The high cost of borrowing to own a home is the primary reason why many Nigerians do not own their homes, according to industry insiders. Nigeria has a relatively low homeownership rate of 20 percent, significantly lower than peer nations such as South Africa, Benin Republic, Libya, Brazil, the USA, Kenya, and Singapore.
Despite the construction and real estate sectors contributing significantly to Nigeria’s GDP, with a combined total of N20 trillion in revenue in the first three quarters of 2022, the housing segment continues to face challenges. There is an estimated deficit of over 28 million housing units in the country.
Inflation: The Central Bank of Nigeria’s interest rate hikes, aimed at controlling inflation, have made borrowing more expensive and have led to rising property prices. Between January 2022 and August 2023, building material prices increased by over 70 percent, further increasing the cost of homeownership.
High Mortgage Rates: Accessing a mortgage in Nigeria comes with interest rates of around 17 percent or higher, making it unaffordable for many citizens, especially those with lower incomes.
Foreign Exchange Rate Volatility: The fluctuating exchange rate of the Nigerian Naira against other currencies affects the cost of importing building materials, driving up construction expenses.
Flooding: Flooding in some areas has reduced property values by approximately 10 percent. Properties in flood-prone areas are less desirable, making it challenging for homeowners to sell or rent these properties.
Building Collapse: The country has witnessed a high number of building collapses, often due to professional ineptitude, the use of substandard materials, poor workmanship, and weak foundations. This has created fear and uncertainty among potential homeowners.
Homelessness: Nigeria is reported to have the highest number of homeless people in the world, with over 24 million people without appropriate access to housing. Access to wealth and resources is a key challenge.
Addressing these challenges is crucial to improving homeownership rates in Nigeria and providing affordable housing for its growing population.