Efr Vol 57 No 4 December 2019 Housing Deficit in Nigeria Issues, Challenges and Prospects
Efr Vol 57 No 4 December 2019 Housing Deficit in Nigeria Issues, Challenges and Prospects
Efr Vol 57 No 4 December 2019 Housing Deficit in Nigeria Issues, Challenges and Prospects
I. Introduction
H
ousing is important to the development of any society, and it has both
economic and welfare effects. Economically, investment in housing
contributes to fixed capital formation, employment and substantial
backward and forward linkages with the rest of the economy. Its welfare effects
include shelter for the populace, access to health and educational facilities.
Improved access to health and education services as well as employment
opportunities may lead to higher productivity and income for poor families.
Provision of adequate and quality housing units is one of the roles of any
government since housing is one of the human fundamental needs. This
indicator signifies, among other factors, the standard of living of a country’s
populace. It can also be used to measure the economic viability of a nation.
Housing deficit, when left unabated, could lead to increase in crime, outbreak
of diseases, unaffordable house prices, poor standards of living as well as high
mortgage payments. Due to this, the United Nations (UN) advocated for the
adoption of Goal 11 globally. Goal 11 was targeted to capture a holistic
perspective of the housing sector, with a view to achieving quality and
affordable housing units for all by 2030. According to the Programme, a high-
quality housing sector is one of the benchmarks for socioeconomic growth and
development.
In Nigeria, majority of cities are fast becoming homes to scores of individuals due
to influx, rapid-growing population and rapid urbanisation, among other factors.
With this trend, there has been increase in the demand for houses across the
country. The housing deficit crisis in Nigeria has worsened in recent times with the
statistics showing a deficit of at least 17.0 million. There has been a steady rise in
the housing deficit, from 7.0 million in 1991 to 14 million in 2010. From the report
of the World Bank in 2018, Nigeria requires about 700,000 housing units annually,
spanning through a 20-year period to accommodate the rising population. This
is highly unattainable with current indices, coupled with the sluggish growth of
Prof. Akpan Ekpo is a Professor of Economics and Public Policy, University of Uyo. The author
acknowledged the research assistance of Oba Obukohwo Efayena of FERT. The usual disclaimer
applies.
Central Bank of Nigeria Economic and Financial Review Volume 57/4 December 2019 177
178 Central Bank of Nigeria Economic and Financial Review December 2019
Several scholars have examined the link between housing deficit and growth in
the Nigerian economy (Anugwom, 2001; Olotuah &Taiwo, 2013; Adedayo 2015;
Gemade 2014; Asojo, 2010). From a macroeconomic perspective, housing, that
is, residential construction remains a potent component of investment demand.
This paper, therefore, briefly examines the issues, challenges as well as prospects
in the Nigerian housing sector. Following the introductory section, section 2
provides stylised facts about the real estate sector in Nigeria; section 3
investigates the challenges facing the housing sector in Nigeria, as a foundation
towards proffering viable policy options in eradicating the housing deficit in the
country. Section 4 provides the policies capable of curbing housing deficit in
Nigeria, while section 5 discusses the prospects. Section 6 concludes the paper.
It is expected that our insights would throw more light on the subject matter.
There are several key players and legislations whose activities control or regulate
the housing sector in Nigeria. These key players in the Nigerian housing sector
include; Federal Ministry of Lands, Housing and Urban Development, Central
Bank of Nigeria (CBN), Financial Institutions and Property Developers, the
Securities and Exchange Commission, Nigerian Institution of Estate Surveyors and
Valuers (NIESV), Nigeria Institute of Architects (NIA), Nigerian Institute of Town
Planning (NITP), Nigerian Institute of Quantity Surveyors (NIQS), Nigerian Institute
of Building (NIOB), and Nigerian Society of Engineers (NSE).
The Housing Policy adopted under the NDP was designed to specifically address
housing, as part of industrial estates, land acquisition and town planning. The
blue print proposed to provide 24,000 housing units. However, the Programme
could not achieve its objectives due to the outbreak of the Nigerian civil war.
Only 500 units were built by the Federal Government. This, thus, created a wide
deficit in the targeted housing units.
Under NDP 2, the federal and state governments proposed to construct housing
units for rent, at affordable prices. It was proposed that 54,000 housing units
would be delivered between 1972 and 1973, comprising 10,000 units in Lagos
and 4,000 units in each of the then 11 state capitals. The Programme did not
achieve much due to bureaucracy in government. The Federal Housing
Authority (FHA) did not commence operation until 1976, thus, crippling the goals
of the Programme during the period.
Under the NDP 3, the government established the Ministry of Housing, National
Development and Environment with the primary responsibility to provide quality
and affordable housing units. A total of N1.83 billion was allocated to the housing
sector. It was proposed that a total of 202,000 and 46,000 housing units would
be provided annually by the Federal and Lagos State governments,
respectively. The Plan also proposed that 12,000 housing units would be built
annually by Kaduna State government, as well as 8,000 housing units in the
remaining state capitals. With the huge capital obligations, only 28,500 housing
units were completed under the Programme.
NDP 4 was designed to provide 2,000 housing units annually in each of the 19
states of the Federation, with a lump sum of N1.6 billion allocated to the housing
sector. But the Programme was relatively inefficient, with only 47,200 housing
units completed during the period of the programme.
180 Central Bank of Nigeria Economic and Financial Review December 2019
The 1991 National Housing Policy was intended to ensure that all Nigerians own
or have access to decent housing accommodation at affordable cost by the
year 2000. The objectives of the Policy include:
To facilitate the mobilisation of funds for the provision of houses for
Nigerians at affordable prices;
To ensure constant supply of loans to Nigerians for the purpose of
building, purchasing and improvement of residential houses;
To provide incentives for the capital market to invest in property
development;
To encourage the development of specific programmes that would
ensure effective financing of housing development for low-income
workers; and
To provide long-term loans to mortgage institutions for on lending to
contributors to the Housing Fund.
Under this Programme, it was proposed that 121,000 housing units were to be
constructed for all income groups. The nine newly created states in Nigeria was
to have 5,000 housing units each, while the other 21 states shared 76,000 housing
units. As in the case of previous housing programmes, it failed to deliver on its
promises. Only 1,014 units were completed under the Programme. The Nigerian
government also adopted the National Housing Policy (2002) which led to the
creation of the Federal Ministry of Housing and Urban Development. Even with
Ekpo: Housing Deficit in Nigeria: Issues, Challenges and Prospects 181
the adoption of the Nigerian National Housing Policy (NHP 2006), there is still
huge housing deficit in Nigeria.
-2
Per cent
-4
-6
-8
-10
Quarters
The figure clearly attests to the dismal growth performance of the real estate
sector. The growth rate stood at a marginal 0.93 per cent in the first quarter of
2019.
With regards to the housing sector, the government has not been proactive in
terms of policy formulation. For instance, in the face of high housing deficit, the
government expended only 2.0 per cent of its total expenditure in the housing
sector (NBS, 2012). In addition, of the ₦18.5 billion allocated to the Ministry of
Lands, Housing and Urban Development, only a marginal ₦13.5 billion was
allocated for capital expenditure on housing and urban development (CAHF,
2014). Further, most new housing construction were meant for the upper income
households, leaving an acute housing shortage for middle- and lower-income
households. The greatest need for affordable housing is lower income
182 Central Bank of Nigeria Economic and Financial Review December 2019
households in urban areas. Almost 50.0 per cent of the Nigerian population lives
in cities and about 80.0 per cent lives in substandard conditions (World Bank,
2016).
d) Durability: Unlike most goods, the life span housing units extends even
beyond that of its owner(s). It is both a short- and long-term
investment item due to its longevity.
e) Low elasticity of supply: Owing to the complexity and variability of
the product, housing has a relatively lower elasticity of supply. If left
to the market forces, the supply of the product will be low. In the
same vein, a sudden change in demand for the product will affect
its price rather than its supply.
There are various challenges which the housing sector in Nigeria faces. These
challenges are the main causes of aggravating housing deficit, which the nation
has encountered through the years. The challenges include:
a) Land Tenure System - There is high insecurity in the current land tenure
system being operated on in Nigeria, with the Land Use Act vesting
the title to all lands in a State, in the hands of the State Governor
who holds same in trust. The Act gives the Governor the mandate to
reserve the right to revoke title to any land under his jurisdiction for
public purpose. This Act has resulted in low investment on the part of
property developers who constantly entertain fears about investing
in housing. In the long run, the effect is felt in increased deficit in the
housing sector.
affected the ease of building more housing units in Nigeria, since the
bureaucracies in the process will limit the quantity and affordability
of such structures in the long-term.
f) High Interest Rates and Inflation - The high interest rate in Nigeria (16-
24 per cent) has deterred to a large extent investment in the Nigerian
housing sector. High interest rates have discouraged potential
investors especially those within the low- and middle-income bracket
from seeking mortgage loans. This has resulted in such group(s)
resorting to personal savings, local thrift societies, friends, etc. to
embark on housing projects, thus resulting in low output in terms of
quality, quantity and affordability of such housing units.
Despite the challenges that the Nigerian housing sector has to grapple with
through the years, the housing sector holds numerous prospects for
socioeconomic growth and sustainable development of the nation. The
opportunities for growth in the sector are increasing with the expanding
population creating demand for residential and commercial properties. With
sluggish growth in the housing sector in the nation, the prevailing housing deficit
presents an enormous potential for housing finance investors. The country
requires huge financial outlays to meet its housing demand. This trend is an
incentive for investors to reap the huge financial benefits in this sector. The sector
holds the potential of contributing more to Nigeria GDP than other sectors due
to the peculiarities of the sector.
186 Central Bank of Nigeria Economic and Financial Review December 2019
There are signs of emerging trends in the sector in recent times which include a
shift from luxury development to middle income housing; affordable housing
schemes through private-public partnership arrangements; and the potential to
bridge the housing gap with new residential developments when mortgage
reforms become effective. Governments at all levels need to provide the
enabling environment for investors to show interest in the housing sub-sector.
VI. Conclusion
The demand for affordable and quality housing in Nigeria is very high and
growing steadily. There is urgent need to stimulate the players in the housing
sector in order to reduce the widening housing deficit in Nigeria. The following
policy suggestions would help close the housing deficit in Nigeria:
More than ever before, there is need to train and utilise local craftsmen.
In the process of eliminating or at least reducing the housing deficit,
government need to establish training schools for local artisans to cover
such trades as plumbing, painting, electricians, welding and fabrication,
carpentry, interior decorations among others. This will help reduce the
cost of providing housing in Nigeria;
References