyond the means of most homebuyers.

The country must take a critical look at land policy and regulation to improve land accessibility by easing the consents required to transfer title deeds and simplifying the land title registration process. Simple land allocation systems would ensure better access to land, speedier registration, and faster assignment of land titles.

IFC has been a strong partner to Nigeria, focused on deploying investments that are critical to supporting sectors that can deliver on the country’s key development needs of diversified growth, inclusion, sustainability, and job creation – housing is one of those priorities.

Increasing the availability and accessibility of affordable homes to more Nigerians will require urgent collaboration and action among public and private sector stakeholders. This is just the first step to IFC’s work that will support private and public sector partners to making affordable housing a reality for more people.

While the housing deficit remains a big issue in Nigeria, requiring an estimated N3.5 trillion annually, I believe now is the time for stronger collaboration between key stakeholders focused on targeted engagements with policymakers, as this will have a far-reaching impact in addressing the issues and closing the housing gap.

Shah is Senior Country Manager, Nigeria, Sierra Leone and Liberia for International Finance Corporation (IFC). The IFC is a member of the World Bank Group and the largest global development institution focused on the private sector in emerging markets.