For the faint-hearted, available statistics on Nigeria’s housing deficit paint a grim picture while for the incurable optimist, they present limitless opportunities. Available data (for 2014) from the World Bank and the National Bureau of Statistics agree that Nigeria has an estimated housing deficit of over 17 million units. With a population of almost 180 million, according to data from the United Nations, an annual population growth rate of 2.8 per cent (2015), and an annual urban population growth rate of 4.7 per cent, we need to stop talking and start building.
This is more so, as global trends show, that the world is experiencing a housing crisis and various countries, especially in the global South, have approached the issue with the urgency it requires. According to the UN statistics, about 1.6 billion people live in substandard housing globally, while over 100 million are homeless. Nigeria hosts an uncomfortably large percentage of these two, with over 100 million Nigerians considered to live in substandard housing.
Nigeria’s housing problems are severe; even by continental parameters. For instance, according to a former Minister of Finance, Ngozi Okonjo-Iweala, the country’s size of mortgage finance (as a share of Gross Domestic Product) is 0.5 per cent; compared to two per cent for Ghana and the same two per cent for Botswana. In a paper titled, “Unleashing the Housing Sector in Nigeria and in Africa”, presented at the 6th Global Housing Finance Conference in Washington DC in 2014, Okonjo-Iweala also pointed out that these figures contrast sharply with estimated mortgage finance to GDP ratio of 80 per cent for the United Kingdom; 77 per cent for the United States of America and an average of 50 per cent across Europe. Nigeria’s abysmal ranking on the mortgage finance scale shows that the several mortgage financing initiatives by successive governments in the country have failed.
These factors paint an accurate picture of the fact that the country’s economic growth has failed to impact on basic necessities such as creating jobs, stimulating businesses and improving access to finance; or have any effect on the rapidly shrinking middle class. A recently rebased GDP saw Nigeria overtake South Africa to emerge as the continent’s biggest economy. However, even with the rebased GDP which came to $509.9bn in early 2014, per capita income hovers around $3,000; far less than that of South Africa which stands at $7, 336.
Our economic growth is non-inclusive and this has impacted on the housing deficit that Nigeria suffers. Last year, the Nigerian Bureau of Statistics reported that Nigeria’s real estate market contributed only 6.82 per cent to the real GDP in the first quarter of 2014; down from 8.37 per cent in the preceding quarter. However, stakeholders agree that the country’s real estate growth is impressive; with PricewaterhouseCoopers projecting, in its report – “Real Estate: Building the future of Africa”, – that Nigeria’s real estate investment will rise by about 49 per cent, from $9.16bn to $13.65bn in 2016.
Investors are impressed with the outlook and have made significant inroads in tapping into the opportunities presented by the country’s housing deficit. It is instructive that in Lagos, for instance, a consortium of investors is turning land reclaimed from the Atlantic Ocean into a vital piece of prime real estate known as the Eko Atlantic City. The development has become a model of the possibilities that abound when progressive governments play their role as a facilitator that creates the conducive social and physical infrastructure for businesses to thrive sustainably.
To encourage more of this type of investors, it bears stating that Nigeria’s policymakers need to ensure that access to long-term finance is guaranteed to enable investors attract consumers from the upper end of the market that play in the prime real estate sector. The gaps in government-run infrastructure would also need to be plugged to guarantee efficient urban development. Roads, electricity, security, among others are significant areas that the government would need to invest in to ensure that developers and clients enjoy best practice residential and commercial property standards.
The government will also need to promote favourable macroeconomic policies which will in turn encourage private sector investors to partner her in providing low-cost mass housing. These policies must result in low interest rates, stable exchange rates and low inflation to encourage investors move into mass housing projects and low-income earners move from rented (substandard in most cases) housing to their own affordable mortgage-enabled homes. These policies, in conjunction with a broader economic growth stimulation that results in lifting more Nigerians above the poverty line, will make low-cost housing actually affordable for the low-income earner.
Processes for land acquisition, construction permits and property registration must also be simplified and automated in line with global best practice. We simply cannot continue with a culture that frustrates estate developers and discourages prospective home owners. In extreme cases, prospective property owners have had to wait years to secure required approvals and documentation. Controversial pieces of legislation such as the 1978 Land Use Act and the 2012 National Housing Policy must be revisited to tackle areas of their implementation that stifle the growth of the real estate sector.
The new Minister of Power, Works and Housing, Mr. Babatunde Fashola, seems the right candidate to push through such progressive policies. Nigeria, by all indices and despite its challenges, represents a huge market for real estate development; and the minister seems to have shown that he understands the business of government in providing an enabling atmosphere for investors. Nigeria needs almost one million housing units annually; offers a high return on investment in prime real estate; and hosts one of the world’s fastest growing populations: investors see opportunities in these figures.
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