Assessing Nigeria’s mortgage industry amidst high inflation, interest rates

Nigeria has long grappled with a persistently widening housing deficit estimated at 20-28 million units. This chronic shortage has for decades remained a damning national challenge, defying the efforts of successive administrations.  Experts attribute this to a combination of factors, including weak mortgage systems, limited access to credit, high interest rates, ineffective housing policies and […]

Nigeria has long grappled with a persistently widening housing deficit estimated at 20-28 million units.

This chronic shortage has for decades remained a damning national challenge, defying the efforts of successive administrations. 

Experts attribute this to a combination of factors, including weak mortgage systems, limited access to credit, high interest rates, ineffective housing policies and an urbanisation rate that continues to outpace housing supply.

When President Bola Ahmed Tinubu assumed office in May 2023, he admitted that access to decent housing is not just a matter of shelter but a cornerstone of national development, adding that it promotes social stability, improves health outcomes, reduces poverty and drives inclusive economic growth.

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Although the government has rolled out some viable policies, checks by Daily Trust show that inflation, inefficient data, lack of local manufacturing hubs as well as high interest rates are still some of the issues affecting the sector.

 

Challenges of mortgage sector

Inflation remains the sector’s most severe challenge. The National Bureau of Statistics released its Consumer Price Index report for April 2025, revealing a slight easing in Nigeria’s inflation rate compared to previous months and the same period last year.

The headline inflation rate moderated to 23.71 per cent year-on-year, marking a decline from 24.23 per cent recorded in March 2025 and a sharp reduction from 33.69 per cent in April 2024.

However, analysts say inflation at over 20 per cent still remains high for meaningful development in the industry.

A key driver behind this inflationary pressure is the depreciation of the naira, coupled with global commodity price shocks, both of which have severely inflated the cost of construction materials. For instance, the price of a 50kg bag of cement surged from around N3,000 in 2023 to between N10,000 and N10,500 in 2024.

Another structural problem is the dearth of reliable housing data. The government has no comprehensive audit of existing, abandoned, or informal housing stock, complicating effective policy formulation and resource allocation.

Accordingly, the Minister of Housing and Urban Development, Ahmed Dangiwa, raised concerns over the worsening housing crisis in the country, adding that the government has not established a full-fledged data bank to ascertain housing deficit.

To bridge this gap, the ministry is collaborating with the National Population Commission (NPC) to ensure the next national census provides accurate housing data.

“Additionally, the government has launched a National Housing Data Infrastructure initiative, bringing together key stakeholders such as the Federal Mortgage Bank of Nigeria, the National Bureau of Statistics, and the Central Bank of Nigeria.”

In addition, the inability of the country to establish manufacturing hubs that will reduce the high cost of imports and improve local manufacturing has been one of the major challenges of the mortgage sector. This is because developers import materials at high rates, which also affects affordable housing for mortgage.

In the same vein, the high rate of lending at double-digit has discouraged many Nigerians from accessing mortgage loans. 

The current interest rates as set by the CBN is 27.5 per cent. Experts suggest that primary mortgage banks lending at that rate may affect the government’s efforts in affordable mortgage.

Stakeholders at different fora advocated a more comprehensive approach by the Federal Mortgage Bank of Nigeria under the leadership of Shehu Usman Osidi to tackle the issue.

Findings by Daily Trust showed that the FMBN  has introduced several products, such as the expanded mortgage access, digital banking, rent assistance loans, and non-interest mortgage loans, among others.

 

Gov’t initiatives 

Between May 2023 and early 2025, the FMBN announced that it disbursed over N11.75 billion in NHF mortgage loans to 1,285 beneficiaries. These funds provided access to affordable, long-term loans at single-digit interest rates, reducing the financial barriers that historically hindered many Nigerians from owning homes.

The FMBN added that it has scaled up its Rent-to-Own programme. With N15.06 billion disbursed in the past two years, 1,140 Nigerians now live in homes they are gradually paying for through rent, with the assurance of eventual ownership. This flexible model is delivering both shelter and long-term security.

Beyond facilitating new ownership, FMBN has supported existing homeowners through its Home Renovation Loan initiative. Over 27,900 Nigerians have accessed N15.35 billion to carry out essential home upgrades.

In the same vein, one of the president’s Renewed Hope Agenda is the FMBN’s support for the Renewed Hope Cities and Estates Programme. The bank committed a N100 billion off-taker guarantee to private developers handling the project, providing the assurance needed to access loans and begin construction.

FMBN is directly financing federal housing projects in Ibeju-Lekki, Lagos, and Karsana, Abuja, with N27 billion and N19.9 billion, respectively. These cities are envisioned as modern, sustainable communities with critical infrastructure, green spaces and integrated transportation, which are hallmarks of the Tinubu administration’s urban vision.

Similarly, in a country where public institutions are often hampered by slow service delivery and manual processes, the bank recently ordered the full deployment of the FMBN Core Banking Application (CBA), which has been in the works for years, marking a landmark achievement.

With this system, contributors can register, remit NHF payments, apply for loans, cheques, and balances and request refunds online, eliminating bottlenecks and long queues. Service turnaround times have been reduced by over 40 per cent as a result of this initiative.

This digital shift is especially empowering for Nigeria’s tech-savvy youths, small business owners and remote workers who demand convenience and speed. The CBA aligns with President Tinubu’s broader digital public sector vision and positions FMBN as a modern institution capable of scale and inclusion. It has eliminated the challenge of financial alienation, which previously besieged underserved populations.

It added that it has introduced new offerings, including a Rent Assistance Loan and a Home Improvement Loan, both designed for the informal sector. These products target self-employed individuals and daily earners who typically lack traditional documentation but represent a large portion of the population.

The bank is also introducing a non-interest NHF mortgage loan, providing an option for Nigerians who prefer alternative financial models. These initiatives reflect FMBN’s responsiveness to evolving customer needs.

Another landmark initiative is the soon-to-be-launched Diaspora mortgage product, developed in collaboration with the Nigerians in Diaspora Commission (NiDCOM). This will allow Nigerians abroad to contribute to the NHF Scheme and access mortgage financing for homes in Nigeria. It will also strengthen diaspora ties and offer a safe, structured real estate investment avenue.

With remittances from Nigerians abroad exceeding $20 billion annually, this product is expected to unlock new inflows into the housing sector and position FMBN as a strategic player in diaspora engagement.

Subsequently, to modernise the mortgage sector and ensure greater transparency, FMBN says it is spearheading the establishment of a National Mortgage Registry (NMR).

Once launched, the centralised digital database will record mortgage transactions in real-time, enabling financial institutions, government agencies and homebuyers to verify property titles, track loan status and prevent fraud. It will streamline processes, reduce risks and expand access to mortgage finance, especially for informal sector participants who were historically excluded from the system.

 

Recapitalisation of FMBN must happen sooner than later – Expert

Speaking on what needs to be done to strengthen Nigeria’s mortgage system and deepen the impact of FMBN, a real estate expert with specialisation in commercial mortgage, Daniel Nuhu, told the Daily Trust that for Nigeria’s mortgage to work, the recapitalisation of the FMBN must be done now and not later.

“We have heard that FMBN wants to recapitalise to N500 billion so that it can expand its capacity for affordable housing delivery. 

“That is very crucial for Nigeria’s mortgage, which has been very slow for years now, and the recapitalisation has to happen sooner than later,” Nuhu said.

He added that to further strengthen the mortgage sector, “The FMBN and NHF acts should be amended to modernise their legal frameworks, as that will strengthen institutional effectiveness, enhance access to finance and ensuring long-term sustainability of the housing sector.”