President Bola Ahmed Tinubu, on February 15, 2024, gave the green light for the restructuring of the top management teams of two agencies under the Federal Ministry of Housing and Urban Development.

According to a recent statement from his Special Adviser on Media and Publicity, Ajuri Ngelale, released in Abuja, the agencies in question are the Federal Mortgage Bank of Nigeria (FMBN) and the Federal Housing Authority (FHA). This reshuffle includes the appointment of Mr. Shehu Usman Osidi as the new Managing Director/CEO of FMBN and Oyetunde Ojo as the MD/CEO of FHA.

The recent appointments herald a fresh chapter in tackling the array of obstacles confronting the housing industry.

Upon investigation by Daily Trust, it is evident that key challenges plaguing the sector encompass a substantial housing shortfall, abandoned ventures, underperforming loans, and the need for recapitalization of the nation’s mortgage institution.

**Housing deficit**

Nigeria has an estimated 28 million housing deficit as of 2023 which indicates that a total of N21 trillion is required to provide housing units to fill the deficit.

Consequently, this entails that the real estate sector needs an investment of over N21 trillion to build sufficient houses for the entire population, taking cognizance of the annual average rate of N7.47 trillion credit to the real estate sector.

However, the major challenge is Nigeria’s population which keeps increasing geometrically, thereby posing a huge threat to efforts at closing the housing deficit.

For instance, the country’s population has been growing by 3.2 per cent annually, based on a 2006 population census estimate by the National Population Commission (NPC) as our population grew from 140 million in 2006 to over 210 million in 2023.

**Non-performing loans**

A large chunk of the FMBN’s loan portfolio is classified as non-performing, which has been a source of concern for industry stakeholders. Experts say tackling this issue requires effective debt recovery strategies, improved loan administration, and stricter credit risk assessment. Similarly, reducing non-performing loans has the capacity to avail new capital for new lending and ensure the bank’s financial sustainability.

If the issue of non-performing loans is tackled, stakeholders believe it would go a long way in driving Nigeria’s housing vision.

**Addressing issue of abandoned housing projects**

Both FMBN and the FHA have a huge role to play in tackling abandoned projects which is put at 46 across the country.

As such, the FMBN and FHA executives can collaborate with private developers and investors. The bank can act as a facilitator, de-risking investments and creating attractive incentives for private participation. This collaborative approach can inject much-needed capital and expertise to boost housing construction.

At a recent meeting with the management of Shelter Afrique Development Bank, FMBN MD, Shehu Usman Osidi, said the bank will explore its infrastructure funding product as part of efforts to revive about 46 abandoned housing projects across the country.

“Our findings show that banks have entered into a housing financing agreement with states where the state governments are expected to provide infrastructure for these estates, but unfortunately many states reneged and the projects were abandoned.

“We have explored the product offerings of Shelter Afrique Development Bank and found that they actually offer infrastructure financing. So we want to bring them onboard to offer these financing so we can finish up the projects and hand them over to the many Nigerians who are in need of shelter,” he said.

However, it is left to be seen how fast the FMBN can be able to address the pressing challenge.

**Recapitalization**

One of the challenges of accessing credit from the FMBN is that the capital base of the banks at N2.5 billion is too low for any significant growth.

The outgoing MD of the FMBN, Madu Hamman, while lamenting on the capital base of the bank, which he said was highly inadequate considering the enormous responsibility expected of FMBN, had called on them to think deeply so as to satisfy the demand of the numerous contributors.

“The greatest challenge of the bank is the need to recapitalize it. The capital structure of the bank is highly inadequate. Currently, the bank operates with only N2.5 billion as the capital base and that is highly inadequate. We have been working tirelessly in consultation with the minister of housing and the various committees on housing at the National Assembly to assist us in putting our case to the government and the National Assembly.

We appeal to the new management to rigorously pursue that. Concerning the issues of loan approvals and reduction in the Non-Performing Loans (NPL), we had to formulate a new committee to tackle the issues of nonperforming loans, we have witnessed a drop in the non-performing loans from 82 per cent to about 56 per cent as of today,” he said.

Also, operators under the aegis of Mortgage Banking Association of Nigeria (MBAN) said the capital base of the Federal Mortgage Bank of Nigeria (FMBN) is too low, canvassing that, as the managing agent of the National Housing Fund (NHF) scheme, the bank should be recapitalized to, at least, N500 billion, adding that the recapitalization of the FMBN was to adequately position the institution to deliver on its mandate as a secondary mortgage institution designed to create long-term funding for housing finance for Nigerians.

**Access to Finance**

The current minimum wage is N30,000, having been reviewed upward from N18,000. Moreover, the rising inflation rate, which stood at 29.9 in January, has undermined the minimum wage increase. The country’s benchmark interest rate currently stands at 22.75 after the central bank jerked it up last week by 400 basis points from 18.75 per cent.

One of the major challenges of access to finance for mortgage is that most mortgage banks require borrowers to pay at least one-third of the cost of the house they want to buy or service the loan with 33.3 per cent of their monthly income. For instance, to access a mortgage loan, a Nigerian is expected to at least pay approximately N10,000 per month for a 30-year loan period.

Most challenging is that primary mortgage banks rarely give long-term loans. As such, many mortgage loan seekers hardly get long-term repayment plans. On the other hand, many Nigerians cannot afford the short-term financing provided by mortgage banks, hence expanding the huge housing deficit in the country.

Industry players believe that it is unsustainable for every mortgage bank in Nigeria to depend on funding from the Federal Mortgage Bank. They said funding from the Federal Mortgage Bank cannot go around to everybody.

They therefore call for a different funding structure in the mortgage market to make it more flexible and accessible for ordinary Nigerians to get loans and repay within a specific period of time.

A primary challenge lies in the fact that primary mortgage banks seldom offer extended-term loans. Consequently, numerous individuals seeking mortgage loans struggle to secure extended repayment schedules. Conversely, many Nigerians find it difficult to afford the short-term financing options provided by mortgage banks, thus contributing to the significant housing shortage in the country.

Stakeholders in the industry argue that it is unsustainable for each mortgage bank in Nigeria to rely solely on funding from the Federal Mortgage Bank. They emphasize that the resources from the Federal Mortgage Bank are insufficient to cater to every party.

Therefore, they advocate for a revised funding framework in the mortgage sector to enhance flexibility and accessibility, enabling ordinary Nigerians to obtain loans and repay them within a designated timeframe.