In the wake of “The Great Housing Crisis of 2019,” panic and complaints spread throughout campus about the poor fate of returning students who planned to live on campus next year. With Lemon Hall’s fall to the custody of the incoming freshmen in place of Jefferson Hall as well as One Tribe Place’s closing, the panic is definitely understandable.
However, returning students have definitely over-exaggerated the problems concerning housing, which shows more about their own negativity than the school’s lack of accommodations.
I will admit that not all dorms are created equal. However, the dorms offered to upperclassmen have their own positives that students refuse to acknowledge. DuPont Hall may have the reputation of being dingy, but it is close to Earl Gregg Swem Library, and many of the rooms have suite bathrooms. Richmond Hall is admittedly extremely far from everything on campus, but the rooms are newly renovated with double beds, and its proximity to Food Lion is a plus.
Upperclassmen hate the idea of living in Jefferson the most, despite that the only real difference between Jefferson and other upperclassmen dorms like Barrett Hall is that the hallways are less aesthetically pleasing. Jefferson is extremely conveniently located, as it is close to Colonial Williamsburg, the Sir Christopher Wren Building and Marketplace, as well as the academic buildings on the Sunken Garden. It is also still fairly close to the Sadler Center, the Integrated Science Center and Swem.
Of course, these options are not as nice as Landrum Hall or Hardy Hall, but that does not mean that the College of William and Mary does not care about students’ needs. The changes to housing are necessary. One Tribe Place needs to be closed for important renovations, apparently for mold, asbestos and structural issues.
All of these problems are urgent, and if the College was to ignore them, students would complain about their lack of concern for student wellbeing. Similarly, Lemon is now to house freshmen in order to increase accessibility. Students also criticize the College for not listening to students’ needs through Student Accessibility Services as well as the Counseling Center, but now that the College has responded to the needs of incoming freshmen, the school supposedly does not care about any of the students. Students criticize the College for the supposedly poor conditions that upperclassmen must endure, but this is a ridiculous overreaction.
Dorm life may not be perfect, but at the end of the day, it is never advertised as perfect. I have heard students complain about the money that they pay to come to school here, as if that money does not go towards classes, professors and other opportunities long before it goes toward housing. Students attend college for the education and overall experience, not because their room is comparable to a five-star hotel.
On a similar note, students like to complain about housing here as if other schools have perfect housing plans, and the College is the only place where students are left wishing for better room options. Some schools cannot guarantee housing for more than one or two years, and others cannot guarantee air conditioning to upperclassmen, which are two positives to housing here at the College.
Students here are promised housing for at least three years, and all upperclassmen dorms have air conditioning. I do agree that housing selection can seem unfair and stressful at times, but students should take a step back and look at the big picture before complaining relentlessly for weeks about how much the College hates its students.
Africa is a diverse continent, with roughly 1bn people, 54 countries and thousands of languages. Additionally, many of its economies are facing similar challenges. One of the most common obstacles African markets face is a shortage of affordable housing. Kenya has a housing gap of approximately 2m homes, for example, while more than 12m people in Egypt live in informal buildings. This is hardly unique to the continent, but with high GDP expansion, limited job creation, strong population growth and rapid urbanisation, its acuity in African economies is more pronounced.
There are upsides to these drivers, of course. By the year 2040, for example, the continent is expected to have the largest workforce in the world, and African cities and towns will see consumer spending exceed $2trn. But to foster and sustain high economic growth – and the positive factors that come with it – African markets will need to improve the fundamentals of their housing sectors. While the specific features of local real estate markets and regulatory regimes vary significantly across the continent, from Egypt to South Africa, chronic housing deficits, a lack of funding and an affordability gap are common throughout the region.
Nonetheless, the situation is beginning to change. Policymakers are turning their attention to the problem and are developing both supply- and demand-side interventions to tackle one of the continent’s most pressing social and economic issues. Demand Pressures
Demographic trends alone point to the pressing challenge of housing provision. While much of the world is experiencing a slowdown, or even a decrease, in population growth, the rate of demographic expansion in Africa continues to rise.
By 2050 the population of the continent will have doubled, meaning that the region will have added 3.5m people per month. Indeed, Africa will contribute more than half of the world’s total population growth through to 2050 and more than three-quarters of that growth up to 2100. The situation is not uniform across the continent. Some countries will see even greater population burdens. Nigeria, for example, which currently has roughly 180m people, could have the greatest population increase of any nation in the world through to 2050, according to some projections.
The sheer numbers alone illustrate the challenges of housing provision. And given that Africa already has the youngest population in the world, countries within the region are in for a prolonged period of demand for housing as graduates and young professionals contemplate getting married and starting families. This is already evident in a market such as Egypt, where there are almost 900,000 marriages per year, and as such the large pool of first-time home seekers are increasing the demand for residential units. Urbanisation
The demographic factors only partly explain the acuity of the housing deficit in Africa. Another, and perhaps more salient, factor is the high level of urbanisation — something that has put an immense amount of pressure on existing infrastructure and housing stock. By the midpoint of this century Africa will be home to almost 25% of the world’s urban population. Yet, as of 2015, a third of sub-Saharan Africans living in towns and cities did not have access to electricity. The situation is particularly pressing in Nigeria, where 80% of the population uses kerosene, charcoal or wood for cooking. As this suggests, informality abounds, and almost 50% of the continent’s urban dwellers live in slums or informal housing.
Cairo is a good case in point. The Egyptian capital, which has an estimated population of 12m and as many as 20.5m people in the wider metropolitan area, has been struggling with a lack of affordable housing for several years. Across the country as a whole, the housing deficit stands at approximately 3m units, with the capital responsible for the largest share of this shortfall. “Private developers collectively provide about 20,000 units per year, but this barely scratches the surface in the housing gap,” Magued Sherif, managing director of Sixth of October Development and Investment Company, told OBG. Indeed, according to research by Colliers, a real estate services firm, Egypt will need as many as 100,000 units per year through to 2020 to meet demand. According to Colliers, more than half of Cairenes can afford a property in the $26,000-to-estate market tends to offer units starting from approximately $60,000, affordable only to 13% of Cairenes.
As a result, property and construction in Cairo is dominated by the informal sector. Informal housing in unplanned areas, known as ashwa’iyyat, increased by 2m units across the country between 2012 and 2014. During the same time period, the social housing project of the Ministry of Housing produced just 50,000 affordable units. The vast number of units being churned out by the informal sector illustrates the scope and scale of the potential housing market.
Without decisive intervention, this situation is not going to improve. By 2050 African countries will have had to find accommodation in urban settlements for 900m new home seekers. The scale of this demand is unprecedented, the developed world having had over two and a half centuries to construct the same amount of accommodation. Given the dizzying pace of change, it is perhaps unsurprising that this urban transformation poses challenges to stability and growth across the continent. African urban centres have the second-highest inequality measurements in the world and are often home to unemployed youth. Indeed, some 75% of Africa’s urban population is under 35, yet youth unemployment is six times higher in the continent’s cities and towns than in rural areas. Current Limitations
Clearly then, the need for housing in the continent’s major markets is only likely to expand further. Addressing that, however, will require rethinking how affordable units are delivered, given that the current pipeline – whether for public or private projects – fails to keep up with demand.
The majority of developers and investors across Africa are focused on the top end of the market, for example. Private capital and investment funds are rarely directed towards the mass housing market and usually focus on the commercial real estate segment. Residential holdings comprise just 2.5% of listed property funds on the continent, compared to 25% in other developing markets and 15% in developed countries. Yet the need for capital is significant. Nigeria, for example, has a housing shortage estimated at 17m units, with a funding requirement of $363bn. This is perhaps unsurprising given that net annual returns in commercial and industrial real estate in Africa can reach around 20%, according to PwC.
The issue of incentivising private sector involvement in mass housing provision is not confined to Africa; across the globe, large-scale volume business is often shunned in favour of high-margin, luxury residential and commercial property. In the UK, for example, developers have made the point that they are unable to deliver affordable units while satisfying their desire for industry standard profit margins of 17% to 20%. In Africa, beyond the question of margins, there are impediments to building on the scale required to make low-income housing efficient and profitable for developers. From registration to pricing, land is a pressing challenge in many markets. Indeed, the ability to acquire on a scale that would make an affordable housing project viable is often constrained. According to a report by Resilient Africa, a Nigerian developer, South Africa accounted for almost 93% of large lot property transactions in 2014. Complex ownership patterns, such as traditional land ownership rights in countries like Côte d’Ivoire, which do not always reflect formal land registry rolls, and inadequate local management of land, are key factors in the ability to obtain and build on sizeable plots in many jurisdictions. Administrative Reforms
To address this, a number of African markets have launched reforms looking to alleviate the bottleneck, incentivise private sector participation and simplify land registration. In Côte d’Ivoire, for example, the government has moved aggressively to clarify ownership of land, particularly in peri-urban and rural areas. In 2013 the legislature extended a grace period for the codification of land transactions in rural areas until 2023 in a bid to encourage registration of land ownership outside of major urban areas. Similar efforts include a push to register tens of thousands of immigrants, who were previously undocumented and often settled in slums, giving them the ability to own land, as well as a move to survey and register all land that lacks a current title, which by some estimates account for upward of 90% of the country.
Côte d’Ivoire has also managed to bring down the length of time it takes to register land to roughly 30 days, about half the length of time required on average in sub-Saharan Africa. “The government has taken a step towards improving transparency by mapping the entire country and assigning price structures per sq metre of land, which is CFA2000 ($3.33) in urban centres, CFA1500 ($2.50) in the regions and CFA700 ($1.17) in rural areas,” Siriki Sangaré, CEO of Ivorian housing firm, OPES Holding, and president of the National Chamber of Builders and Developers of Côte d’ Ivoire, told OBG. “However, a change in the institutional framework that governs land acquisition is needed, since it has remained unchanged since 1960,” he added. Mortgages
In 2007 Egypt was the first country in the region to establish a mortgage refinancing company. This brings liquidity to the mortgage sector through a secondary market, and thus allows originators to produce more mortgages. The establishment of a refinancing company also reduces the cost of capital and allows mortgage firms to extend loan tenors, making mortgages more affordable to the end consumer. Following Egypt’s lead, countries such as Tanzania in 2010 and Nigeria in 2014 also developed their own mortgage refinancing companies.
Indeed, greater volumes and more affordable mortgages will be essential in meeting the continent’s housing needs. Marja Hoek-Smit, director of the International Housing Finance Programme at the Wharton School, University of Pennsylvania, told OBG in 2014 that Egypt’s large-scale home building targets “can only happen when we have mass mortgage finance”.
In general terms, mortgage penetration rates in Africa have some way to go to reach global averages. Mortgage values to GDP range from 28% in Angola to 0.07% in Senegal. However, only five countries on the continent (Angola, South Africa, Cape Verde, Namibia and Mauritius) have a rate exceeding 10%. This compares to rates of 80% in the UK and 77% in the US. Solutions
However, while the scale of mortgage roll-out remains a challenge, things are starting to change, and financing is beginning to become more accessible and compelling in certain markets. For example, in Morocco, Egypt, Algeria, Ghana and South Africa the average mortgage interest rate is below 10%, while in all of those countries, with the exception of Ghana, the average loan tenor is at 20 years or above. As mortgages become more affordable and accessible across the continent, uptake will grow.
The Nigerian government has also made efforts to address financing concerns and the affordability conundrum via a public route. The National Housing Fund (NHF), managed by the Federal Mortgage Bank of Nigeria, issues subsidised loans of up to N15m ($75,400) with an interest rate of 2%. Contributions to the fund are made at 2.5% of salary for workers earning N3000 ($15.10) and above per month. As of March 2016 the NHF had raised N191.9bn ($964.6m) from 4.1m contributors and disbursed N5.9bn ($29.7m) to 118,284 borrowers. While this mechanism provides a start for improving the financing environment, it does not completely address the affordability issue.
The NHF’s minimum loan of N5m ($25,100) requires a 10% equity payment of N500,000 ($2513) and monthly repayments of N12,500 ($62). This is out of reach for most home seekers across the country. More than half of Nigerians live on less than $1 a day, while a significant amount receive the minimum wage of N18,000 ($90.50) per month. For such potential borrowers in Nigeria the down payment alone would take almost nine years of salary savings. Direct Intervention
The Nigerian government is taking a more direct approach, with an emphasis on supply-side interventions. The government set a target of building 1m homes per year. In 2016 it aimed to construct 250,000 housing units at a cost of N40bn ($201m). State governments were tasked with building an additional 250,000 units, while the private sector was expected to construct a further 500,000. Regional efforts are also afoot to expand affordable housing stock. For example, in May 2015 the International Finance Corporation announced the launch of a new project to support home building in multiple African countries. Developed in conjunction with CITIC Construction, a Chinese firm, the project will provide long-term funding to local developers. The goal of the $300m project, which is being rolled out through an investment vehicle called CITICC (Africa), is to support the development of 30,000 homes by 2020. Cooperatives
Kenya faces many of the same challenges as Nigeria, only on a smaller scale. Land registration and titling, high financing costs – ranging from 11.9% to 23%, and limited supply all constrain affordability in the market. However, the country has seen the emergence of a number of developers focusing on affordable housing. Jamii Bora and Karibu Homes-Parktel offer units with prices as low as KSH1.6m ($15,600).
Yet the main forces connecting demand and supply in the market are cooperatives. Under the auspices of the National Cooperative Housing Union, which has 800 member cooperatives, several local cooperatives are offering their members affordable housing units, housing microfinance and attractive payment plans. Private Equity
Such projects point to the viability of housing provision for low-income earners through a number of supply- and demand-side interventions. However, it is South Africa that really illustrates the possibilities for affordable housing once the regulation is in place, and the will of the public and private sector is present. Almost a fifth of households in the country are located in informal settlements, while the housing deficit nationwide could be as high as 2.5m units. This has prompted private equity investors to explore potential opportunities in the segment.
International Housing Solutions, a private equity investor, launched their first fund for the affordable housing segment in 2007. This fund financed over 28,000 units in South Africa and achieved returns totalling R1.8bn ($127.1m). Consequently, the investor launched its second fund targeting affordable housing in 2014. Phatisa, a Mauritius-base fund manager, launched its 10-year Pan-Africa Housing Fund in 2013, raising $41m. The fund targets affordable and middle-class housing in markets in Eastern and Southern Africa by providing risk capital for developers with land on a joint-venture basis. Solutions
Such endeavours should provide a boost for affordable housing across the continent and could set a benchmark for funds looking to enter the affordable housing segment in other markets in Africa. The introduction of private capital in the affordable housing market on a bigger scale will be critical in meeting demand over the coming years.
However, it will not be the only solution. Given the current housing deficits across the continent, and the rapid pace of demographic and urban growth, markets will require multiple innovative interventions to meet housing requirements. These will include government-supported home-building programmes, better regulatory environments related to land registration and credit information, and improved access to finance and microfinance.
If the continent is going to meet the challenges of housing provision in the coming decades, it will require a concerted and sustained effort from both the public and private sectors.
Nigeria’s housing sector has remained a major problem that appears to have defied all approaches to make it work, most especially as the federal government, under the different administrations, consistently paid lip service to enhancing the sector.
A paradigm shift
A major paradigm shift in the use of indigenous building materials for housing design and construction may take long to come, following the inability of the federal government and its agencies to implement the new National Housing Policy.
2017 National Housing Policy
Under the 2017 National Housing Policy, the government was urged to pursue vigorously the adoption of functional design standards that will facilitate cost reduction, affordability, acceptability and sustainability, which will respond to the cultural and regional peculiarities of potential users; expand and improve the manufacturing base for building materials production from all available local materials and evolve a more efficient distribution system.
According to the policy, the development of appropriate capacities to achieve sufficiency in the production of basic building materials and components of acceptable quality from local resources will stimulate effective economic growth and development; and structured manpower development programme for domestic requirement and international engagement.
The document further called on the authorities to encourage the expansion of existing industries producing building materials from local sources such as clay, bricks, concrete products, timber, glass and tiles.
It wants collaboration with other developing countries in the development of technical know-how for building materials manufacture; and encouragement in regional spread of building materials industries to stabilize cost as well as widen distribution.
Absence of indigenous technology
Notwithstanding the good intentions of the stakeholders to ensure a robust indigenous building materials market, the absence of effective indigenous technology for the production of building materials, new building materials factories due to high cost of finance; inadequate and inefficient Infrastructural facilities (roads and rail transportation, water, sanitation, and power supply have worsened the plights of manufacturers and investors.
Besides, the recommendations of the policy for government to encourage the production and use of locally manufactured building materials by: providing incentives to, and creating the enabling environment for the private sector in order to encourage rapid flow of funds into building materials manufacturing through tax relief, accelerated depreciation and generous capital allowances are not adhered to.
There is also minimal support in providing matching grants for investments into research in the use of local materials for building materials manufacturers; providing loans at reduced rate of interest to manufacturers who will in turn supply self-built housing cooperatives and developers of low-income housing with their products at reasonable prices; attracting foreign participation into the building materials industry; and using local building materials for public projects at all tiers of government.
The Building Materials Producers Association of Nigeria (BUMPAN) formed to promote and encourage the production of building materials has remained in comatose.
The association is supposed to lay a solid foundation for the development of robust, effective and economically viable small and medium scale industries for the production of building materials.
Other strategies that are enshrined in the document such as strengthening the administrative, regulatory and institutional framework to ensure certification, registration and control of professional practices; supporting an integrated action programme for the organization of the informal building materials marketing sector; restructuring and adequately fund the Nigerian Building and Road Research Institute (NBRRI); and encourage establishment of building materials testing laboratories by the private sector have not been supported by the government.
Non-adherence to the content of the policy
Experts say, the non-adherence to the content of the policy is impacting negatively in the housing delivery, which should reduce the housing gap, currently put at over 17 million.
According to them, since the aim of the housing policy is to solve housing problems, there is the necessity to enhance the workability of the policy in order to achieve the goal.
Consequently, they stressed the need for periodic review of the housing policy to make it functional and acceptable.
Nigeria Institute of Architects
The immediate past President of Nigeria Institute of Architects (NIA), Tonye Braide, said the policy is a mere paper work as there are many cheap materials coming from China, which are competing with the local materials.
According to him, government should come out with a better policy as the price of the local materials are still high, which is reducing the local component needed for housing delivery.
He lamented a situation where materials that come from outside the country are cheaper and of higher quality, which will not help in mass construction of housing and ultimately reduce the housing deficit.
He said: “ it is not right that some body will carry materials all the way from China and it will be cheaper than the one manufactured locally.
“Like the project we are doing in Akwa ibom, there is no local content element in it.
“In the presentation of proposal, you have to put it that construction will use local content and local labour, but in practice that is not the case.
“I feel that there must be a conceited effort than the lip service we are seeing in the implementation of the policy”, he added.
For NIA second Vice President, Enyi Ben-Eboh, there is a noticeable difference to the extent that such materials like cement are locally available. “To a large extent, there are areas in basic housing that foreign components are utilised.
“ One of the few aspects is roofing aluminum sheets where we still depend on foreign materials imported.
He said the foreign doors from China are becoming common. If you look at the cost in relation to a wooden door, which may not be as durable, people will still prefer Chinese metal doors.
“To that extent, the government may have to look into how some of these materials that are unfavourably competitive with local ones can be either made to pay higher tariff or allow incentives for local manufacturers to be able to compete to achieve mass housing and eventually reduce the housing deficit.
According to him, affordable housing thrives on mass production.
“Whatever is manufactured, if it is done over a large quantity, the prices come down, so if most of these components are produced locally like cement, it can meet the housing demand in Nigeria.
“We will get to a time when local product outweighs demand, then competition will come and the price will begin to come down.
“Presently, if you assemble available materials for a two bedroom bungalow, the price will still not be affordable to those who wants it.
“You found out that those who can afford a two bedroom bungalow are senior civil servants who do not need that level of housing .
“For the people below level seven and downwards, they cannot afford the local materials based on their salaries”, he added.
Local content consideration
Speaking also on the local content consideration of the policy, an official of the Nigerian Building and Road Research Institute (NBRRI), Razaq Babatunde Lawal said the institute has been able to develop building materials like Pozzolana, a cementious material, Mardotile roofing, and other varieties of machines but mass-producing it for the housing industry, has been a big challenge.
“Pozzolana is an ancient materials of construction that is coming back in view of its advantages and need to have an alternative cementitious material apart from over dependence on ordinary Portland cement 100 per cent.
The material like Pozzolana was developed and used in the past but it is now staging a come back because of its affordability and its usefulness as a building material.
Pozzolana materials include volcanic ash, power station fly ash, burnt clays ash from some burnt plant materials; siliceous earths. When mixed with cements, it activates the cementing properties to reduce cost of concretes made from composite materials often referred to as blended cement”.
Lack of political will
Managing Director of Bolyn construction Nigeria Limited, a brick manufacturing company, Elder Rufus Bamgbola Akinrolabu said government has shown lack of political will to implement housing policies.
He lamented that government’s direct involvement in the housing sector over the years has led to politicisation of policies and programmes including those relating to housing, to the detriment of Nigerians.
He blamed the situation on issue of corruption in system, which has made ‘nothing’ to be implemented in the previous years.
Following his swearing in on the 29th May, 2015, President Muhammadu Buhari while delivering his inaugural speech, stated clearly that his administration would focus on the economy, fight against corruption, and provision of security.
And under the economic reform programmes rolled out, the development of infrastructure, which was identified as a major vehicle through which any sustainable economic development can be achieved, was prioritised. This must have informed the premium placed on the three economically key sectors of power, works and housing by Mr President to provide basic infrastructure and service needed to accelerate social and economic developments in the country.
On appointing and inaugurating his cabinet, the Hon. Minister of Power, Works and Housing, Mr. Babatunde Fashola assumed duty On 10th November, 2015 with a glowing zeal to tackle the underdevelopment challenges that have bedeviled these sectors largely due to neglect by successive administrations in decades. Presenting the scorecard of his three years stewardship as the ‘Chief Servant’ of the ministry on 12 November, 2018, Fashola stressed that the ministry under his watch had fulfilled at least to a greater extend the campaign promises of Mr. President regarding infrastructure.
The Super Minister, as he is fondly called, recalled that shortly after his inauguration and specifically on the 8th day of December, 2015, he prefigured what members of the public should expect in a statement titled “Setting the Agenda for Delivering Change” in which he set out what they inherited, what they planned to do, and what members of the public should expect thus:
“For the sake of consistency, let me refresh your memories by repeating some of what I said about each sector, as a benchmark for assessing our progress in the report which I will present shortly. With regard to our mandate on power supply, I promised that we will improve on the gas supply, increase the transmission capacity, pay MDA debts and generally improve your experience with power supply, first by getting incremental power, then proceed to stable power and hopefully reach uninterrupted power.
“With regard to works, I said as at May 2015, many contractors have stopped work because of payment and many fathers and wives employed by them have been laid off as a result. The possibility to return those who have just lost their jobs back to work is the kind of change that we expect to see. ‘‘And with regard to Housing, I said the Housing Sector presents an enormous opportunity for positively impacting the economy to promote not only growth but inclusion.
I also said that government will lead the aggressive intervention to increase supply” starting with a pilot scheme,” he said, adding that virtually all that have been achieved going by what the government has achieved within the short three years that the administration has been striving to meet the yearnings of Nigerians infrastructurally. Details of what has been achieved in each sector in the last three years were given in the Minister’s speech. Road Sector (Works) The Nigerian road sector no doubt may have witnessed unprecedented improvement going by the record of on-going and completed highway and bridge projects that cut across the 36 states and the FCT in the last three years that the present government boldly made known its intention to upgrade the country’s infrastructure which hitherto have been in utter decay.
When the Hon. Minister of Power, Works and Housing, Babatunde Fashola presented to the public a sketch of the achievement of the Buhari-led government regarding road rehabilitation, construction and maintenance, it became clear to many Nigerians that the government has been on its toe in a bid to deliver on its promises of revamping the country’s infrastructure as a gateway to sustainable socio-economic development. When the Minister assumed office in November, 2015, the lamentation was that the ministry inherited about 206 road projects across the country, most of which were abandoned by the contractors mainly for lack of fund, and in a few cases, insecurity, with the attendant loss of jobs by thousands who were engaged and earning their living from those contracts. However, while presenting the scorecard of the 3 years, the Minister affirmed that contractors have since been mobilised back to the sites while thousands of job lost in the course of abandoning the projects have been recovered.
He explains: “We have recovered the thousands of jobs that were lost to public works. “This recovery is the result of an expansive infrastructure spending that saw works budget grow from N18.132b in 2015 to N394b in 2018. “The outcome is that there is not one state in Nigeria today where the Federal Government is not executing at least one road project and construction workers are engaged on these sites.
“Difficult or abandoned projects like the 2nd Niger Bridge, Lagos-Ibadan Expressway and the Bodo-Bonny Bridge have been brought back to life. “Sections of Ilorin-Jebba, Sokoto to Jega, Sokoto-Ilela have been completed, while progress of works continues nationwide from Jada to Mayo Belwa, Enugu to Port Harcourt, Lagos to Otta, Ikorodu to Shagamu, Benin to Okene, Lokoja to Abuja, Kano to Maiduguri, Abuja – Kaduna, Kano to mention a few. “Apart from recovered construction jobs and growth in construction sector of the economy, the feedback from road users is that the journey times are reducing on the completed roads. This is what we promised in my inaugural address.
“We acknowledge that the work is not finished, but as long as we remain able to finance the projects, I have no doubt that it will get better.” ‘‘The intervention on roads, as made clear by the ‘infrastructure’ Minister, does not stop on interstate highways. It has also entered 14 Federal Universities where unattended internal roads are now receiving attention. The universities include: University of Nigeria, Nsukka; Federal University Oye, Ekiti; University of Benin; Federal University, Lafia; Fed University, Otuoke Bayelsa; Bayero University Kano; Federal University of Technology Owerri (FUTO); University of Maiduguri; Federal University, Lokoja; Federal Polytechnic Bauchi; Federal University, Gashua; Kaduna Polytechnic; Federal College of Education Katsina; and University College Ibadan’’.
“This is the First Phase under the 2017 Budget and we are preparing to do more under the 2018 Budget,” the Minister noted. He also stated that even as rehabilitation and reconstruction works were on-going, maintenance of existing roads and bridges was not left to suffer. “As we build roads, we are also attending to old or damaged bridges and restoring the value of maintenance. “So, while the Loko -Oweto Bridge is nearing completion, the damaged Tatabu Bridge linking Ilorin and Jebba has been reconstructed and the Tamburawa Bridge in Kano, the Isaac Boro Bridge in Rivers, Eko Bridge in Lagos and the Old Niger Bridge that links Anambra and Delta are receiving regular maintenance attention,” he said.
Also during the briefing, the Ministry also gave statistics of road projects in the last three years. It said in 2016, 277 kilometres of road was constructed, 345km was rehabilitated and 17,749 people were employed in the process. For 2017, the federal government constructed 488 roads, rehabilitated 256 others and engaged 31,227 persons. For 2018 till November, 497km of road has been constructed, 284 rehabilitated and 30,402 persons employed. Expatiating on this, the Permanent Secretary (Works and Housing), Mr Mohammed Bukar said there have been award of 365 roads for construction since 2001.
He said the Buhari government awarded 121 of these in three years while the previous government awarded 144 others in the whole of 17 years. “You will see that out of the 365 roads, 144 were awarded in the period of 17 years while in just three years, we awarded 121 roads, just within three years and we are still counting because the 2018 procurement is on-going,” Bukar noted.
On the N206bn 2nd Niger Bridge being funded by the Nigerian Sovereign Investment Authority (NSIA), the ministry said about N31bn has been given to Julius Berger as advance which resulted in the significant record of pillars erected on site as the project is expected to be completed in 36 months. Housing Sector Section 43 of the 1999 Constitution of Federal Republic of Nigeria recognises the right of every citizen in Nigeria to own property, especially land and its resources. Also, access to livable, safe and secured shelter is a fundamental human right as enshrined in Article 25 of the Universal Declaration of Human Rights and the Universal Declaration of Human Rights and International Covenant on Economic, Social and Cultural Rights. Given that low income earners constituted over 80 percent of Nigeria’s active workforce, federal government needed to strike a balance between affordable housing for low income cadre and housing for selected Nigerians.
Currently, Nigeria is challenged with over 18 million housing shortfall despite the large number of completed and unoccupied houses dotting the landscape of major states in Nigeria. To this end, the administration of President Muhammadu Buhari initiated and commenced the pilot phase of the National Housing Programme (NHP) in 34 states including the Federal Capital Territory (FCT), with the exemption of Lagos and Rivers states whose governors failed to donate land for the project.
The two agencies, Federal Housing Authority (FHA) and Federal Mortgage Bank of Nigeria (FMBN) under the ministry are also pushing for the provision of affordable housing to workers as seen in various projects and programmes. The pilot phase of the NHP is directly executed by the federal government through the federal ministry of power, works and housing (housing sector).
The private sector may likely participate in the second phase depending on the acceptability of the designs by intending off-takers. Reports, highlighted that the sum of N35 billion was budgeted for the project in 2016, about N41 billion from the N64.9 billion budgeted for capital spending in the housing sector 2017 budget was set aside for the project while in 2018, N35 billion was also budgeted for the project. The essence of the project is to provide affordable homes for low income earners.
To achieve this objective, state governments and Federal Capital Territory (FCT) were asked to provide suitable lands on January, 2016 in their state capitals and municipal council areas. The houses which are at various stages comprise of 1 bedroom, 2 bedroom and 3 bedroom semi-detached bungalows. The NHP expected to add 2,736 units to the national housing stock, has provided about 13,680 direct jobs and 41,000 indirect jobs according to the Minister of Power, Works and Housing, Mr Babatunde Raji Fashola.
In order to eliminate issues bordering on abandoned projects and shoddy job, the former minister of state II for Power, Works and Housing, Mr Suleiman Zarma, accompanied by staff and media team embarked on massive inspection of federal government projects in Nasarawa, Benue, Plateau as well as other states. Zarma disclosed that the aim of NHP is to build communities that would integrate with one another both within and around the estates.
The preparation for Abuja Mass housing project, Zuba started in the second half of 2017 following the release of N5 billion from the federal government. All technical documentations were done and the first phases of the award were carried out in February 2018 through selective tendering process while subsequent awards were done through open tendering process.
The Zuba project was initially planned for 16 nos 3 bedroom blocks of 8 flats, 25 nos 2 bedroom block of 8 flats, 10 nos 1 bedroom block of 16 flats and 5 nos 3 bedroom block of terrace duplex of 4 units, with a total of 508 housing units. The Kwali mass housing site is another project undertaken by FHA to boost affordable housing. Located at the Lambata, behind federal government college Kwali, it is a 305 hectares of land given to FHA under the Abuja Mass Housing Programme. The Kwali project consisted of 12 blocks of I bedroom flat (192) and 8 blocks of 2 bedroom flat (64). Contracts were awarded for the development of phase 1 of the land in May 2018 but due to conflicts in payment of compensation and poor weather conditions like rainfall, the project was relocated to Zuba as approved by FHA board.
With the relocation of 256 units from Kwali site, the project, expected to roll out 754 houses for off-takers comprising of civil servants and informal sectors has gulped the sum of N6.62 billion already. The entire estate covers over 2.6 kilometres of 7m carriageway road with trapedozial drain. Over N10 billion would be spent on the project upon completion and it is expected to be commissioned by President Muhammadu Buhari by the beginning of the second quarter in 2019. Managing director of FHA, Prof Mohammed Al-amin, stated that many jobs have been created at the site which absorbed the services of skilled and semi-skilled labourers.
He noted that the idea is in line with President Muhammadu Buhari’s vision of creating jobs and wealth for Nigerians, stating that 35 percent of the houses have been sold to interested Nigerians. Al-amin maintained that its Gombe mass housing project was completed in 2018 and sold out through the Federal Integrated Staff Housing (FISH) scheme anchored by head of service while payment was made to FHA through the National Housing Fund (NHF) managed by Federal Mortgage Bank of Nigeria (FMBN).
Al-amin hinted that the phase 1 of its Oshogbo project was completed and handed over to off-takers, noting that all elements of corruption and indiscipline would be eliminated from FHA. He pointed out that the work progress was hindered due to the presence of some structures on the roadways and inaccessibility of some roads due to undefined boundaries with some adjoining public institutions like the LEA primary school.
He further advocated the increase for the agency’s budgetary allocation from N5 billion to N 50 billion, stating that it would create more jobs and circulate wealth for many Nigerians. Senate Committee on Lands, Housing and Urban Development led by its chairman, Sen Barnabas Gemade and other members visited the site to access the level of work done. Gemade was satisfied that the committee took the right decision at the parliament to integrate the FHA into the national housing scheme, noting that it is one of the most advanced stages of national housing projects around the country.
He assured that the committee would look into the request made by Al-amin to raise the agency’s budget to N50bn, which he described as ambitious. Gemade commended the management of FHA in its efforts towards the re-birth of the agency, adding that the agency was almost going into extinction since 2002. He kicked against constant bickering and numerous petitions received by the committee from disgruntled staff and contractors, noting that the notion that over 90 percent of contractors handling FHA projects must be members of staff is wrong and must stop henceforth.
Federal Mortgage Bank of Nigeria (FMBN) The Federal Mortgage Bank of Nigeria (FMBN) has played a crucial role in providing shelter and loans for workers across the states. The bank in partnership with the Nigeria Labour Congress (NLC), Trade Union Congress (NUC), and Nigeria Employers Consultative Association (NECA) commenced the construction of 1,400 affordable housing units for workers nationwide last year. The Nasarawa and Kogi housing sites were the first of the fourteen locations to be used as the pilot phase of the programme, with 200 housing units expected to be constructed in each of the six geopolitical zones in addition to Lagos and Abuja.
The housing scheme is a product of strategic collaboration between FMBN and labour unions towards addressing the housing needs of its members estimated at 3.75million units. The first phase of 100 housing units each in Kogi and Nasawara states were projected to be completed within six months. The house types captured proven social housing models, comprising of one bedroom, two-bedroom and three-bedroom units, with prices ranging from N3.1 million to N8.3 million. Also, the bank has expended N2.8 billion in the construction of 985 housing units in Enugu State for Nigerian workers contributing to the National Housing Fund (NHF) under the National Affordable Housing Delivery Programme (NAHDEP).
The FMBN has so far disbursed housing loans totaling N40.9 billion to 1,843 contributors, provision of home renovation loans totaling N14.072billion to 16,031 Nigerian workers, processing of N12.4billion refunds to contributors to NHF and registration of 224,752 workers to the fund. Other innovative products undertaken by the bank include the rent-to-own scheme, where contributors could own a home and pay monthly or yearly rents over a 30-year period as well as the NHF individual housing construction loans that are payable over a 15-year period at interest rates of 7 percent. Another notable effort is the reduction of equity contribution for accessing NHF loans to zero percent for N5m and below as well as 10 percent for N15 million and above.
The unveiling of FMBN digital platform code *219# for National Housing Fund (NHF) contributors was also a strategic move aimed at improving access to home ownership for workers. The managing director/chief executive officer of FMBN, Arc Ahmed Musa Dangiwa, said it is the first time the bank and labour unions have synergised with stakeholders to develop a realistic and acceptable framework for delivering affordable housing to workers. According to him, “The collaborative spirit provided an opportunity for labour leaders who understand the financial challenges faced by workers to make constructive inputs to the designs, pricing range and other relevant conditions for delivering the project”.
Dangiwa disclosed that the programme is targeted at shrinking the national housing deficit estimated at over 22 million units, stressing that the project is a departure from earlier social housing projects that was executed without considering the economic realities of the workers. Also, the president of NLC, Comrade Ayuba Wabba commended the FMBN for boosting the partnership, noting that the project is laudable and would touch the lives of many Nigerians.
Ayuba lauded the Nasarawa state government for speedily providing land at zero cost, saying that the state workers contributing NHF would be excited with the project. Family Homes Fund (FHF) The Family Homes Fund (FHF) is another housing project domiciled in the office of the Vice President, Prof Yomi Osinbajo. Through the fund, the presidency is expected to invest about N500 billion in five years for the construction of social and affordable housing. The Special Adviser to the President on Economic Matters, Mr Adeyemi Dipeolu, hinted that government would release N100 billion yearly for the next five years to FHF with the intention of leveraging N1 trillion from the private sector.
Dipeolu confirmed that the money is meant for the construction of affordable housing, adding that Nigerians earning N30, 000 could buy houses through the FHF. He emphasised that some houses had been completed in Nassarawa state while about 3,000 to 6,000 are under construction across the country.
According to reports from the Ministry, power generation was at 4,000 megawatts (MW) in when the present administration took over in May, 2015. Recent reports say it has increased to over 8,200 MW and transmission from 5,000 MW in 2015 to 7,000 MW while distribution has increased from 2,690 MW to 5,222 MW. Despite the increase already recorded, Fashola emphatically stated that the work was clearly not finished, stressing that the Ministry was still in the process of delivering additional power to the grid.
According to him, the additional 215MW would come from the Kaduna Power Plant while 240MW would come from Afam IV, 40 MW from Kashimbila, 30 MW from Gurara, 29 MW from Dadin Kowa and a total of 3,750 MW from two big Hydro power plants in Zungeru (700MW) and Mambilla (3,050MW) while power is also programmed for nine universities and 15 markets across the country. Also expected transmission expansion from 90 transmission projects nationwide to boost the capacities of the Distribution Companies to distribute power across the country, the Minister said adding that some of the transmission substations recently completed included Apo, Mayo Belwa, Damaturu, Maiduguri, Odogunyan and Ejigbo substations.
On distribution, the Minister explained that the sub sector is being boosted through over 100 injection sub-stations, a distribution expansion programme to be funded by the Federal Government. To this end, the government recently announced the approval of N72 billion distribution expansion program which is being implemented by the transmission company of Nigeria (TCN) in conjunction with the ministry.
While the Minister agreed that there are still much to do to give the consumer the best experience, he noted that the challenges posed by disruptions from time to time and people who also needed meters remain valid but stressed that, “it is indisputable that we have delivered on incremental power”. Supporting his points with data, the Minister, recently quoted the 3rd Quarter 2018 report of the National Bureau of Statistics as revealing that Electricity made the highest contribution of 18 per cent to the 1.8 per cent growth in the nation’s Gross Domestic Product (GDP).
He added that previous quarterly reports from 2017 had consistently recorded growth, which, he noted “is a clear departure from 2014-2015 and proof of change”. On rural electrification as it relates to deploying Solar Power, Fashola while speaking at an interactive section recently recalled the “Thank You” visit of the Gora Community of Nasarawa State to his office to express their gratitude to the Federal Government over the provision of Solar Power to their Community saying it was a testimony to the growth in electricity supply and increasing accessibility to the rural communities.
The Community delegation, led by its Traditional Head, Alhaji Jafaru Adamu, thanked the government of President Muhammadu Buhari for initiating the rural electrification programme and the Minister for driving it adding that since the installation of the Solar electricity, the Community has consistently enjoyed several benefits hitherto not known to them, especially in the areas of social life, education and health. Arguing against the reversal of the privatisation policy in that forum, Fashola, reiterated the existence of challenges in the sector which, but assured they were being dealt with.
He declared, “But you must decide in this country whether you want to continue to see devils or angels. I like to see angels; my glass is always half full and problems are opportunities for me to show that nothing is wrong with us and to benchmark what I have achieved. There are problems no doubt and we must deal with them”. Speaking further on policy, he said as the policies on Mini Grids, Meter Asset Provider, Eligible Customer, and liquidity sustenance and improved governance deepen, the experience with power supply could only get better adding, however, that the success of the plans now would depend on “energy users who must conserve energy when not needed”.
Whatever your perspective may be the Minister is certain that the ordinary Nigerians now have course to say progress has been made in the power sector’’. This is evident when he said, “As some citizens recently reported, they no longer have to iron all their clothes one week in advance as they previously used to do, because the supply is proving reliable and predictable even if not yet fully stable and uninterrupted. This is progress that we must move forward by consolidating on our mandate of change. We cannot go back”, the Minister declared.
These achievements in relatively shorter time may have triggered the Minister’s emotive bulk passing statement while fielding questions at the briefing on the poor road networks in the country. Fashola who admitted it said, “Yes, we know they are bad. There is no magic to it. If those who came before us had done their work, we won’t meet bad roads. That is the simple truth.
“We earned $100 per barrel of crude oil for about five years. We knew what other countries like Abu Dhabi (UAE), and Saudi Arabia did with their own. What did we do with ours? This is a President and a government that is now trying to do more with the less that it has. So give us some time, we will get there.”
After a year of rebound and recovery, Africa’s old and new hydrocarbons markets have an opportunity to further entrench the continent’s position as the world’s hottest oil and gas frontier in 2019. However, the new year also brings a new set of dynamics and challenges set to influence the future of the industry, from presidential elections to megaprojects developments, amidst intensifying international competition.
New African frontiers opening up
Independents are leading the way in exploring and opening new frontiers across Africa. This year will be key for the advancement of new exploration and production development projects from West to East Africa. Developments to watch notably include Senegal’s SNE field development, where FEED works are ongoing and a final investment decision (FID) is expected by Woodside Energy and Cairn Energy this year; Niger’s Amdigh oilfield development, where Savannah Petroleum’s $5m early production scheme is set to start anytime soon; and the opening up of Kenya’s South Lokichar Basin by Tullow Oil, where FID is also expected before year end amidst rising tensions with the Turkana local community.
A year to confirm Africa as a global exploration hotspot
Ongoing bidding rounds in key existing and new African hydrocarbons markets will tell if Africa further confirms its position as the world’s new exploration hotspot and manages to attract necessary investment in its oil and gas acreages.
Amongst well-established African producers, OPEC members Gabon and Congo-Brazzaville each have ongoing bidding rounds. Gabon’s 12th shallow and deep-water licensing round is set to close in April 2019 and Congo-Brazzaville’s License round phase II in June 2019. With both countries struggling to implement their new Hydrocarbons Codes, the success of these rounds will tell if investors have been convinced by policy reforms developed over the past two years.
Two bigger African producers and also OPEC members, Nigeria and Angola, are set to launch landmark and out-of-the-ordinary bidding rounds this year. Nigeria will auction its gas flare sites under the Nigerian Gas Flare Commercialisation Programme, likely to happen after the February general election, and Angola will hold its Marginal Fields Bidding Round, result of a new May 2018 policy enacted by President Lourenço, and to be launched at the Africa Oil & Power conference in Luanda in June 2019. With the Nigerian Petroleum Industry Bill yet to be signed and the ink still fresh on Angola’s new policy regime, both rounds will also be key in assessing investors’ interest for both countries’ business environments.
Also attracting interest is the newest and arguably one of the upcoming entrants – Ghana – holding its first formal licensing round set to close in May 2019 which has reportedly got the attention of 16 oil companies, including majors ExxonMobil, BP, Total and ENI. As a hopeful new East African offshore frontier, Madagascar is also putting 44 concessions on offer until May 2019, none of which has ever been tendered or explored before. For a country without any major oil discovery to date, the ongoing license round is a wager test.
Africa’s struggling FLNG industry
After the start of commercial operations at Golar LNG’s Hilli Episeyo FLNG vessel in Cameroon in June 2018, hopes were high that Equatorial Guinea would soon move forward with its own Fortuna FLNG project, set to be Africa’s first deep-water FLNG development. While Fortuna was to be game changing for the gas industry of Equatorial Guinea and the rest of the continent, the development of the $2 billion project has stalled due to a lack of financing. And the clock has been ticking since.
The lack of progress on this plan has been so slow that operator Ophir Energy has been denied the extension of its license to operate block R (as of January 2019), which contains the giant Fortuna gas discovery. While Equatorial Guinea’s FLNG aspirations look more uncertain than ever, 2019 will tell if the country can find the right partners to put the project back on Africa’s FLNG map.
Meanwhile, new entrants in Africa’s hydrocarbons stage are making remarkable advances towards the development of their own FLNG industry. On December 21st last year, BP finally announced its FID for phase 1 of the cross-border Greater Tortue Ahmeyim development between Senegal and Mauritania, which involves the installation of a 2.5MTPA FLNG facility. It became the third African FLNG project to reach FID after Cameroon’s 2.4MTPA Hilli Episeyo and Mozambique’s 3.4MTPA Coral South FLNG.
Mega projects on the move
Africa’s come back on the global oil and gas map is not only due to the vast natural resources found in its soil and waters, but also to the continent being home to mega energy projects set to transform the future of the industry.
On the upstream side, the recent inter-governmental cooperation agreement between Senegal and Mauritania, and BP’s FID on its cross-border Greater Tortue Ahmeyim development, bodes well for the future of West Africa’s hydrocarbons industry. The project aims at extracting the 15Tcf of gas estimated to be held in the Tortue gas field, located at a depth of 2,850 metres. However, the ability of both Senegal and Mauritania to work out their differences to ensure a more sustainable development of their offshore reserves and facilities around the MSGBC Basin is a factor to watch out for.
African mega gas projects are not the sole property of the continent’s West coast, with Mozambique moving forward with two landmark projects putting the Southern African nation on the global LNG map. Following the launch of the Coral South FLNG project by ENI in June 2017, a FID is now expected in the coming months for the Anardarko-led Mozambique LNG project, an onshore LNG development initially consisting of two LNG trains totaling 12.88MTPA to export the gas extracted from the offshore Area 1, estimated to contain a whooping 75Tcf.
Sub-Saharan Africa’s biggest petroleum producers, Nigeria, is also moving forward with massive oil development projects in 2019. Last year already saw the launch of Total’s $3.3 billion Egina FPSO in Nigeria, where production officially started in the first days of 2019 and is set to peak at 200,000 bopd. FID is now expected on Shell’s Bonga Southwest offshore field in Nigeria early this year, a multi billion-dollars development whose production is expected to reach 180,000 bopd.
International contenders and pretenders
As Africa strengthens its position at the centre of global transformations, it is increasingly becoming the playground for international actors willing to benefit from the continent’s vast resources.
While China has asserted its position of a contender in the continent, will new continental dynamics lead the Asian giant to change its investment strategy or portfolio? With Russia’s intentions on the continent becoming clearer and clearer, will the first Russia-Africa Summit this year translate into more concrete Russian deals across the continent? At the same time, will the US’ “Prosper Africa” initiative launched in December 2018 be able to counter both rising international competition and declining US influence on the continent?
A complex energy diplomacy dilemma for OPEC in Africa
With a majority of its members made up of African nations since the joining of the Republic of Congo in June 2018, OPEC’s evolving relationship with the continent as it strives to manage the global supply glut will be requiring skillful diplomatic ingenuity.
On one side, Africa’s biggest producers and OPEC members Algeria, Libya, Nigeria, Angola and Congo-Brazzaville, are striving to boost their domestic output, which makes it harder and harder for the Organisation to negotiate its production cuts.
On the other side, the continent is also home to a flurry of upcoming petroleum producers like Senegal, Kenya or Uganda, or old players making a comeback like South Sudan, some of them part of OPEC’s Declaration of Cooperation, whose upcoming or increasing output adds another layer of complexity to the formulation of OPEC’s global oil prices management strategy.
An increasing African output from OPEC and non-OPEC member countries only complicates OPEC’s maneuver capabilities and increases its dilemma of both providing a stable pricing environment conducive to investments, while avoiding a worsening of the supply glut that would push prices further down.
Africa’s biggest petroleum producers casts their ballots
Amongst the series of elections happening in the continent this year, from Senegal to Mozambique, none will be more important for the African oil sector than that of Nigeria this February. The Nigerian presidential election is set to shape the future of the industry, not only because Nigeria is Africa’s biggest oil & gas producer, but because what happens in Nigeria impacts the rest of the subcontinent one way or the other. While both Muhammadu Buhari, seeking re-election, and his ally turned rival Atiku Abubakar have committed to the signing of the Nigerian Petroleum Industry Bill, the ability of the future President to get his office in order and get the bill passed quickly will heavily influence investments within Nigeria’s hydrocarbons sector for years to come.
North, Algeria and Libya are also entering an election year, with the 2019 Libyan general election set for the first half of the year, and Algeria’s for April. Both countries are on a transformation path. Libyan authorities plan to more than double the country’s output to 2.1 million bopd by 2021, providing politics doesn’t tamper hydrocarbons governance and the work of the National Oil Company. With Muammar Gaddafi’s son Saif al-Islam Gaddafi set to stand for election and the country still divided between West and East, maintaining the stability required by investors will prove challenging.
In Algeria, where a wave of reform is shaking the entire hydrocarbons sector, elections are expected to maintain a relative status-quo, at least politically speaking. The country’s national oil company, Sonatrach, has launched an ambitious transformation strategy that will see it investing $56bn over the next four years and internationalising its operations across major global energy markets. 2019 could even see the state-owned giant and Africa’s biggest company further expand south of the Sahara.
Angola’s steady road to reforms
Since taking office in the summer of 2017, Angolan President João Lourenço has been implementing a bullish reformist agenda which is drastically transforming the governance of the country’s oil & gas sector. Angola is reforming fast, but will market forces allow changes to happen at that pace and yield the results that the government is looking for?
While international investors seem to think so, with Total and BP signing major agreements to boost their Angolan operations over the past few months, 2019 will tell if the international oil industry is being convinced of Angola’s return as a competitive African frontier or not.
To showcase the work being done by Sonangol and the Angolan government to generate more investment in the country’s oil & gas industry, Angola is backing up an international conference being organised by Africa Oil & Power in Luanda on June 4-6, 2019, where it will be launching the Angolan Marginal Field Bidding Round. This will be the first official investment roadshow organised in Angola under the current administration, and one that is set to unveil a new set of reforms and investment commitments.
South Sudan’s march to peace
The major progression in South Sudan, and one on which the entire economy relies, is that of the peace accords. The Sudanese and South Sudanese authorities have time and again demonstrated their commitment to the peace process, which has remained peaceful for the most part. However, will peace deals translate into investment promises and money being invested into the South Sudanese economy this year? Some signals point to that direction, with South Africa’s Central Energy Fund committing $1 billion to South Sudan late last year, but markets are still skeptics and observers will remain pragmatics and wait to see how the peaceful transition is managed and how oil production resumes before making any concrete moves.
A year to improve market access for East African producers
With Uganda set to join the club of African petroleum producers by the early 2020s, efforts are on the way to develop adequate infrastructure for the evacuation of oil that will be produced from the Lake Albert Basin. The project seemed to be positively moving forward when Uganda and Tanzania exchanged the inter-governmental agreement for the 1,443km East African Crude Oil Pipeline in May 2017. However, the partners in the pipeline’s construction, French major Total, China’s CNOOC and Tullow Oil, are yet to make a final investment decision on the project. Meanwhile, the Host Government Agreements are to be signed this January, but delays in concluding the pipeline’s financial deal have already pushed back Uganda’s oil production ambitions from 2020 to 2021. The pipeline is crucial for the further integration of the East African community and to set a positive record of joint planning, financing and implementation of landmark energy projects in the region.
Since the current recession in Nigeria was officially declared in 2016, the economy has faced two particularly negative economic indicators– rising prices and low rates of employment. These will have devastating effects on many sectors of the economy for many years to come and housing will be one of the major ones affected as unemployment and high costs of home ownership are the chief reasons for homelessness worldwide. In fact, the Nigerian housing sector has been lagging behind many similar middle income economies since the 1980s and the recession is likely to have a more jarring effect on this sector compared to others unless economic planners take specific precautions to prevent this trend. In addition to the recession, Nigeria is also experiencing an increase in population growth and urban sprawl that is likely to further exacerbate the current housing problem. The current 2016 budget provision of ₦40 billion to provide 1 million units to counter an estimated 17-million-unit housing deficit is in no way adequate to face this challenge especially as the estimate is likely to increase greatly in the very short run.
Russia experienced a similar contraction in the size of its economy in its 1998 financial crisis along with a temporary increase in the population growth rate in the early 2000s and these factors directly led to a depression in the housing market during the same period. The increase in crime rates and corruption during this period was linked to instability and the poverty that a society experiences when its citizens lose the most important asset for most family units – housing. In comparison, the Nigerian is facing a similar situation. The Nigerian population has been growing by a steadily increasing rate as infant mortality continues to drop mainly due to the attainment of middle income status and global interventions such as the Millennium Development Goals and Sustainability Development Goals that continue to propel worldwide development measures.
This growth will inevitably come with increased housing needs especially as the youth age group – 18-34 – become the largest and the group that is also most likely to seek housing as individuals or to start out families. In developed countries like the U.S. and most of Europe, the 65 and older age group (also called baby boomers) are becoming the largest age group and this will lead to a contraction in the demands on the housing market as more elderly citizens opt to sell their homes and live in assisted living with other members of their age group. Nigeria’s case will be the reverse of this trend and it would be wise to consider adopting some of the policies that these countries adopted when the baby boomer generation was still in its youth and the dominant age group in those populations.
One of such policies; which will bring the finance ministry, agencies and private sector institutions to the table in the provision of increased access to finance to meet the excessive demand from Nigeria’s young population; is a shift from public housing to public-private arrangements. This was the course taken in the U.S. in the 1960s just as its first crop of the massive baby boomer generation i.e. those born in 1946 became young adults and started to join the housing market. The focus should be on providing this financing for housing through the private sector specifically for low income and middle income households. The main means of financing this would be indirectly by providing low interest loans to housing developers to construct and maintain low cost housing or directly by providing low interest mortgages to households that allow longer repayment time lines i.e. 20 or more years.
While some noteworthy schemes have started to involve public-private partnerships in provision of financing for the housing sector, this is a potentially lucrative business that has been poorly explored so far. It becomes even more important to explore these possibilities when the social benefits are considered which would include reduced homelessness and crime as well as the many indirect results stability will have on children including improvements in education and health.
According to the Global Competitiveness Report index, some countries have pointed out to be very keen as far as the progress of their infrastructure is concern.
The index tracks the performance of about 140 countries on 12 pillars of competitiveness, including the quality of road infrastructure development.
Below are the 5 African countries noted to have good roads:
The country is noted to be the first country in Africa to have the best roads. According to the report, Namibia is ranked 31 out of 137 countries in the world (with a score of 5.0 out of 7). It was first on the African continent.
According to reports, Namibia’s progress in road infrastructure is attributed to the establishment of its Roads Authority in April 2000 that has paid attention to roads that were hitherto abandoned, contributing to socio-economic development.
The country is ranked second best in Africa (with a score of 5.0) to have the best roads. According to the report, the country has made a large investment in the transport infrastructure with aid from China, Japan, the European Union, among others.
Nonetheless, the government has announced moves to invest more in transport infrastructure in order to “plug domestic road network gaps and stimulate economic growth.”
This country is ranked third best in Africa and 52 globally, beating global giants like Italy and Belgium. According to the report, due to the country’s strategic location and its proximity to Europe, it has enabled it to be among the top destinations for tourists. The Moroccan government has over the years invested in rural infrastructure, providing access to water and electricity and of course good roads.
Mauritius is ranked fourth and 48 globally (with a score of 4.5) with the best roads. This country is noted to be the most democratic country in Africa. It has roads that are in fairly good conditions with safety signs and a network for those who would want to take a tour of the island.
• South Africa
The country is ranked fifth in Africa and 50 globally (with a score of 4.4). Having one of the largest road networks in the world, South Africa’s modern road network has been planned and developed over the years with its main trunk routes.
At a time when Nigeria’s property market showed signs of rebound, election uncertainties morphed into what the industry experts refer to as a ‘nightmare’. The country’s real estate sector has responded differently to the last two presidential elections, as such industry experts imagine the forth coming general election will follow suit.
Jide Ogunleye, CEO of Denaro properties Ltd, a business and investment strategies expert with emphasis on real estate said the 2019 general election will have a lot of impact in the direction the real estate will take.
“As a developer, I have already started getting feedback as regards the forth coming election. If the election goes on peacefully, and regardless of the political party that wins and there is a peaceful transition, it is going to hold well for the real estate sector, Ogunleye said.
Figures by the Nigeria Bureau of Statistics, revealed that Nigeria’s real estate sector showed slow signs of growth for the second consecutive quarter in Q3 2018. Although still in contraction mood, the sector did better than the -3.88 percent growth rate recorded for Q2 by 1.21 percentage points.
However, Nigeria’s GDP growth rate of 1.81 percent in the third quarter of this year could not rub off on the country’s property market. This is now coupled with the fact that the road ahead for the sector appears bleak owing to the uncertainty around the 2019 elections.
“If the 2019 presidential election becomes toxic, the real estate sector is one of those that will suffer the most,” an industry expert who preferred not to be quoted said. Nigeria with about 20 million units housing deficit has reported 11 consecutive quarter recession for its property market since the first quarter of 2016. “If the whole process does not go well and there is unrest in the system, the recession will are seeing in the real estate sector will continue,” Ogunleye said.
The real estate performance under different leaders showed that the real GDP growth recorded in the sector in Q2 of 2011, the same quarter former president, Goodluck Jonathan was sworn in, stood at 10.48 percent- the sector positively welcomed the leader.
This is compared to the 2.97 percent recorded for the same quarter in 2015 when Muhammadu Buhari, the incumbent president was given the baton. The third and fourth quarter growth for the property market under Jonathan followed in appreciation trajectory while Buhari’s went in opposite direction.
Meanwhile, Jonathan whose primary goal was to achieve stable electricity supply in Nigeria earned the dubious distinction of being the first president in Nigerian history to lose an election.
Olurogba Orimalade, Chairman of the Nigerian Institution of Estate Surveyors and Valuers (NIESV) Lagos State Branch said the real estate sector is going to drag because of the political uncertainties. Although he mentioned the sector will eventually bounce back regardless of whether the present government remains or not.
Here’s a look at realtor.com’s housing forecast for 2019. Look at rising mortgage rates to play an even greater part in affordability, slowing the market for sellers and impacting buyers. Home prices are still expected to rise, though at a much slower rate than we’ve become accustomed to. Realtor.com forecasts home prices to increase by 2.2% nationally.
There are some exceptions. Areas from the 50 largest markets forecasted to have the largest price increases include Grand Rapids, Michigan at 8.2%, Las Vegas-Henderson-Paradise, Nevada at 7.9%, Boise City, Idaho at 6.9%, Denver-Aurora-Lakewood, Colorado at 6.8%, and Deltona-Daytona Beach-Ormand Beach, Florida at 6.3%.
Realtor.com expects mortgage rates to hit 5.5% by the end of next year. What that means in real money is the average home will cost 8% more per month than in 2018. Home sales could decline by 2% next year. These numbers aren’t startling by themselves. It’s comparing the market to the boom times of the past few years that have the money pundits warning of a significant housing market downturn.
Buyers still don’t have a lot of good news to look forward to. “Unfortunately, it’s only going to even cost more to buy, especially in the entry level market. To be successful, buyers should think through how they’ll adapt to higher rates and prices,” explains Danielle Hale, realtor com’s chief economist. “Some buyers will be thinking I can’t even afford a home. They will have to struggle with the decision of what they want versus what they really need,” Hale adds.
Unless you’re sitting on a ton of cold, hard cash, you’re going to need a mortgage to buy a home. Unfortunately, you can’t just show up at a bank with a checkbook and a smile and get approved for a home loan.You need to arm yourself with the right knowledge about the home loan application process.
Here are 10 things you need to know before applying for a mortgage.
1.Mortgage Originators – These are the players in the real estate market in Nigeria. They are your typical developers, Primary Mortgage Institutions (PMI), Banks and the National Housing Fund. What this means is that, to get a house that is built with quality materials and delivered on time would mean sourcing for the right Developer. It also means, I you must look out for a PMI that is ready to offer the best deal in terms of Interest rates, tenor, collateral etc.
2.Agents – Lawyer and Real Estate Agents also play an important role in mitigating any risk that may arise out of the choices you make in 1 above. Agents know the market and are savvy enough to recognise the best deal for me.
3.Interest Rates – Interest rates on mortgage loans in Nigeria range from 15% t0 25% per annum excluding fees and other charges. To put this into better context, the Subprime Mortgage Crisis of 5 years ago in the West was because Interest rates on Mortgages suddenly jumped from about 4% to 8% per annum leading to massive defaults. So, in Nigeria if you take a Mortgage Loan of ₦25million at 15%pa interest rate you would have paid ₦37.9million in interest only over the 15year period!! That is even more than the Principal itself!!. The trick here is that at 15% interest rate, it takes a lender approximately 7years to recover the ₦25million it lent to you. That’s about 6 years if the interest rate of 20%. With that sort of interest rate, can anyone honestly afford a mortgage on a steady salary?
4.Tenor – The time period giving to repay a loan, otherwise known as the Tenor is also a significant consideration in the repayment of a loan. A longer tenor means that you often have lower and favourable cash payouts as your principal and interest repayments are evened out over a longer period of time. However, this is quite deceptive and conceals the real cost to you. Using the example above, had the loan been for 30years and not 15years the interest rate would be ₦88.8million!! So basically, for a house that cost ₦25million, you pay an additional ₦88million in interest over time.
5.Equity – This is the amount you are expected to contribute from your savings in addition to the mortgage when you plan to buy a house. This amount averages between 10%-20% in Western societies but in Nigeria, Mortgage Originators will often require you contribute at least 30%. Basically, the more equity you contribute on the outset the lower the amount you have to borrow from the bank.
6.Location– The location of your property is also a very important consideration should you wish to part finance it with a mortgage. Why would anyone borrow money to buy a property in a location that have little potential for economic development? When getting a mortgage the timeline for the economic potential of your location to materialise should always be lower than the tenor of your mortgage. For example, if you buy a house in Epe with a mortgage loan payable over 10years, and property values in Epe double over that same period, then the increase in value of the property would have helped reduce the interest rate you have paid over the years.
7.Cap Rates – Cap Rates are basically the return on investment a property can generate. In other words if you own a property worth ₦30million that can generate a going rent of ₦3million per annum, then the cap rate for that property is 10%. Cap rates matter in a mortgage and particularly in an economy like Nigeria where interest rates are double digits. You definitely want to make sure the rentable value of your property outweighs the interest payable on it at any given year. Your cap rates should be more than your interest rates.
8.Percentage of your Income – Mortgage payments should not be more than one quarter of your take home pay or income. The reason is that when you take a mortgage that grabs 25% of your take home, it is very likely that you must have staked in a lot of equity into the property which in itself is a very good thing. It also helps you free up some cash which you can use for your savings and investments.
9.State – The Government always have a stake in almost everything we do. It is important to verify Title ownership of Lands from the Lands registry. It is also important to know what applicable fees are for seeking governors consent, registering land titles, land surveys, land use charge etc. You must also consult them to know if the Mortgage Originators have obtained all the requisite approvals and development permits before buying. According to the Land Use Act, the state governments have the legal power and authority over the lands within their states so they are also very important
10.Taxes – Profit from a sale of property in Nigeria is chargeable for Capital Gains Tax (CGT). There is currently no CGT payable for a sale of a property which is a dwelling house (house that you live in). However, if it is a house that you own and you do not live in it, then you will pay CGT when it is sold. For those looking to obtain a mortgage, your contribution to the National Housing Fund is tax deductible from salary when computing PAYE.