Why mortgage accounts for less than 3% of housing finance in Nigeria

Elsewhere, especially in the advanced economies of the world, housing finance is synonymous with mortgage, because in such societies, the only known way of buying and owning a home is by applying for, and accessing a mortgage facility.

In Nigeria, the story is different. This is a country where homeownership is realised almost 100 percent from own savings or through communal and co-operative efforts.

In Lagos, for instance, a city of about 18 million people where over 60 percent of this population lives in rented accommodation, unconfirmed report has it that about 86 percent of the housing stock in the city is funded from household income.

Experts have revealed that housing finance by public authorities in Nigeria is about 10 percent; mortgage banks contribute about 2 percent, while contribution from banks and other institutions is insignificant.

In a comparative analysis of what obtains in Nigeria, Ghana and South Africa, Sonnie Ayere, CEO, Dunn Loren Merrifield, notes that in South Africa, mortgage contributes about 40 percent of housing finance while in Ghana, our much smaller West African neighbour, the contribution is 3 percent.

Ayere, who spoke at an economic forum in Lagos, explains that the low mortgage contribution to housing finance in Nigeria is the cumbersome and unfriendly land administration in the country, pointing out that Nigeria ranks highest in property registration and construction permits.

“Nigeria is ahead of all other African countries in procedures legally required for registering property; it takes about 360 days to register property here as against Ghana’s less than 10 days,” he says, adding that in Lagos, the cost of registering property is about 15 percent of the value of the property.

Ayere points out that there are altogether 16 stages and 60 steps to getting a property registered in Lagos, eight stages and 30 steps for each of the lender and the borrower, stressing that this explains why it is difficult to get mortgage for housing finance.

This, he says, is against what obtains in other economies including Ghana and South Africa. “Ghana before now had a dysfunctional land administration, long and expensive procedures that lasted up to five years and involving six different agencies supervising which resulted in inefficient state land bureaucracy and customary tenure,” he says.

When, however, government instituted reforms, he points out, property registration was cut to 34 days and queues at the lands commission disappeared, making it possible for the mortgage sector to thrive. In Egypt, he adds, government identified high fees and inefficient government agencies that hindered the formalisation of real estate as a major issue and sorted it out by reducing property registration fees; simplifying the property registration process thus encouraging citizens and companies to obtain titles.

Ayere, therefore, calls for discarding of multiple verification payment, deployment of Global Information Services (GIS), making payments with a single receipt, improving capacity building and significant investment in technology.

Developers and mortgage providers at the forum could not agree more, and according to

Hakeem Oguniran, managing director, UACN Property Development Company (UPDC) plc, there are five drawbacks to housing finance including cost, character, capacity, collateral and conditions.

Oguniran states that the problem with land registration was much with the system, explaining that the system is people-driven and not process-driven. He recommends that there should be one-stop-shop for perfecting title and should be made business-like.

Abimbola Olayinka, MD/CEO, Resort Savings and Loans plc, says the Land Use Act should be used to empower the people and not as an economic and political tool by state chief executives, adding that the Act should be taken away from the constitution so that it could be easily tinkered with.

He recommends that land administrators should adopt what he called three-one-three strategy for land registration, explaining that land titles should be perfected in three days at one central place, and at the cost of 3 percent of the value of the land.

Chuka Uroko