‘Nigeria should provide incentives for property developers’
Mr. Femi Adewole is a Nigerian and acting Managing Director of Kenya-based Shelter Afrique. He joined the pan-African finance institution as Director, Business Development and Operations and previously worked as Chief Executive Officer for First World Communities in Lagos. In this interview with Property & Environment Editor, CHINEDUM UWAEGBULAM, he explains his plans for the institution and how Nigeria could turn around the housing industry.
Recently, you were confirmed the Managing Director of Kenya-based pan-African finance institution – Shelter Afrique, the second Nigeria to achieve such feat. What are your plans for the organisation, especially now the agency is facing a crisis of confidence, with the loss of over $2.16 million?
I am currently leading the organisation in an acting capacity. The primary goal of the Board and the Management team in the immediate future is to achieve a turn around and strengthening of Shelter Afrique to make it a much more effective financing and advisory partner for our public and private sector partners including 44 African Governments. We aim to achieve this goal by doing three things over the next three years:
We will work with shareholders to inject an additional N50bn equity capital into the Institution. This in addition to debt capital will ensure that Shelter Afrique has the resources to finance new affordable housing and urban infrastructure projects in member countries.
Since you referred to the delated loss on our accounts for last year, I should clarify that this is part of cleaning up the company’s books and increased provisioning for existing bad loans.
The Company continues to enjoy the confidence of its shareholders, and indeed in 2017 alone, shareholders, including the African Development Bank, injected about N16bn additional equity capital in the Company.
We will be restructuring the organisation, amongst other things to strengthen our local presence and visibility in member countries. We want to ensure that we have teams on the ground who understand the local market and are empowered to make decisions without necessarily reverting to Nairobi.
We will be rolling out a new set of very exciting financing products and services. With a rising need for affordable housing across the Continent, Shelter Afrique will be positioned to support our private and public-sector customers with advisory services and financing to deliver large-scale housing and urban infrastructure projects. The new strategy recently approved by the Board will enable us to provide a wide range of services and financing solutions including rental housing, co-operative housing, slum upgrading, site and services and last-mile infrastructure projects.
I will like to recognise the role played by Nigeria through the Minister of Power, Works and Housing, Mr. Babatunde Fashola who in his role as Chairman of the last Annual General Meeting of Shareholders oversaw important reforms to the Company’s statutes.
Nigeria is facing a huge housing glut in choice areas within Lagos and Abuja, and vacancy rate has increased to about 70 per cent. What should be done to ensure sustainable recovery from the present economic recession in the real estate sector in Nigeria?
It is reasonable to expect that all sectors of the economy, especially the real estate sector will be affected by the recent challenges to the Nigerian economy. We support the efforts being made by government to return the economy to sustainable growth.
For the real estate economy, particularly the housing sector, there are some important lessons to be learnt. It is unacceptable that we have these kinds of vacancy rates in a market where an overwhelming proportion of the population, especially those with low income, have no access to decent, affordable homes. The key issues we perhaps need to consider include:
Firstly, the use of the planning system and land use allocation to improve housing supply and demand. Currently, the market is oversupplying homes in the market segments with the lowest need whereas market segments with the most needs are increasingly undersupplied. There are interesting examples across Africa where this being successfully done and we can learn from them. Ethiopia and Morrocco have admirable social-housing programmes we can emulate.
The second area of opportunity worth looking at to rebalance the demand and supply of housing is to create improved incentives for developers of housing that are affordable to people on low income.
Finally, I believe that building professionals and their institutes have a significant role to play. Put bluntly the practice of design and construction of housing in most sub-Saharan countries are archaic and inefficient. It needs to change.
Shelter Afrique between 2005 and 2010 committed over N22.51billion on housing initiatives in Nigeria, and new initiatives are ongoing, how much interventions are we expecting in the housing sector, in the coming years in Nigeria?
Shelter Afrique is committed to strengthening our partnership with the private and public sector in Nigeria. While in the medium to long term we expect to see increased financing commitment to projects in Nigeria, on the supply side, one area where we expect to see some interesting and game-changing intervention is working with the Federal and State Governments. We are very keen on working with their housing corporations, various cooperatives and experienced private developers to conceptualise and arrange to finance for large-scale housing projects. It’s time to build big and build fast. This is an area where Shelter Afrique has experience spanning over 35 years, and we believe we can share this with our partners in Nigeria.
The other key area where we expect to intervene shortly is the capital market. Shelter Afrique is has been a leading issuer of bonds on the Nairobi Stock Exchange and the West African Francophone Markets for about 10years. We will draw on that experience to raise local currency capital to support an expanded programme in Nigeria.
Your organisation recently launched 5000 to 5000 Housing Competition to stimulate and reward innovative thinking in Sub-Sahara Africa. What is the aim of the competition? How can this help to attain livable and sustainable low-income housing developments?
We have been very excited about the 5,000 for 5,000 housing competition. We received about 200 entries from a diverse range of people from various parts of the world. The objective of the competition is to stimulate innovative thinking and approaches to designing and building housing which is affordable to people on low income. We were keen on integrated solutions that combined design, construction and financing innovations. The competition is now closed, and we expect to formally announce and introduce the winners within the first quarter of this year.
We hope that we can promote the actual realization of the winning entry on a large scale and in so doing encourage early adoption of the innovation as a possible template for a decent housing which is affordable for people on low income. We will require the involvement of our member countries to achieve this, and so far, we have received positive feedback.
Shelter Afrique is into direct equity participations in financial institutions catalyse the development of the mortgage market across Africa through the provision of long-term funding. What impact has such joint venture investments made in Nigeria to enable the provision of affordable housing on a mass scale?
Yes, Shelter Afrique has an equity stake in a number primary and secondary mortgage institutions across Africa. We do not currently have this kind of relationship in Nigeria but remain open to the right opportunities. However, we currently have exposure of about N7billion in long/medium term Lines of Credit to various Financial Institutions in Nigeria. The objective of these lines is to provide capital for on-lending as mortgages to homebuyers.
Currently, the recession is ravaging Nigeria’s economy and triggered high cost of building materials. Do your organisation support developers and financial institutions involved in the construction sector in the procurement cycle of building materials and equipment? How?
We are currently able to offer a Trade Finance Facility to qualifying developers and financial institutions. This provides capital for the bulk importation of building materials. However, our longer-term objective is to work with partners to facilitate local production of building materials.
Shelter Afrique has approved financing worth over USD1billion for new housing projects across Africa in the next five years. What is coming to Nigeria under this scheme, and who are the target group and beneficiaries?
It is difficult to speculate about the level of financing for new projects in Nigeria. However, Nigeria is a major market for Shelter Afrique, and I believe that subject to usual concentration risk issues, a significant amount of any capital we have will be deployed in Nigeria. The key thing is having good quality projects, which meet our risk criteria.
About the target group and beneficiaries, we are quite clear and focused. In line with the aspiration of our shareholders, we will be focusing almost exclusively on housing which is affordable to people on low-medium income. That will mean homes that are affordable for teachers, junior police and members of the armed forces, young families, and civil servants.
Shelter Afrique is one of the promoters of Nigeria Mortgage Refinance Company (NMRC) Plc, and its activities mark a wholesale shift in mortgage funding from depository savings, towards long-term sources of funds derivable from the capital market. Is Shelter Afrique satisfied with the milestone achieved so far, the organisation? What is your expectation from NMRC?
We believe without an iota of doubt that the NMRC has a significant role to play in the development of the housing finance market in Nigeria. We are also immensely proud of the achievement of the team at NMRC to date. It has issued bonds on the market and is leading discussions on the changes that need to happen in the sector. It is a long road, and the Company requires every support it can get to deliver on its Mandate. It can be assured of support from Shelter Afrique.