Emmanuel Addeh writes that the launch of the Home Ownership scheme by the Federal Mortgage Bank of Nigeria (FMBN), appears a long-term solution to providing affordable mortgage loans to shelter-starved Nigerians.
Shelter is so critical to human survival that UN-Habitat, the arm of the United Nations responsible for promoting socially and environmentally sustainable towns and cities, lists it as a fundamental human right.
The global body places affordability, sustainability and inclusiveness of the housing sector at the core of the urbanisation drive as a way of ensuring access to adequate housing for all. In this sense, housing goes beyond the brick walls and the roof; it's an opportunity for a better life and a better future.
However, the journey to owning a home in Nigeria can be fraught with challenges, especially for low and middle-income earners. These include factors like high property costs, limited access to affordable financing, and bureaucratic hurdles.
The home rental segment greatly imparted by inflationary trends, makes the situation worse, with reports indicating that more than 80 per cent of Nigerians spend roughly 50 per cent of their income on rent.
It is this ugly situation that the Federal Mortgage Bank of Nigeria (FMBN) was created to address. Mandated by the FMBN Act 82 (1993) to serve as the apex mortgage institution in Nigeria, the bank has since then assumed the role of Nigerians' best chance at affordable housing.
Primarily, the bank was empowered to administer and manage the National Housing Fund (NHF), a contributory savings scheme established in 1992 under the National Housing Fund Act (1992). The primary objective of the NHF is to provide affordable housing finance to Nigerians, especially those who struggle to access housing loans from traditional financial institutions.
The motivation behind the Scheme was the urgent need to combat Nigeria's growing housing deficit, which was aggravated by the lack of affordable financing options for home ownership.
Prior to the establishment of the NHF, the housing finance ecosystem in Nigeria was practically non-existent, with the few available commercial players showing limited and their loans largely inaccessible to the average Nigerian. High-interest rates, stringent loan conditions, and short repayment terms made mortgages unattainable for most Nigerians, particularly those in the low-income brackets.
Recognising these barriers, the NHF scheme was conceived as an affordable, long-term solution to provide affordable mortgage loans and products. By mandating contributions from Nigerian workers, the NHF sought to create a sustainable pool of funds from where contributors can access single-digit loans for home acquisition and/or construction. The goal was to democratise access to housing finance and make home ownership a reality for a broader segment of the population.
How Does the Scheme Work?
The scheme is a compulsory savings programme that requires Nigerian workers in both the public and private sectors to contribute a percentage of their monthly income to the fund.
The scheme mandates that all Nigerian workers earning the national minimum wage and above contribute 2.5 per cent of their monthly income to the fund. This compulsory contribution applies to both public and private sector employees.
On the other hand, Nigerians in the informal sector are expected to ascertain their monthly income and pay 2.5 per cent of that amount on a monthly basis as their contribution, through which they can gain access to housing finance through a range of products.
Refunds to Contributors
A unique aspect of the NHF scheme is its provision for refunds to contributors upon retirement or the attainment of 60 years. Refunds are for all NHF contributors at the end of their active years of work, whether or not the beneficiary benefits from the scheme.
Total contributions made throughout the individual's active years along with a 2 per cent interest are put together and paid to the individual. In essence, the NHF scheme provides a safety net for those who may not have been able to secure a mortgage in the course of their active years, while also ensuring there's something significant waiting for every retiree who contributed to the scheme.
Either way, whether a contributor secures the NHF loan or not, they still benefit immensely by getting back all their savings, which they may have been impossible without the NHF scheme.
Low-interest Mortgage Loans
A defining feature of the NHF Scheme is its provision of low-interest mortgage loans to contributors. Unlike commercial bank loans, which come with high-interest rates ranging from 15 per cent to 25 per cent, loans gotten through the NHF Scheme come with an affordable interest rate of 6 per cent. This significant reduction in interest makes its housing loans more accessible and affordable, particularly for low and middle-income earners who are the primary beneficiaries of the Scheme.
Moreover, the NHF scheme allows for extended repayment periods of up to 30 years, depending on the borrower's age and loan terms. This long repayment tenure reduces the monthly financial burden on beneficiaries, making it easier for them to manage their mortgage obligations without compromising their overall financial stability.
Innovative Products
The National Housing Fund (NHF) Mortgage Loan is a flagship product of the Federal Mortgage Bank of Nigeria (FMBN). It is designed to provide affordable housing loans to Nigerian workers who contribute to the NHF Scheme. This facility is granted at 4 per cent interest to accredited Primary Mortgage Banks (PMBs) for on-lending at 6 per cent to NHF contributors over a maximum tenor of 30 years, which is secured by the mortgaged property.
A contributor can access up to N50 million from the fund through an accredited and licensed PMB as a mortgage loan to build or buy a home after six months of continuous contributions. The long repayment period and low interest rate make this product the most affordable mortgage option in Nigeria as of today, significantly reducing the financial burden on homeowners.
Rent-to-Own
The FMBN Rent-to-Own scheme is an innovative housing solution that allows Nigerians to live in FMBN-funded properties as tenants while gradually paying towards ownership.
This product is designed to ease the burden of large upfront payments typically required to purchase a home. Under this scheme, tenants make affordable monthly, quarterly, or annual rent payments, with a portion of the rent contributing towards the purchase of the property. Over time, as the tenant pays off the balance, the home fully becomes theirs.
With an interest of 7 per cent of the price of the property annually, this approach makes homeownership more accessible, especially for low and middle-income earners who may struggle with traditional mortgage requirements. Also, no equity contribution is required from the subscriber before moving into the property.
Home Renovation Loan
The FMBN Home Renovation Loan (HRL), the bank says, has become one of the bank's most successful products. It is aimed at helping existing homeowners improve or expand their homes.
This product offers up to N1 million at a single-digit interest rate, with a repayment period of up to five years. The loan is specifically designed for individuals who already own a property but need financial assistance to make renovations, repairs, or upgrades.
The Home Renovation Loan provides an affordable alternative to high-interest loans, enabling homeowners to enhance their living conditions without overextending their finances. This product is ideal for families needing to upgrade their living conditions without taking on large, high-interest loans.
Cooperative Housing Dev Loan
The Cooperative Housing Development Loan (CHDL) is a collective financing solution that enables cooperative societies to obtain funds for constructing houses for their members. Under this scheme, a cooperative society finds a land, identifies a developer, designs their own estate and then approaches the bank for construction finance. Once the homes are completed, FMBN then goes ahead to provide mortgage loans to individual members of the cooperative at 6% interest rate to enable them offtake the homes. This product leverages the strength of group savings and collective bargaining, making it easier for members to access affordable housing finance.
The loan can cover the cost of land acquisition, site development, and construction, providing a comprehensive solution for cooperative societies aiming to deliver housing projects for their members.
Individual Construction Loan
The FMBN Individual Construction Loan is designed for Nigerians who already own titled land and wish to build their homes. This loan provides up to N50 million, depending on the applicant's income and repayment capacity, with an interest rate of 7 per cent per annum.
The loan covers the cost of building materials, labour, and other construction-related expenses. The repayment period is up to 15 years, depending on the applicant's age and income. This product empowers individuals to construct their dream homes without the need for large upfront capital, providing a flexible financing option for self-build projects.
Diaspora NHF Mortgage Loan
The Diaspora NHF Mortgage Loan is tailored for Nigerians living abroad who wish to own property in Nigeria. While it is yet to be fully operational, the Bank has finalised modalities with other parties like the Nigerians in Diaspora Commission (NiDCOM) and the Central Bank of Nigeria (CBN) on technical issues.
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This product will allow Nigerians in the diaspora to access mortgage loans for purchasing, building, or renovating homes in Nigeria. Like the NHF Mortgage Loan, it offers up to N50 million at a competitive interest rate of 9 per cent per annum.
The loan is repayable over a period of up to 10 years, making it a convenient option for diaspora Nigerians to invest in real estate back home, thereby contributing to the development of the Nigerian housing sector as well as reducing the country's housing deficit.
Rental Assistance Loan
This is yet another innovative introduction by the FMBN. The Rental Assistance is a newly introduced product, yet to hit the market, aimed at providing financial relief to individuals and families struggling with high costs of rent.
It is a micro-housing loan product meticulously designed to alleviate the financial burden of rental payments for eligible Nigerians. This innovative product has been thoughtfully crafted to ensure accessibility, affordability and flexibility, making it a viable solution for many who have found it challenging to secure housing finance through other traditional financial arrangements.
Currently open to informal sector contributors to the NHF Scheme who have been consistent over a period of six months, the Rental Assistance Loan offers a maximum loan amount of N2 million which is subject to the beneficiary's affordability.
Enrolling for NHF Scheme
A common requirement for accessing any of the products of the FMBN is an applicant's contribution to the NHF Scheme for a period of at least six months. What this means is that only Nigerians who are registered on the NHF Scheme and have consistently contributed for six months are eligible to apply for any loan from the Bank.
The NHF Scheme is, therefore, an assured gateway to fulfilling the homeownership aspirations of Nigerians.
In a country where the dream of owning a home often feels out of reach, the NHF Scheme, according to the bank, stands as a testament to what is possible when visionary policies are coupled with practical, accessible solutions.
For many Nigerians, the journey to home ownership may still seem far-fetched and unrealistic, but with the NHF scheme, FMBN insists that that dream now looks more achievable.
