A country as populous as Nigeria and as evolving as any other 3rd world country has had its share of challenges, from politics to health, economic development and recently due to population, housing especially in terms of renting and owning of residential properties.

The National Bureau of Statistics reported in 2013 reported that following a banking sector crisis in 2009, which is now working its way out of the system, the real GDP growth rate rose to 7.8% in 2010. Growth dropped to 6.6% in 2012 as a result of a partial removal of fuel price subsidies, an increase in electricity tariffs, security challenges and a decline in agricultural output. Nigeria’s economy is dependent on its two driving sectors, mining (40% of GDP in 2011, and including oil and gas at 15% of GDP) and agriculture (30% of GDP in 2011, and employing 70% of the labour force). For 2013, growth is projected to increase marginally to 6.7%, and to 7.3% by 2014. Inflation is projected to come down slowly from 12% in 2012, to 9.7% in 2013, and 9.5% in 2014.

These data not only backs up our growth rate and the reason behind it, it also shows us a huge lacking an area which until now was relatively unexplored. House Micro Financing (HMF)

Microfinance basically entails the provision of financial services to micro-entrepreneurs and small businesses, which lack access to banking and related services due to the high transaction costs associated with serving these client categories. The two main mechanisms for the delivery of financial services to such clients are: relationship-based banking for individual entrepreneurs and small businesses; and group-based models, where several entrepreneurs come together to apply for loans and other services as a group. Housing delivery requires that a number of systems work; finance, land and infrastructure. Housing microfinance works even when many of these systems do not work well. For example, certain segments of the population build and improve housing circumstances incrementally, because of the high cost of housing and lack of affordable finance.

Text book wise, HMF is tailored to match this staged build process, financed by these relatively small and less predictable incomes streams. Dr. (Mrs.) Okonjo Iweala recently espoused the impact of Nigeria Mortgage Refinance Company and related initiatives tend to unlock in Nigeria’s economy. While we agree with this statement, we have a duty to provide some level of insight on areas that require adjustment or refocus in order to achieve the overall stated objective of the low-income housing scheme. The need to adopt the principles of microfinance has been advocated in the quest by government to provide affordable housing for low-income earners in the country. We can take a cue from the Malaysian government.

The Malaysian government at first instance targeted the construction of 350, 000 units for low income earners with a monthly income of N78, 872.55, and a fixed price for the building at N2, 039, 100.00. Taking the case of the Federal Territory of Kuala Lumpur with about 52% of the population into trading and small businesses, it was discovered that achievement of the low income housing in Kuala Lumpur was the lowest with 27.3% compared to the medium (233.7%) and the high cost (749.6%). Analyzing the issues that necessitated the low performance of the low cost housing revealed that incentives given to medium cost developers was not available to the low cost builders, and most importantly, the lack of proper regulation, control and monitoring by the local authorities for the construction and completion of the low cost housing. In their attempt to resolve these imbalances, the Malaysian government created a new categorization called the low medium cost housing in 1998 which recorded a tremendous success taken the above negating factors into consideration.

Nigeria can model their solution after this. There is need to solve the of lack of infrastructure and services to support housing delivery. This includes water, sanitation, electricity and roads. This problem curtails housing supply particularly affordable housing, and is at the heart of slum formation. How does HMF work in the context of this shortage, and does it possibly offer some solutions?

Currently, Nigeria is projected to be having about 84.7million adults’ population out of which about 40million is financially excluded. More so, affordability for formally constructed housing purchased with a mortgage is limited to less than 15% of the adult population due to their inability to access mortgage finance, either because it did not exist or because it was inaccessible.

Household initiatives to provide infrastructure and services offer some solutions to the problem and HMF can finance these, particularly smaller scale, household and neighbourhood incremental infrastructure. Further, technological developments are increasingly showing that households and neighbourhoods can produce and manage their own services through off-grid solutions. However, we cannot discount the role of the state, particularly in ensuring that services are affordable and equitably distributed.