Stakeholders and professionals in the Nigeria housing and construction sector are unanimous in the observation that one of the greatest challenges faced by the sector is the lack of adequate funding to transform ideas into practical solutions.
While access to housing is an unprecedented global challenge growing fast with rapid urbanisation, the housing problem is more pronounced in emerging markets like that of Nigeria.
The biggest challenges faced by emerging markets like that of Nigeria are fragmentation and inability to meet unprecedented volumes of housing deficit; Inability to align stakeholders and catalyse grassroots impact; challenges in making the economics work, and in a number of cases, housing initiatives are driven by governments who face enormous treasury challenges.
Foreign Direct investments, as important as they are, are attracted more by regions where domestic capital is already being applied to unbridle the potential in these economies. It is therefore very important for Nigeria’s minister of works and housing, Babatunde Fashola to get the ball rolling in terms of seeing that local investments are up and running in the sector.
In addition to strong economic fundamentals, local capital is required to de-risk opportunities and prove their viability to international investors
The application of local capital ahead of FDI plays an important role for the sustained growth of local enterprise in an economy.
According to some stakeholders, transforming the huge housing need in Nigeria into bankable opportunity will require public and private sector involvement
FDI they say, has to be deployed in key areas of the value chain to have the most impact in order to stimulate home production and ownership.
Foreign capital when applied appropriately can improve an economy’s capacity to create affordable mortgages. The creation of mortgages has a huge multiplier effect in stimulating the production of lower middle income and affordable housing because it gives investors a clear exit path.
Foreign capital is better attracted to opportunities where local capital (public or private sector) has been used to de-risk them.
The first tenure of Babatunde Raji Fashola saw him undertake a pilot National Housing Programme which led to a nationwide housing construction in various states of the federation. According to the minister, while giving account of his service mentioned that construction works at these project sites are an ecosystem of human enterprise where artisans, vendors, suppliers and craftsmen are direct beneficiaries as well as contributors to nation building. It is therefore important that unlike previous housing programmes in Nigeria, this one should not be abandoned, but reinvigorated and adapted to prevailing challenges in a way that more results can be achieved and more houses built for the poor who needs them the most. According to Housing Development Advocacy Network, the projects that are ongoing should be completed and new ones initiated, and must be affordable for those that genuinely need the houses.
Another fundamental issue that if addressed can boost the confidence of investors is that of enabling policies that need to be either amended or introduced. For example, it is very important for the land use act to be amended to make land administration and its access easy for investors and developers. This has been an ongoing argument, and it is time for a headway. There is also need to pass the foreclosure law to enable a legal framework for addressing challenges relating to mortgage default etc. The issue of policy framework is not limited to these two, as there are pending policies that if passed or amended can greatly improve the working environment for investors. The minister therefore needs to engage in a lobby process that will enable the passage and amendment of these and many more policies.
This will be very critical for the kind of progress needed in the housing sector and macro-economic policy that supports liberalisation play an important role in attracting foreign capital inflows.