One of the most well-intentioned attempts by the Nigerian Government to facilitate affordable home ownership for working-class Nigerians is the National Housing Fund ("NHF" or "the Fund"). The NHF Act requires all Nigerian workers in both the public and private sectors earning at least N3,000.00 (Three Thousand Naira Only) to contribute 2.5% of their monthly basic salaries to the Fund. Self-employed individuals who desire to take advantage of the scheme are also required to contribute the same rate from their monthly income. The Federal Mortgage Bank of Nigeria (FMBN) is the institution saddled with the responsibility of managing the Fund.
Despite being a well-intentioned scheme, the NHF has largely failed to deliver on its objectives. To a very large extent, this can be attributed to the bureaucratic bottlenecks that have made access to the loans very tedious and discouraging. The general apathy demonstrated by most private sector employers towards the scheme is a clear demonstration of the lack of confidence Nigerians have demonstrated in the scheme. According to the Centre for Affordable Housing Finance in Africa (CAHF), Nigeria's mortgage to GDP ratio as at 2017 is estimated to be less than 1%, with South Africa well over 30%.
In fairness to the FMBN, the Bank's management has within the last two years taken deliberate efforts at eliminating barriers that have impeded access to the loans. This article seeks to shed some light on the workings of the NHF and how small business owners and their employees can benefit from the scheme.
- Coverage: as stated in the introduction, the scheme covers private and public sector employees, including self-employed persons who earn a minimum of N3,000.00 per month. Clearly, small and medium-sized firms fall within the coverage of the NHF.
- Contributions and Tax Benefits: Section 9(1) of the NHF Act stipulates a deduction of 2.5% of employees' basic salaries as contributions to the Fund. Contributions made by employees across the country are pooled together to provide mortgage loans under the scheme. Section 23 of the Act exempts the Fund from payment of income tax. Hence, all deductions towards the NHF scheme are tax-exempt and can be enjoyed as tax relief by contributors. All contributors are issued with passbooks containing their unique registration numbers and records of their monthly contributions.
- Accessing Mortgage through the NHF: contributors are expected to have made remittances to the Fund for at least six (6) months before they can be eligible to access the loans. Loans are accessed through Primary Mortgage Banks (PMBs) duly accredited by the FMBN. The PMBs help applicants to package and submit loan applications to the FMBN. Applicants would typically follow up on the status of their applications through their PMBs.
- Loan Amounts, Rate and Tenor: the maximum amount accessible through the NHF is N15,000,000.00 (Fifteen Million Naira Only). These loans are disbursed at a fixed interest rate of 6% per annum, and repayable over a maximum period of 30 years. The tenor is often calculated by deducting the applicant's age from the retirement age of 60 years. It should however be noted that while applicants can borrow as much as N15m, the actual amount an applicant can qualify to access depends on his/ her earnings and the value of the property being purchased. Applicants are also expected to make equity contributions towards the purchase price of the property. This is usually about 20% of the property value. However, as part of its efforts at repositioning the scheme, the FMBN was recently reported to have waived equity contributions for applicants purchasing properties valued at N5m or less.
- Frequency of Borrowings: contributors to the Fund can only access the NHF facility once in a lifetime. Where a contributor is unable to access the facility till retirement, Section 17 of the NHF Act makes provision for such contributors to have their contributions refunded.
With improved administration of the scheme and increasing awareness of this and other laudable efforts at increasing home ownership, such as the mortgage refinancing scheme being driven by the Nigeria Mortgage Refinance Company (NMRC), Nigerians can begin to explore the opportunities of owning their homes through mortgage.