Boosting the housing sector to promote economic growth

The National Built Environment Conference (NABECON),2017 organised by the Nigerian Institute of Building and Council of Registered Builders of Nigeria (CORBON), a former president, Nigerian Institute of Quantity Surveyors (NIQS), Agele Alufohai made some recommendations that; the adoption of public-private partnerships for financing infrastructure and Singaporean model for mortgage financing to stimulate construction activities in the country.The Singapore model refers to creating a pool of funds into which everybody contributes monthly and from which everybody borrows to buy a flat or house.
Housing policies and reforms must seek to work for all Nigerians in order to boost construction activities and make a significant contribution to economic development in Nigeria.

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According to him, monetary and fiscal policies must support what is sustainable and good for the Nigerian economy in the next ten to twenty years rather than what is good for us now which lead us often to what levels to maintain current consumption of imports. What investors require is a credible, sustainable and stable exchange rate, not a high or low one that is highly vulnerable to movements in oil prices. If the Central Bank of Nigeria had decided to maintain the exchange rate six months ago at N450-to-$1, decided to design its intervention in the market to sustain this rate, a lot of imported goods, including shampoos, would have become unaffordable to Nigerians, and Nigerian businesses would have moved to exploit this opportunity by producing them locally.In addition, unstable exchange rates also affect the housing sector. Nigeria should have the boldness to aim for stable and sustainable exchange rates and stable prices or low inflation in order to create a suitable environment for a successful development plan in the housing sector.

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In Nigeria unfortunately, less than 3% of homeowners acquire or build through mortgages. Between 1960 and 2009, mortgages in Nigeria were less than 100,000. Some developing country lacks the financial depth or huge savings that are the bedrock of mortgages.
Nigeria has to re-strategise the National Housing Fund (NHF) and find ways to mobilize contributions; a critical component will be the upward review of the interest paid on deposit.
According to the Federal Mortgage Bank of Nigeria (FMBN), we need to build 720,000 units of houses per annum in Nigeria at a cost of N56 trillion per annum to close our housing gap. The total assets and liabilities of all mortgage finance institutions in Nigeria as at March 2017 was only N97 billion with about N10 billion being contributions into the NHF. This is less than 0.3per cent of GDP compared to South Africa where mortgage assets are almost 40 percent of GDP and 80 percent, 50 percent and 33 percent in the United Kingdom, Hong Kong and Malaysia respectively. The Nigerian Mortgage Refinance Corporation, a recent innovation in the housing space, to date has only N40 billion in assets.

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The Government of Egypt, through the Central Bank of Egypt, in 2014 decided to advance 10 billion Egyptian pounds to banks to be used to support 7 to 8 percent mortgages for low and middle-income houses. In 2017, the Central Bank of Egypt increased the Mortgage Finance Fund to 20 billion Egyptian pounds ($1,133,963,800.00) after seeing how effective the scheme quickly proved in expanding homeownership. The Egyptian scheme is working for even the very poor with those who earn 1,400 Egyptian pounds or N29, 000 per month getting mortgages at only 5per cent. Rather than have a multiplicity of schemes, the Singaporean model, which the government also tops up, is quite appealing.The government would need to have very strict specifications for the sort of housing that should be financed with this model.

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As election season draws near, let’s impress it on our politicians that we are not just expecting modest improvements in policy and palliatives. Let’s share and develop with our bureaucrats, political parties, investors and businesses, big visions for how we can have macroeconomic policies that deliver stable prices and low inflation


Source: The Guardian