1. Potentials for Nigeria’s Mortgage Market
David Gardner
Specialist Consultant
Centre for Affordable Housing Finance in Africa (CAHF)

2. But we have to overcome significant blockages
Introduction: The Nigerian Housing Potential Fundamentals are there for housing sector growth…
But we have to overcome significant blockages
“Good housing makes for good economies and healthy families, and the need is significant”
CAHF Yearbook, 2017

3. Source: CAHF Housing Yearbook (2017)
Background: Nigeria’s Housing Market
A society desperate for home ownership….
Pop: 186 m
GDP: $405,1 bn
Massive Population & Growing Economy
Urbanisation: Growing Cities 49% / 4.3%pa
Home Ownership Rate: Hunger to own 25%
Financial Services: Formally Banked (2016): 38%
Source: CAHF Housing Yearbook (2017)

4. Background: Nigeria’s Housing Market
Background: Nigeria’s Housing Market ...but struggling to scale its mortgage market
Mortgages as % of GDP (2016): low but growing 0,9% (N600-bn)
Average Mortgage Loan Size (2016): $28,000? (55,000 loans?)
Proportion of Households able to Afford: <10%
Cost of Conventional, Formal CAHF House (2016): $43,454

5. Diagnosis: Nigeria’s Housing Market
Buying power exists, but not at the levels we build for

6. Diagnosis: Nigeria’s Housing Market Cost of housing as it is currently built is relatively high
Source: CAHF Housing Cost Benchmarking

7. Source: CAHF Housing Cost Benchmarking Study (2016)
Diagnosis: Nigeria’s Housing Market High Land, infrastructure, materials and labour costs
Source: CAHF Housing Cost Benchmarking Study (2016)

8. Solutions: Nigeria’s Mortgage Market Property market fundamentals matter
Government “Oils the gears” of whole housing economy, not just formal market: Prioritisation and consistency
Land titling, transfers and perfection of security are key
Access to land… at scale and small size
Planning, zoning, land use controls
Infrastructure networks and transport

9. Nigeria: Residential Construction and Real Estate Economic Impact
Solutions: Nigeria’s Mortgage Market Economic impact of residential construction & real estate
Nigeria: Residential Construction and Real Estate Economic Impact
Total Employment
2,633,109
+ ??
N0-bn 0%
N0-bn 0%
N0-bn 0%
N915-bn 19%
N2,956-bn 60%
N1,015-bn 21%
N58-bn 2%
N51,337-bn 43%
N3,101-Bn 39%
N4,886-Bn 61%
N7,987-Bn
N7,987-Bn 100%
N1,706-bn 55%
N7,987-Bn 100%
$8,6-bn
$13,5-bn
$22,2-bn
Direct Impact Multiplier: 1.63*
N5,404-Bn
68%
N0-bn 0%
N2,582-bn 32%
4,8% of GDP
N = NGN $ = USD
* Depends on intermediate input import leakages
NOTE: Imputed Value of Owned Housing Excluded

10. Solutions: Nigeria’s Mortgage Market Recognise that economies and people build houses
Economic fundamentals matter (inflation, interest, national debt)
Virtuous cycle: Housing finance markets deepen, widen, quicken economic impact - housing builds manufacturing and services sectors
Housing mortgages only work if they work profitably (interest, tenor, security, profitability vs Treasury investments & other assets)
Liquidity - Stronger links between wholesale and retail finance (NMRC & capital market participation)

11. Solutions: Nigeria’s Mortgage Market Must focus down-pyramid, and on informal incomes
Mortgage Finance barely penetrating the top of the income pyramid: Look down-market at tens of millions of middle income households
Significant demand in households who are good credit prospects but with informal or ‘mixed’ incomes
Need more affordable housing products for households to purchase as a start: N5-million to N2-million and below
Housing as homes and housing as business - rental market & construction industry growth

13. Solutions: Nigeria’s Mortgage Market Change what and who we finance with mortgages…
Smaller housing products (less than 40m2) on less land
Less expensive construction (less than N3-million products)
Incremental building (finance land & services, core houses)
Informal & SMME Incomes
“Massive small”: support production by SMMEs and households as a business. Private sector holds the key to success

14. 2. Solutions: Nigeria Mortgage Market Mortgage is a part of a housing Finance Value Chain

15. Solutions: Nigeria’s Mortgage Market More data, information, knowledge, market intelligence…
Chronic lack of rigorous data collation and market intelligence: Breadth and character of financial infrastructure investment; Extent of housing market and transfers; Loan book performance; Uptake of new residential developments.
NMRC’s championing of Housing Market Information Portal is welcomed!
CAHF looks forward to furthering our collaboration with NMRC to grow understanding of Nigeria’s housing and mortgage markets
Market Overview Data; Market Performance Data, Mortgage market data

16. Conclusions: Nigeria’s Mortgage Market Mortgage finance drives formal housing sector growth
Government must create solid framework: housing, finance, facilitation
Private sector holds capacity to expand and rapidly grow impact
Mortgage market holds key to starting housing sector growth & investment: All must collaborate to understand and grow Nigeria’s housing market – NMRC as champion
Drive for effective demand (affordability, availability, willingness): Households and SMMEs will continue to drive housing sector growth

17. David Gardner Specialist Consultant david@gardner.za.net
Thank You!
David Gardner
Specialist Consultant