Even as the authorities work to create more opportunities for Nigerians to own affordable homes, mortgage penetration continues to be low. The ratio of outstanding mortgages to GDP was 0.5% in 2020 – up from 0.2% in 2019 – compared to 18.9% in Namibia, 16.2% in South Africa, 10.2% in Tunisia, 2.2% in Kenya and 1.6% in Ghana, according to the Centre for Affordable Housing Finance in Africa (CAHF). That year there were some 535,000 outstanding mortgages valued at $2.2bn in Nigeria, and the country was home to the highest number of mortgage providers in Africa, at 57, compared to five in Namibia, eight in Ghana, 15 in South Africa and 25 in Senegal. Nigeria needs between N15trn ($40.1bn) and N20trn ($53.4bn) worth of mortgage financing to alleviate the housing gap, according to a 2020 report from the Central Bank of Nigeria (CBN). “Nigeria’s mortgage industry remains extremely limited, with fewer than 10% of apartments purchased through a mortgage,” John Beecroft, managing director and CEO of Lagos-based property development firm Tetramanor, told OBG. “Rates remain too high, and the market needs to be restructured to become more efficient and attractive.”
The country is home to 35 primary mortgage institutions that are supervised by the CBN. While some commercial banks provide home loans, these sources are characterised by interest rates of around 25% with short maturities, and over 60% of loans have a tenure of under 30 days. This has contributed to low mortgage penetration, as many Nigerians are priced out of these options. To bolster access to affordable housing finance, the Federal Mortgage Bank of Nigeria (FMBN) became the leading mortgage institution in 1994. It works to deliver accessible and affordable homes through the provision of long-term credit to mortgage institutions; administers the National Housing Fund (NHF); and mobilises domestic and international funds for the residential real estate segment. The bank also provides loans for real estate development, and home renovation and construction. The FMBN was valued at N383bn ($1bn) in May 2020, and was working to recapitalise to N500bn ($1.3bn) as of early 2021 in order to facilitate more lending.
Under the NHF – a form of social savings programme – the FMBN gives primary mortgage banks loans at a 4% interest rate that are then passed on to mortgage recipients. Qualified homebuyers can receive as much as N15m ($40,050) at 6% interest and a tenor of up to 30 years. In February 2021 the FMBN announced that it had disbursed N30.5bn ($81.4m) worth of housing financing in 2020 via the NHF, bringing the total allocation since 2017 to N118bn ($315.1m).
The Nigeria Mortgage Refinance Company (NMRC) is a partnership between the government and entities such as primary mortgage banks, insurance companies, private equity investors and international financial institutions to develop both the primary and secondary mortgage markets. Licensed in 2015, the NMRC encourages institutions to provide mortgages by allocating long-term funding at an affordable rate, as well as providing liquidity to the segment as a whole by raising long-term funds via capital markets. As of December 2020 it had spent N20bn ($53.4m) to refinance the mortgage loan portfolios of commercial and mortgage banks. “Mortgage penetration is slowly increasing, a sign that the economy is becoming more solid and robust,” Kehinde Ogundimu, managing director and CEO of the NMRC, told OBG.
In late 2020 the NMRC issued N10bn ($26.7m) worth of fixed-rate bonds, the proceeds of which went towards refinancing mortgage loans. The issuance was more than three times oversubscribed, with N32.8bn ($87.6m) worth of commitments received. According to DLM Capital Group – the financial advisor for the issuance – the bond had the highest subscription rate for a Nigerian bond to date, and highlighted investor confidence in the NMRC. The refinancing institution had previously raised N8bn ($21.4m) in July 2015 and N11bn ($29.4m) in June 2018.