1.1 BACKGROUND OF THE ESSAY
The problem of housing has been every day discussion in all quieter of the public and private services of the developing countries of Africa. It has become increasingly glaring that most of the urban population live in dehumanizing housing environment while those that have access to average do so at abnormal cost. According to Onibokun (1986), Nubir (1991) rent in major cities of Nigeria 60% of an average workers disposable income. This is for higher than 20-30% recommended by United Nations. Ekeweme (1979) lyagba etal (1998) explain that the rate of demand for new housing awas in part predicated on the rate of formation of new houses and in part on the rate of replacement of old housing stock. With estimated population of 110 million as quoted in 1991 census report, Nigeria need to produce 720,000 housing units per annul based to the building industry.
Despite Federal Government access to factor of housing production, the country loud at, best expect 4.2 of the annual requirement from her. Substantial contribution is expected from other public and private sectors. It should be acknowledge that private sector developers account of 83 of urban housing (federal office of statistic, Lagos 1983). Unfortunately the private sector is saddled with numerous problems which make supply always all for short of demand. Of these the most limited is finance. Varies studies have, at different times, revealed the problem of housing production. Teufic and Oral (1978) Ogundele (1989) Agbola (1987) Opbala and Onibokun (1986) recognized financial as part of housing problems but ranted land and building materials higher. This led to intensive researchers in these areas. Their findings influenced government housing policies and subsequent establishment of some relevant programmes and institutions like the site and services programmed and the national institute of road and building research. The drought of information and working knowledge of housing financial operation is a major problem today.
In a tight money market, housing is the first area to suffer, since neither the building nor the consumer can readily obtain finance for housing. Actually manage builders have difficulty obtaining capital for their projects even in normal times. Two of these problem the high interest rate contribute the high cost of housing and the difficulty is obtaining capital for home construction are examined more clearly in this paper.
According to Onabule (1996) 245 primary mortgage institutions were established under the NHP between 1991 – 1996. unfortunately, only 54 are now operating mainly in south west of the country and Abuja.
According to Abiodun (1999). National housing fund collected about 4 billion naira from the mandatory saving scheme. Out of 300 million loan approved by FMBN, only N100 million was advanced. The problem in this case is not availability of fund but strongest measures to prevent default. Hence the housing problem perish.
According to Arilesere (1997) Abiodun (2001) Agro – based to petro – Naira. Based economy did not help matters, the assertion that “money was not our problem but how top spend it” accredited to one of our Heads of State, is a summary of a Nation that lacked focus in the formulary years. This situation together with unprecedented population growth has remaining unchecked ever since. If the foundation is faulty, what can the righteous do? Housing finance was during the colonial days was limited to the expatriate staff and few selected indigenous senior civil servant in the urban countries. The establishment of Lagos exclusive Development Board (LEDB) in 1925, Nigeria Building Society (NBS) in 1956, formation of state Housing corporation between 1956 and 1960, National Council of housing 1971 and federal mortgage Bank of Nigeria (FMBN) 1977 with take off capital of N20m which was later increased to N250 in 1979 are very families development in our history. The world Bank assistance was obtained in 1979. This led to housing project in eight state of Nigeria with Bauchi state having a share of N24.6 million and Imo state N63.8 million. The 1980 – 1985 fourth National Development programs also proposed a budget of N1.9 billion for housing.
During this period N600m was spent on housing construction. The failure of these incremental housing production programs and the ever – increasing housing need lead to the promulgation of National Housing policy of 1991.
HOUSING AS A SOCIAL PROBLEM
The literature on economic development abounds with reference to the social nature of housing requirement. This phrase is used to distinguish the housing sector from other capital institutions sectors of developing economic such as manufacturing. The implication which is often made very explicit, indeed, is that while there is no economic need for housing investment since the market demand for it appears very weak, it ultimately must be provided in order to solve a social problem “according to smith (1970) housing sector is regarded as a drag upon the process of economic growth. While it is admitted that housing must be provided or improved eventually many national economic development programmes regards housing as a form of investment eminently able to be postponed. The longer it can be put off, the reason goes, the better the result for the nation as a whole.
2.1 THE BIG QUESTION
How does housing come to be excluded from the category of economic goods’ so that it must be bestowed as a kind of social security benefit? Housing as a ‘social goods’ is not a universal concept. There are porter of the world in which the satisfaction of demand for housing and housing improvement, is a rewarding private business which does not lack eager participant and which seems to produce as in the united state, a general level of housing welfare which is widely envied. Nevertheless in many part of the world housing is regarded as a demand which cannot and should be not satisfied by the market and hence must be distributed as a form of public largest. The perception of housing as either “economic good” or social – good will determine the level of investment and government involvement in its production and distribution. When seen as a social goods, housing market is subjected to political uncertainly and statutory intervention. In such a circumstances, private involvement if discouraged for investors will be unwilling to take the risk. Our land is an example of such restraint. The 1996 Rent control in Lagos was a discriminatory one. The rent control was limited to low income in housing. This discrimination will lead to investment in high income housing as shown in Lagos. Abuja etc. today.
Pursuit of the export promotion, import substitution strategy to increase income and did induce migration of surplus labour from the rural to the urban sector. This migration however together with nature population increase hearted growing housing needs. The needs were manifested in over crowded. Unsanitary living conditions and the sprawl of quarter settlement in urban centers. 70% of metropolitan Lagos was declared slum in 1996 according to United Nation’s report. Despite this there is still a strong belief that people are too poor to save or to repay housing loans, this lead to heavy housing subsidy e.g. allocation a standard plot of land at the rate of N1,000 for high density, N1,500 for medium density and N2,000 for medium density (Nubi 2000) and sole of Shagari core housing at N6,000.00 and N15,5000.00 respectively for one bedroom and 3 bedroom bungalow – a paternalistic approach that could not be sustained.
HOUSING FINANCIAL: A NEGLECTED ELEMENT OF DEVELOPMENT STRATEGY
Commercial banks and commercial banking activity have been present in Nigeria at colonial period. Owing partly to commercial banking tradition and partly to their role in international finance and trade during the colonial period, commercial banks primary serve the financial needs of commerce – supplying venture capital has typically been the role of merchants or investment bankers who in the colonial period tended to operate from Europe.
Except for a restricted clientele, commercial banks did not then nor do they now serve the financial needs of house holds. Early effort to supplement foreign venture capital through the establishment of both industrial and generalized development banks did not live up to expectation, largely because – they failed to mobilize domestic savings – they attempted to lend at concessional interest rate – they never succeed in breaking their dependence on limited government budget sources and from international lending agencies and – they relied on government deposit.
The financial sectors of Nigeria thus did not broaden appreciation beyond the commercial banking sector savings growth and domestic financial of domestic investment continued to lag behind the growth of income.
In this process, the housing hold sector was over looked as a significant source of domestic saving. This was at last in part to the postulate of development theory that the vast majority of individual families were too poor to save and in part to the fact that development strategy militated against the allocation of domestic resources to household investment. Given the view for example that credit for housing, like credit for the purchase of automobile or household equipment constitute the financing of consumption expenditure that, in the grand design should be deferred until self sustaining economic growth had been achieved. Little or no encouragement was provided for the development of household oriented finical institution. The metamorphosis of Nigeria building social into federal mortgage bank with a capital base of N20 m which was later increased to N150m in 1979 was a big distribution in the mortgage banking evolution. This laid the foundation for its imminent future as experienced even today. The federal mortgage bank is like a big and old eagle that cannot fly. Consequently individual families remain then as they do today, the largest sources of untapped savings in a development economy.
1.2 STATEMENT OF THE PROBLEMS
Despite the fact that the national funds NHF scheme is a loadable programmed it is however observed that contribution were not reaping maximum benefit to the fund this is as a result of certain constraints imposed by the degree before obtaining the loan among which are, the provision of title document (certificate of occupancy to the land) and a consent to martgage (PMT) must have secured a block of existing mortgage with or without funding from the banks and also contribute 10% of the amount that is to be disburse by federal mortgage bank of Nigeria from the NFH pool, and also the misconception the have about NHF scheme are some of this problem this research piglet will look into.
1.3 OBJECTIVES OF THE ESSAY
This study is undertaken with a view of examine the following
- The nature of housing market in Nigeria with particular emphasis to the mortgage institution.
- Sources of fund for housing development in Nigeria with special reference to the primary mortgage institution.
- The ample investment opportunity that are bound in the mortgage industry,
- The special kind of role played by mortgage institution in the Nigeria experience as regard to housing.
The few primary institution just springing up could not be controlled since they are just setting appraising mortgage financiering. The degree of deficiency of the findings, conclusion and recommendation on the study therefore depends on the degree of accuracy of the information supplied by these various sources. So care must be taken when interpretation the result of the study. To this extent the study is capable of being improved upon in studying any additional information not available now is supplied later.
1.4 SIGNIGICANCE OF THE ESSAY
This significant of this study lies in facilitating and mobilized of funds for development for Nigerians at affordable prices. However the study is pertinent important to the following the mortgage institution the mortgages and the Nigeria economic at large.
- It will strengthen them to render their operations responsible to demand.
- The essay will determine whether or not the aim or objectives of setting up thee institutions has been achieved therefore serving as a watch dog.
- The study will encourage and promote their active participation in housing as not much has been achieved.
- The problem that characterized the housing financing in the Nigeria experience as regard to housing.
- Recommendation that will improve the condition of housing.
- The study will also serve as a reference material to both student associate practitioners in the field of mortgage financing in Nigeria.
1.5 SCOPE AND LIMITATION OF THE ESSAY
It is pertinent at this stage to the define the boundaries of the study, from the topic of studies role of mortgage financing institution in Nigeria experience two boundaries are clearly stated these are, mortgage institution and the Nigeria experience. This study inclusively in the Nigeria experience and it is mainly out to look at the institution frame work on which mortgage business are carried out hence mortgage financing through touched in this study is mostly concern with the role of the said institution and with the Nigeria experience from 1956 when Nigeria building society was established to provide mortgage loans and deserving Nigeria to data.
Firstly there was the problem of data availability in the right quaintly and quality. The secretive nature of banking business has not been helpful. Then there was the problem of bureaucracy. Time constraints could not allow for more of the bank branches allover the country to be visited. Conclusively, the upward of inflationary cost of building material visa vis the limitation in using the availability resource for housing development only a radical approach by the government to check the liger cost of building materials and reducing it to the bearest minimum could make us to realize housing for all by sometime with the 21st century.
1.6 DEFINITION OF TERMS
The finance industry is a composite and complex industry with full of term government day to day activities of the industry. It is therefore pertinent for the purpose of the study and clarity and easy understanding to briefly explain some of these term as used in the study among which are: –
HOUSING – Housing refers and shelters infrastructure faculties such as water electricity and social unities such as schools and hospital housing is both process and product as well as on asset and on a services.
HOUSING FINANCING – Housing refers to the activities of both private and public sector improve financial resources, without intermediaries for the purchase, contribution improvement or renovation.
NHF – National Housing Fund.
FMFI – Federal Mortgage financial Limited
CIBS – Chartered Institute of Bankers of Nigeria
MBS – Mortgage baked securities.
HOUSING FINANCE SYSTEM – Is a structure of laws institution and relationship between individuals institutional and non institution units. Which facilities the process of financial intermediation and capital termination in the housing sectors.
MORTGAGE – Is a conveyance of interest in proper as security for the payment of a depth or the discharge of some usually other obligations. The kinds of property usually employed as security by means mortgage and the lender the mortgage.
MORTGAGE FINANCIAL INSTITUTION – Mortgage institution decree 53 of 1989 defined mortgage institution as institution allowed collecting savings and deposits for creation of mortgage assets. They are grouped into two main groups that is, the Apex mortgage and the primary mortgage instituting (PMIS)
F.M.B.N. – The Federal mortgage bank of Nigeria, Apex mortgage institution regulating the activities of the primary mortgage institutions.
CBN – Central Bank Of Nigeria
SAP – Structure Adjustment Programme
NHP – National Housing Policy.
PMIS – Primary mortgage institution. These are mortgage financial.
UNCHS – United National Commission on Human Settlement.
UBS – Nigeria Building Society.