What you should know about non-interest mortgage in Nigeria

One of the major challeges in Nigeria’s housing system is the inability of many citizens to afford mortgage and fulfill the dream of owning their own homes. It has been reported that the Federal Government would need to spend N21 trillion to address the country’s 28 million housing deficit and the needs of a rapidly […]

One of the major challeges in Nigeria’s housing system is the inability of many citizens to afford mortgage and fulfill the dream of owning their own homes.

It has been reported that the Federal Government would need to spend N21 trillion to address the country’s 28 million housing deficit and the needs of a rapidly growing population, which is estimated to be 220 million.

For decades, Nigeria’s housing crisis has been worsened by limited financing options, especially for citizens who require non-interest or faith-aligned alternatives

However, the non-interest mortgage system introduced by the federal government has been described as a channel to boost affordable housing

The system is based on ethical, Sharia-compliant financing models. The collaboration is expected to expand homeownership access for millions of Nigerians who are currently unable to qualify for traditional, interest-based mortgage products.

Checks by Daily Trust show that the three different mortgage financing schmes include Murabaha, Ijarah and Diminishing Musharakah

How the non-interest mortgage model works

The NIM framework will be built on Islamic finance principles that avoid interest and rely on shared ownership, asset-backing, and fair, pre-agreed returns. Key models under consideration include:

Murabaha (Cost-Plus Sale):

In the case of Murabaha, it has been described as a simple buy-and-sell arrangement. The bank buys the house you want and the bank sells it to you at a known total price, then the owner pay that price over time in agreed instalments.

For instance if a house costs N12 million,.

The Federal Mortgage Bank or any bank buys it and sells it to you for N13.5 million.

—This N13.5 million is fixed. You pay in monthly instalments.

Ijarah (Lease-to-own)

For Ijarah, the model works like renting a house that gradually becomes your own. In this case, the bank buys the house, then you pay rent for living in it. Subsequently, a portion of your payment gradually buys the house from the bank and over time, ownership shifts fully to you.

For instance, one pays N200,000 each month, part of it is rent for using the home, while part of it is the purchase payment and by the end of the contract, you own the house completely.

 

Musharakah (Diminishing partnership)

Musharakah is is a joint ownership arrangement between you and the bank. In this case, both the prospective house owner and the bank own the house together in shares. Ome pay monthly amounts that gradually buy the bank’s share. Alternatively, one can also pay a small usage fee for the part you do not yet own.

Over time, your share grows until you become the full owner.

For example, the bank owns 70% of the shares, you own 30%, Each month, you buy 1–2% of the bank’s share. Subsequently, the usage fee reduces as the share grows. After several years, you own 100%.

What FG is saying

Daily Trust reports that the Securities and Exchange Commission (SEC) and the Federal Mortgage Bank of Nigeria (FMBN) unveiled the joint initiative to develop a nationwide Non-Interest Mortgage (NIM) framework. The effort is aimed at reducing Nigeria’s estimated housing deficit of 28 million units.

The new partnership between the SEC and FMBN is positioned as a transformative step toward addressing this long-standing challenge.

SEC Director-General, Dr. Emomotimi Agama, emphasized the Commission’s role in providing a solid regulatory foundation for the proposed mortgage scheme. He noted that the SEC will create frameworks for Sukuk issuances and other non-interest capital market instruments that will support the NIM programme.

“Our partnership with FMBN is essential for unlocking sustainable, long-term capital for housing,” Agama said. “With a clear regulatory structure for non-interest mortgage-backed instruments, we will be able to attract ethical investors both locally and internationally and support a continuous cycle of funding, construction, and homeownership.”

Agama added that a well-designed NIM ecosystem will enhance investor confidence, improve market stability, and strengthen the overall financial system.

Also, the Managing Director and CEO of FMBN, Mr. Shehu Osidi, explained that this collaboration will help address one of the limitations of the current National Housing Fund (NHF) scheme. The interest-based nature of the NHF has historically excluded many Nigerians, especially those who follow Islamic finance principles.

“For many years, a significant segment of our population has been unable to benefit from the NHF because conventional mortgages are interest-based,” Osidi said. “Our work with SEC is a deliberate effort to bridge this gap. We are committed to creating mortgage options that are ethical, inclusive, and sustainable over the long term.”