The availability of decent housing in any society can help check vices such as lack of security and poor health. SAMSON ECHENIM writes that the time to inject life into the National Housing Fund scheme is now, to effectively bridge the wide gap the lack of adequate housing in Nigeria has created.
In 1992, the federal government came up with the National Housing Fund (NHF) as a government-managed pool of funds, to which workers in both the public and private sectors, including the self-employed, are required to contribute a certain percentage of their monthly income. Having consistently contributed over a certain period of time, contributors could obtain long-term loans called mortgages, at the relatively low cost of six per cent.
The scheme set up by Decree 2 of 1992, requires employees in the public service and organised private sector who earn up to N3000 monthly, to contribute 2.5 per cent of their monthly income, to be eligible to benefit from the fund. Repayment period is maximum, 30 years, subject to the applicant’s present age. Maximum repayment period is determined by deducting the applicant’s present age from 60.
In addition to employees’ contributions into the fund, the law also requires that the federal government makes “adequate provision of funds” for the scheme. Every commercial or merchant bank is required to invest in the fund 10 per cent of its loans and advances at an interest rate of one per cent above the interest payable on current accounts by banks.
Insurance companies are also required by the law establishing the NHF, to invest a minimum of 20 per cent of its non-life funds and 40 per cent of its life funds in real property development, of which not less than 50 per cent shall be paid into the fund through the FMBN at an interest rate not exceeding four per cent.
The fund is managed by the federal government-owned Federal Mortgage Bank of Nigeria, which disburses the mortgages through the primary mortgage institutions (PMIs) in the country. The whole idea of the NHF was indeed a bright one, but a clear period of adherence by workers and the success of the fund has never been recorded since its inception.
A Lagos State Development and Property Corporation chief, Mr. Taofeek Abiodun Oki, once observed, “When the scheme was set up, the aim was such that if we had really gone through the objectives, I think housing problems would have been ended in this country.”
Employees had several years ago opted out of the NHF scheme, due largely to complaints regarding alleged poor record keeping by the FMBN and cumbersome bureaucratic bottlenecks.
As government continues to show apathy towards housing in a country with a vast shortage of decent homes and abysmally rising rents in its slum-breeding cities, experts suggest that the government could at least help by revisiting the NHF and re-engendering workers’ commitment to it. This is especially important, as they believe that the fund offers a veritable avenue to make many low-income earners owners of their own homes.
Extreme Shortage of Homes
The United Nations, through its shelter-monitoring arm, the UN-Habitat, in 2000, put Nigeria’s housing shortage at 16 million units. The lapse of time however, does not in any way imply that the figure has reduced as the population continued to grow, duly taking into cognisance additional homes constructed since 2000.
Therefore, if a unit is to house a family of three or four to say the least, this may mean that up to between 48 million and 64 million Nigerians are not likely to be living in decent homes.
The figure representing Nigerians that are likely without decent homes is alarming, as this analysis shows that between 34.2 per cent and 45.7 per cent of the country’s 140 million people may lack access to decent living in its simplest form.
Despite this, the federal government still seems to be slumbering over housing issues. The Federal Mortgage Bank of Nigeria, the country’s apex mortgage institution set up to provide individual and real estate development mortgages, has performed far below average, according to experts’ rating.
The inadequacy or inefficiency of the FMBN has worsened the chances of home ownership by low-income earners in the country.
A former managing director and chief executive of the bank, Mr. Abdulsalam Ahmed said in 2009, that Nigeria needed at least 700,000 houses per annum for the next ten years. Ahmed, who put home ownership in Nigeria at “about 25 per cent”, noted that the situation was “regrettable”.
Nigeria now needs about N45trn to solve its housing deficit, according to figures provided by the former acting managing director of FMBN, Mr. Michael Nwogbo, in a report titled ‘Challenges Facing Housing Delivery in Nigeria’, prepared by the bank late last year.
The current situation in the country’s low-cost housing provision is that the Federal Housing Authority is targeting 240,000 housing units, while its public-private partnership arrangement is expected to yield 500 prototype housing units within the next four years.
However, statements such as this about targets from government agencies are not new. What prevents them from achieving the targets is a story for another day. Experts still harbour doubts about the feasibility of this feat.
Housing as a Social Good
The federal government had never considered housing as a way out of societal problems. According to a former head of the Osun State Property Development Corporation, Mr. Dotun Fatokun, government at all levels must see housing as a social good and must as a result, provide it for low income earners at rates understood to be affordable by all measures. The high cost of production - high cost of land, building materials, labour — and the credit freeze all contribute to the high cost of homes.
Chairman, Wemabod Estates Limited, Fatokun says, “There is no way the country can make housing available at this level of cost. Hardly can you get a three-bedroom flat for less than N3m. The question now is, how many Nigerians can afford such an amount of money?”
He says government must see housing as a social good and therefore, must be involved in its provision actively.
“One issue that must be paramount in the minds of governments is that housing must be classified as a social good, rather than economic. By looking at housing as an economic good, government has it all wrong. Therefore, there must be budgetary allocations year in, year out, to build houses and to give them out to low and medium income earners at subsidised rates.
“To this effect, states should have housing development corporations. Some governors do not appreciate the problem. Our governor once told me when I went to meet him for this, that housing was not a problem to our people because he believed that it is our culture for people to build their own homes, without government assistance
“I managed to convince him to build the workers’ housing estate and when we finally did, we sold them off with amazing speed. So we continued like that and increased allocations in subsequent years. Civil servants unfortunately, are not having access to housing loans,” he observes.
He advises that only professionals who could drive the housing industry should be engaged, adding that they must have excellent knowledge of relevant funding markets such as the FMBN and multinational donor agencies, among others.
“There are opportunities and there are constraints. Besides, governors can use housing programmes to attract investment in their states,” he notes.
Employees Pick Holes in NHF Management
Despite the importance of the NHF in helping the average Nigerian become a landlord, the FMBN is having a hard time collecting contributions from public and private sector employees, who are supposed to contribute to the fund.
Also, at an interactive session organised by the Nigeria Employers Consultative Association to reintegrate employees and the organised private sector into the NHF scheme in Lagos last year, the workers vehemently refused to resume contribution. They cited poor record keeping by the manager of the fund, cumbersome bureaucratic bottlenecks and even sharp practices by employers.
Director-general of NECA, Mr. Olusegun Oshinowo had arranged the session that also involved top officers of the Nigeria Labour Congress (NLC) and the FMBN, to persuade workers to begin contribution last January. But in a calculated opposition move, the vice president of NLC, Mr. Issa Aremu, said workers could not be pushed to make contributions when the safety of their interests was not guaranteed.
The situation has now led to an NHF without enough funds to achieve the objectives for which it was set up. Former minister of Lands, Housing and Urban Development, Mr. Nduese Essien, confirmed this while swearing in the latest management team of the FMBN in Abuja, where he said that about N100bn supposed to be contributed to the NHF by workers across the country, was trapped in various ministries, departments and agencies (MDAs) of the government’ as well as private sector establishments across the country.
Whereas the FMBN’s cumulative approved loan portfolio as at September 2010 was put at N112.4bn, according to recent figures provided by the FMBN, cumulative NHF collection remained at N60.9bn
The figures show an obvious challenge and place a question mark on the possibility of meeting the 740,000 homes in the next four years’ target, even with private partnership.
Failed Mortgage System.
Due to the high cost of mortgages, services of PMIs in Nigeria are only reachable by the rich. The rich also do not need mortgages, so developers take mortgages to build homes that can only be afforded by the rich or middle class in the society.
Mortgages cost is as high as 25 per cent in Nigeria. This is compared to the between eight per cent and 10 per cent in Ghana.
“The FMBN has not adequate money, because people are not paying into the national housing fund. Until the current Central Bank regime came up with its specialisation agenda, directing that banks should withdraw from extracurricular businesses such as property development, commercial banks and the FMBN simply hijacked the little funds in the NHF from the people. This they did by setting up property development companies or mortgage subsidiaries and funded them by loans from the apex mortgage bank obtained at six per cent. The banks were eager to provide the final buyer of the property a mortgage, but at between 20 and 30 per cent and many Nigerians are in the dark about this,” explains a Lagos-based developer, who prefers anonymity.
“If the mortgage system cannot help the low and medium income earners, then such system is a failure, because as we all know, the rich do not need mortgages. But here in Nigeria, they still find a way to hijack it,” he adds.
NHF Act: Old Law for A New Era
An NHF act, which stipulates contribution of 2.5 per cent from a minimum salary of N3000, is obviously an old one that urgently needs to be reviewed.
From the former N5m, the maximum amount of mortgage obtainable from the FMBN-managed NHF has been raised to N15m. This is the only area in which the law has been improved upon recently, but experts say it makes little or no sense, as it offers no meaningful help to low income earners.
“What the low income earners need is an amount between N2m and N5m to put up a two-bedroom bungalow or something of that status. At the end of the day, only the rich get the N15m, because of course, there is collateral to be provided and the bigger the loan, the bigger the collateral needed to obtain the loan,” observes Ijeoma Ofulue, a civil servant in Abuja.
Some experts have also blamed the National Assembly for delaying the passage of some bills on housing pending before it. They identify the bills as the Amendment to the NHF Act, the Amendment to the Land Use Act and Amendment to the FMBN Act, which, according to them, have been before the NASS since 2004.
Pioneer managing director of Federal Housing Authority (FHA), Mr Fortune Ebie, in a recent interview with the News Agency of Nigeria said none of the bills have gone through first reading in the National Assembly.
“I am not optimistic about growth in the housing sector this year, unless the National Assembly passes those housing bills before it since 2004. The government needs to change its focus and be interested in ensuring a robust housing sector in 2011,” he said.
According to Ebie, the housing sector has functioned till date without necessary laws to propel its growth. He said that the extant laws were obsolete and needed to be reviewed, adding that nothing tangible would happen in the sector until this was done.
To Dr Samson Adegoke, a lecturer at the Department of Estate Management in Osun State College of Technology, stakeholders should set up a think-tank on those bills. He says such think-tank will represent the interests of the sector at the federal, state and local government levels.
According to him, there should also be a stakeholders’ committee to lobby and influence the legislators and ensure the passage of all the bills. Adegoke notes that although the environment was now ripe for offshore funding of middle and low-income housing, the funds would not come in without these bills.
Inevitability of The Land Use Act Amendment
Over the years, housing experts, interestingly including government stakeholders, have argued that the problem with housing in Nigeria is rooted in the harshness of the Land Use Act of 1978. Despite the challenge of a shortage of mortgages or individual funds, access to land remains Nigerians’ greatest nightmare in their dreams to own their homes.
Experts believe that current policy framework regarding housing development in the country will make nonsense of any other initiative.
According to Nwogbo in his report, the current difficulty in land acquisition created by the Land Use Act will be a major hindrance to an initiative like this. The law has been criticised for being the major problem militating against the provision of affordable housing for Nigeria’s teeming population.
He says, “Currently, there exists a huge housing finance deficit in Nigeria, which requires a minimum of N45trn. Also, there are difficulties in land and mortgage transactions posed by the Land Use Act and long bureaucratic process for land administration. This has been worsened by the expensive cost and tax requirements.”
While calling on the federal government to establish an intervention fund to alleviate the problem of housing finance and complement the NHF to fast track housing development in the country, the Association of Housing Corporations of Nigeria also wants the National Assembly to quicken the review of the Land Use Act of 1978, to make the procurement of Certificates of Occupancy easier.
AHCN’s position was contained in a communiqué issued at the end of a two-day workshop on public-private partnership for housing delivery and its 44th Annual General Meeting held in Akure, Ondo State recently.
In this regard, Nigeria has refused to learn from smaller African countries like Ghana and Kenya. For instance, the ease of acquiring land for housing development in Ghana has remained remarkable. While it takes about 60 stages for prospective property owners and mortgagers to acquire landed property in Nigeria, only five steps are required in Ghana. The campaign to remove governors’ consent from the process of acquiring land in Nigeria is still ongoing and may not be won soon.
Making NHF Work
Perhaps one major thing the new administration of President Goodluck Jonathan has to do is to ensure that it engages a team of proficient managers of the NHF scheme. Ofulue says that new life has to be injected into the NHF to make stakeholders comply as a matter of legal mandate.
She says, both public and private sectors employers must be brought into the picture and should possibly be held responsible for not making their workers comply where it has been established that workers in such companies are failing to.
“The FMBN must be overhauled in personnel and in their system of operation. Most people stopped because they felt the bureaucracies involved were discouraging. This is the computer age and no one expects the bank to continue all the red tape and bottlenecks that discourage contribution,” she adds.
For Alhaji Akeem Abdukadir, a retiree and beneficiary of the NHF, the federal government will do Nigerians a lot of good if it establishes a policing agency that will monitor, enforce and implement policies that have to do with contribution by employees. Such an agency, he suggests would be to fish out erring or dubious employers in the organised private sector.
He says, “While it is needed that the FMBN lives up to the trends, government needs to establish an agency that will monitor compliance by employees and most importantly, compliance by employers in the private sector. This is because we have also heard reports of some employees contributing without paper evidence.
“I got a loan to build my house some years before I retired from the service and I can say that the NHF is very relevant and provides the easiest way by which all classes of people can own their own houses. Imagine a situation where all workers in Nigeria comply. There will be so much money that no one would need a mortgage and not get it. But because people are not contributing, applicants need to wait a long time before they get mortgages. The government should really step in.”
A private sector employer, Hafiz Adebola says it is necessary that government sensitises people on the need for the contribution, as people are always suspicious about deductions from their salaries.
He says, “A house is the greatest piece of property a man can own and making any legal sacrifice to have one is worth doing, but there are a number of deductions from workers’ salaries now. We have tax deductions and there are pension deductions also. Sometimes, when an employee borrows from the company, that also adds to the deductions. But I’m sure that wise employees will be willing to be a part of the NHF, if there is clear assurance that the aim will not be defeated at the end. So the FMBN has a lot to do to regain workers’ confidence in this regard.
“Government cannot build homes for citizens for free, but it can help citizens build their homes by setting up policies, implementing and channelling citizens’ efforts towards the success of such policies that encourage easier ownership,” he adds.