Among the 17 sustainable development goals (SDGs) adopted by the United Nations (UN) and its Member States, “housing for all” forms one of the specific targets to be achieved by 2030. But 2030 is almost here, even as the issue of housing deficit continues to become worse; despite claims by successive governments to have tackled the perennial problem in their bits.
Recently, there have been debates coming from different quarters in Nigeria regarding the proposed National Housing Fund (NHF) bill, which is currently awaiting Presidential assent. Several top financial and tax analysts have rightly argued different sides to the NHF bill and its possible impacts on Nigeria. And while some are calling for the bill to be scrapped, others are throwing their weights behind it.
How housing development impacts the economy
In economic terms, the development of the housing sector forms an integral part of any country’s economic progress. Whether it is construction, rental or sale, each layer contributes spiral effects on the economy.
Basically, the influences of the housing sector on national economies can be summarised. Firstly, while housing fulfills a basic human need for shelter, it also provides the base from which households participate in the economy. Secondly, housing is the largest single asset most households will accumulate during their lifetime. Therefore, housing constitutes an important part of most countries’ stock of wealth.
An overview of Nigeria’s acute housing deficit
Despite having an estimated population of over 190 million population, Nigeria’s housing sector has been characterized by a housing deficit estimated at 18 million units. Earlier reports from the World Bank (as cited by Global Property Guide) shows that Nigeria needs about 700,000 additional units each year for the next 20 years.
However, recent Reports have shown that for the nation to upturn the high deficit figure, an additional 2 million housing unit per annum will be required for the next 10 years.
Like Nigeria, other nations equally affected
The UN-Habitat report for 2016 shows that globally, one in eight people live in slums. In total, around 1 billion people live in slum conditions today. According to the UN, the numbers are continuously increasing.
The majority of the slum dwellers are in developing economies. In spite of great progress in improving slums and preventing the formation of slums, 30 percent of the urban population living in slums in developing countries. It was further reported that 35% of the world population lives in unimaginable housing situations, representing over 2 billion today.
It has been revealed that the Nigerian housing sector has recently been declining, especially so during the better part of the last 5 years. Moreover, when compared to the housing sectors of some of the most advanced countries in the world, the Nigerian housing sector still has a long way to go. For instance, the Housing sector in countries like the US and Australia boasted largest in terms of the sector’s contributions to GDP and the highest employer of the labour force.
More investments needed to close housing deficits
Recent online statistics have revealed that the Nigerian housing sector would need about $400 billion investment over the next 25-30 years to reconcile this deficit.
Also, reports have shown that the World Bank stated N59.5 trillion would be needed to adequately meet the housing needs of Nigerians. To corroborate this, the Special Adviser to the Nigerian President on Economic Matters, Mr. Adeyemi Dipeolu, during the second Nigeria Housing Finance Conference in Abuja in 2018, stated the following:
“GOVERNMENT IS GIVING FHF N100 BILLION YEARLY FOR THE NEXT FIVE YEARS WITH ANTICIPATION THAT IT IS GOING TO LEVERAGE ONE TRILLION NAIRA OF PRIVATE RESOURCES.”
Analysts at loggerheads on the impact of proposed NHF law
Recall, that the revised National Housing Fund Law was recently passed by the National Assembly and submitted to the President. Nairametrics also joined in the debate, highlighting the possible elevated costs it could entail for several businesses in the country.
Global tax and consulting conglomerate, Price Waterhouse Coopers (PWC) has also opined that the “proposed law is a bad idea”.
The Head of Tax and Regulatory Services at PwC Nigeria and Tax
Leader for PwC West Africa, Mr. Taiwo Oyedele, called for the total withdrawal of the bill. The tax guru stated:
“THE MAIN OBJECTIVE OF NHF SHOULD NOT BE JUST TO MAKE AFFORDABLE FUNDING AVAILABLE FOR HOUSING BUT TO CREATE AN ENVIRONMENT THAT MAKES AFFORDABLE HOUSING POSSIBLE. TO ACHIEVE THIS, NIGERIA MUST ADOPT A HOLISTIC APPROACH TO THE CHALLENGES FACING THE SECTOR OF WHICH AFFORDABLE FINANCING IS ONLY A COMPONENT.”
He further stated the following:
“THE FACT THAT THERE IS NO MARKED PROGRESS TO SHOW FOR THE 27 YEARS OF ESTABLISHING THE NHF IS PROOF THAT NIGERIA’S HOUSING PROBLEM CANNOT BE SOLVED BY SIMPLY
THROWING MORE MONEY AT THE PROBLEM.”
On the contrary, some people are of the opinion that the NHF law is a good thing for the Nigerian economy. The Founder and Publisher of Nairametrics, Mr. Ugohukwu Obi Chukwu, threw his weight behind the proposed NHF bill thus:
“NHF IS A CONTRIBUTION TOWARDS ACQUIRING AN ASSET, IN THIS CASE, A HOME. IT’S ALSO IMPORTANT TO NOTE THAT NHF IS A RELIEF AGAINST TAX.
“NIGERIA’S PROPERTY MARKET FACES A PAUCITY OF FUNDS, THUS A LAW THAT MANDATES EVERY EMPLOYEE TO CONTRIBUTE A PART OF THEIR EARNINGS TOWARDS OWNING A HOME IS IMPORTANT. JUST LIKE PENSION FUNDS, NHF POOLS FUNDS FROM EVERY EMPLOYEE ALLOWING CONTRIBUTORS TO BORROW MONEY AGAINST OWNING A HOME.”
The financial expert further stated:
“NHF HAS LARGELY UNDERPERFORMED DUE TO THE WAY IT WAS STRUCTURED THUS THE CHANGE OF THE LAW. BEFORE NOW NHF WAS NOT MANDATORY WHICH WAS WHY IT DID NOT HAVE THE FUND SIZE REQUIRED TO CREATE LOANS AND SUPPORT THE HOUSING SECTOR. BY MAKING IT MANDATORY, MORE FUNDS WILL BE CHANNELED TO THE FUND MAKING IT EASIER FOR CONTRIBUTORS TO BORROW.
THIS IS A SIMILAR MODEL TO WHAT ESUSU’S HAVE USED EFFECTIVELY FOR YEARS NOW. A ROBUST NHF WILL ALSO HELP CREATE NEW FINANCIAL SERVICES PRODUCTS SUCH AS HEDGING AND DERIVATIVES WHICH WILL HELP REDUCE LENDING RISKS.”
Similarly, a housing industry expert, Mr. John T. Ikyaave, described the recent passage of the revised NHF bill as a positive development. According to him:
“THE NEW NHF BILL, WHICH IS NOW AWAITING THE ASSENT OF PRESIDENT MUHAMMADU BUHARI, WOULD SUPPORT THE PROVISION OF HOUSING LOANS AT BEST AND LOWEST MARKET INTEREST RATES OF BETWEEN SIX AND NINE PERCENT THAT CAN BE PAID FOR A PERIOD OF UP TO 35 YEARS.”
Meanwhile, the CEO of AfriSwiss Capital Management Limited, Mr. Kalu Aja, faulted the NHF proposed law;
“THE PROPOSED NHF LAW TAKES PRIVATE SECTOR PROFITS AND TRANSFERS TO A GOVERNMENT PROGRAM, WITHOUT IMPOSING A TAX. IF THE FEDERAL GOVERNEMNT CAN UNILATERALLY DEBIT PROFIT BEFORE TAXES (PBT), THEN WHAT STOPS ANOTHER GOVERNMENT DEBITING PBT TO FUND “WATER FOR ALL?
“THE PROPOSED LAW ACCUMULATES SAVINGS AT A NEGATIVE RATE , THUS A HUGE OPPORTUNITY COST TO “SAVERS”. ALL THESE WITHOUT A MENTION OF THE LAND USE ACT, CREDIT RATING EVEN COST OF HOMES.”
He stated further,
“RATHER THAN A PUNITIVE FUND, TAKE THE UNCLAIMED DIVIDEND FUND AND “LEND” TO THE NMRF AT 2% PER ANNUM FOR A 30 YEAR ZERO COUPON BOND. TRANSFER THE NLNG DIVIDENDS TO THIS FUND AS WELL. CREATE A N1TRILLION REFINANCE FUND, LET DEVELOPERS BUILD AFFORDABLE HOMES…..THEN SECURITIZE THE RENTALS INTO A MORTGAGE BACKED SECURITY AND SELL TO THE NMRF….AS WAS DESIGNED.”