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Affordable Housing: Shelter Afrique to Address Foreign Exchange Concerns in Nigeria with Innovative Strategies

According to the MD/CEO of Shelter Afrique, Andrew Chimphondah, the institution which is Africa’s largest housing institution and the biggest housing bank for Africa is adopting a public private partnership (PPP) approach in addressing affordable housing challenges in Africa, and with special reference to Nigeria.

While speaking with Housing Development Program, Chimphondah mentioned that the bank has approved 51 projects in Nigeria valued at 181million. He said that in 2019, to deal with the demand side of housing, they approved 20million worth of projects, with beneficiaries including Wema bank (9million); Lapo (7million); and Prudential Mortgage bank (3.5million).

But in spite of this, there are still a number of challenges in funding affordable housing in Nigeria. One of the challenges according to him is that the money they are approving are not being taken up because there are challenges about how to handle the currency risk.

‘’We lend in dollars, while our counterpart banks lend in naira. So of course the banks do not want to take the risk because at the end of the day, the cost to get cover for that foreign exchange is too high which makes the end products not competitive. So the currency exposure risk is a fundamental risk in the Nigerian market. But we will continue to provide lines of credit to tier 1 and tier 2 banks,’’ he said.

For challenges on the supply side, he said, ‘’the big issue we have when we want to lend money is the issue of titles. We take title deeds as a form of security and that is an area that still needs to be developed so that we can lend.

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‘’That is why we have now put together a new business model premised on public private partnership. So we are looking at partnering with developers that have the track records and government institutions so that together we can be able to structure financing deals to be able to deliver large scale affordable housing on the supply side.’’

According to Chimphondah, the bank has now set up a regional branch in Nigeria because of how important Nigeria is in Africa and because of the enormity of the country’s needs when it comes to housing.

‘’Shelter Afrique is owned by 44 countries in Africa, however, Nigeria on its own is a very strategic market for Shelter Afrique. It is the most important market because according to our statistics, we estimate housing shortage to be 56million in Africa, and out of that, the single largest is Nigeria with a shortage of 22million.

‘’If you look at the countries that go after Nigeria in terms of shortage, you have Tanzania and DRC with 3million, Kenya and South Africa with 2 million and a few more.

‘’So, Nigeria is one of the most important countries in Africa and one that Shelter Afrique will like to make a difference in terms of assisting to resolve the issue of affordable housing,’’ he said.

Housing Development

He also revealed that Nigeria is the third largest shareholder in Shelter Afrique and one of the biggest owners with Africa Development Bank being the largest, followed by Kenya and Nigeria.

‘’So because of that and the size of the market, we have come to Nigeria and have set up a regional office in Nigeria and we will employ Nigerians in strategic positions to help guide the strategic direction for Shelter Afrique. For us to understand the Nigerian market, we need to work with Nigerians,’’ he said.

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According to him, Shelter Afrique provide products others can’t provide. ‘’We can provide tenures longer than other banks. We can also provide competitive interest rates. The issue we have to deal with is the foreign exchange cover.’’

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