Challenges of Housing Finance in Nigeria [A Case Study of The Federal Mortgage Bank of Nigeria (FMBN)]

With a population of 197 million inhabitants, Nigeria is the most populous nation in Africa. The contribution that housing makes to the socio-economic development of an economy is significant. Despite this assertion, there exists a housing deficit of 17 million in the country. The gap between demand and supply for housing is wide owing to several challenges encountered in providing mortgage to low and middle-income earners that form the majority of prospective beneficiaries of the home ownership scheme initiated by Federal Mortgage Bank of Nigeria (FMBN).

This study examined the challenges encountered in the Nigerian housing industry by determining the affordability of individuals in terms of access to the National Housing Fund (NHF) loan and further explored a cost-effective means to providing affordable houses to low and middle-income earners. In addition, the work made effort towards determining the effectiveness of the strategies presently used by the bank (FMBN) in creating mortgages and its existing model for housing finance in Nigeria. The need for this research developed because of the high level of housing deficit in the country and the insufficient attention given to empirical research on housing finance in Nigeria. This research used qualitative study approach by conducting eleven semi-structured interviews with key officials and Chief Executive Officers within the Nigerian housing industry supported with archival records of the housing industry in the country to advance ways by which the lending bank can operate efficiently.

Results of the study revealed that key challenges facing the industry were classified into three broad themes namely; financial, procedural and structural challenges. The financial challenges highlighted the constraints (low capitalisation) encountered by FMBN in successfully delivering quality and affordable houses to low and middle-income earners. The procedural challenges emphasise the difficulties (stringent processes) that NHF applicants experience in the process of obtaining mortgage loans. While the structural challenges describe the problems associated with the quality and the standard of the buildings provided by estate developers.

Another key finding is the high level of political interference in the housing sector which had greatly impacted on the nation’s housing delivery. In addition, the institutional structure of FMBN is also flawed with loopholes such as the lack of Information Technology (IT) integration, lack of involvement of major stakeholders in the executive management of the Bank and a need to review the existing regulatory framework. To meet the housing delivery target set by the government, it is recommended that reform of the Housing Act and restructuring the housing industry will help in the needed redress within the industry.