Impact of COVID-19 on Housing; Can NMRC Bridge the Gap?


Friday, September 17, 2021 / 3:27 PM / by CSL Research / Header Image Credit: Bowen National Research 


Like many other sectors, Nigeria's real estate sector has been severely affected by the advent of the global Covid-19 pandemic. In recent years, there has been a strong squeeze in consumers' purchasing power, resulting in low effective demand for housing. Added to this, the high cost of construction means property prices are very high and unaffordable. Rental figures are not left out as rents in many parts of the country have increased significantly. The Central Bank of Nigeria (CBN) has made some efforts through intervention funds targeted at developers, but many developers still complain of the illiquidity within the sector.


The housing deficit in Nigeria is no news. According to the most recent figures from NMRC, Nigeria's housing gap is thought to be in the region of 23 million units. There have been various initiatives by the Federal Government to bridge the huge housing deficit, but such initiatives do not appear to be achieving their desired end. The FMBN is a Federal Government-Sponsored Enterprise with a mortgage finance system built through deposits mobilised and equity contributions by the Federal Government established to address the housing deficit. To aid the FMBN to fulfil its role, Act 3 of 1992 established the National Housing Fund (NHF), a mandatory contributory scheme. Under the NHF, all workers are to contribute 2.5% of their monthly salaries and loans are advanced to eligible workers at an interest rate of 6% per annum. From a demand perspective, we believe that chief among issues affecting growth in the homeownership rate in Nigeria is the high mortgage financing rate and the excessive strain in purchasing power.


In a bid to overcome the high mortgage financing problem, the government launched the Nigeria Mortgage Refinance Company (NRMC) as part of measures to boost liquidity for funding housing development and purchase. In November last year, the Nigeria Mortgage Refinance Company (NMRC) issued a N10 billion 7.20% Series 3 Fixed Rate Bond to boost funding for an affordable mortgage. According to the report, the net proceeds of the exercise will be used to refinance eligible mortgage loans originated by the participating mortgage lending banks. NMRC boss, Kehinde Ogundimu, noted that the bond issuance would cause a substantial decrease in the mortgage interest rate and translate to some cost reduction for the real estate developers who usually borrow short term at a high cost to fund long-term projects. Feelers from the developers, however, suggest that interest rates are still high.


Whilst we laud the various efforts to boost liquidity in the real estate industry, we note that the impact of Covid-19, recent recessions, spike in utility costs and the continuous devaluation of the Naira on the finances of consumers in Nigeria has been very significant. Thus, we expect new home acquisitions to remain less of a priority. In addition, we expect corporate demand to wane with many businesses still struggling with cashflow problems. This is added to the fact that legacy issues such as elevated cost of building materials, Land acquisition difficulties etc. still remain, means that the government needs to do more if housing deficit numbers in Nigeria are to show any real improvement.

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