Housing Funding: Nigeria’s Capital Market Remains Untapped Despite Huge Potentials – Onyema

The Group Managing Director of the Nigerian Exchange Group (NGX), Oscar Onyema has revealed that despite the huge potentials inherent in the nation’s capital market, it remains an underutilized river in addressing Nigeria’s housing gap.

He made this known during a presentation centering on housing funding and capital markets at the Day two of the Africa International Housing Show (AIHS) in Abuja on Tuesday.

According to him, Nigeria’s current population sits at about 218 million with a ten-year average population growth of about 2.6 percent.

He said the rapid growth of the country’s population has led to significant migration of rural dwellers to urban areas as the urbanization rate in the country stands at 4.95 percent, which according to him puts so much pressure on available housing and other infrastructure in urban areas.

“Nigeria currently faces a severe housing deficit estimate by the Federal Mortgage Bank of Nigeria and international human rights commission indicate a housing deficit of about 28 million units.

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“Solving this problem will involve creating linkages between the provision of lands to property developers through increased availability of housing finance to reduce property transaction cost”, he said.

While referencing the World Bank’s statistics, he said the demand for affordable housing in Nigeria is huge and growing in the face of a sizable deficit, hence requiring a rapid intervention to help close the gap.

He said that despite the challenges faced by the real estate sector during the covid-19 pandemic, it has recovered from the pandemic slippage which resulted in the 9.22 percent growth in 2020.

Available statistics from the USA show that private residential investment contributes about 5 percent to GDP while housing services contribute about 13 percent to GDP, summing up the total housing contribution of 18 Percent.

While reeling out some of the efforts the government has made in closing the housing gap, Onyema said that the government at various levels has recognized the importance of housing and embarked on various reforms and interventions in the sector to bridge the existing deficit.

The interventions include the Federal Ministry of Housing and urban development’s proposed housing reform, the 2000 to 2004 policy focused on the private sector serving as a major catalyst for housing delivery in Nigeria, and issues in the Land Use Act which according to him were raised for review as well as provision of incentives to dwellers.

Others are the establishment of financial infrastructures like the Federal Mortgage Bank of Nigeria (FMBN) and the Nigerian Mortgage Refinance Company (NMRC).

While describing financing as the most crucial element in housing investment, he said that the availability of finance determines access to other key inputs such as land, labour, materials, and infrastructure.

He challenged Nigeria to draw lessons from developed countries like the USA, UK, and Australia, which have used capital market instruments to fund real estate projects.

He said instruments such as equities, bonds, REIT, and mortgage banks securities have been adopted as skills in their economies to solve their housing needs and helped to deepen their capital markets.

“The private sector is the major catalyst of private housing in Nigeria. Capital instruments can be used to drive Real Estate in developed countries, Nigeria can key into this. The potential of Real Estate firms and mortgage systems are highly underestimated, they have barely been scratched in Nigeria”, he revealed.

He urged concerned bodies to look more closely at the capital market “if we are to unlock this much-needed funds for our housing projects as well as the millions of our population that needs affordable housing.”