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Cablegate: Nigeria: Federal, State Solutions to Address National

VZCZCXRO8000
RR RUEHMA RUEHPA
DE RUEHOS #0259/01 1980735
ZNR UUUUU ZZH
R 160735Z JUL 08
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC 0021
INFO RUEHUJA/AMEMBASSY ABUJA 9707
RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 LAGOS 000259

SIPDIS

STATE PASS USAID FOR NFREEMAN, GBERTOLIN
DOC FOR 3317/ITA/OA/KBURRESS
DOC FOR 3310/USFC/OIO/ANESA/DHARRIS
DOC FOR USPTO-PAUL SALMON
TREASURY FOR RHALL, DPETERS
STATE PASS EXIM FOR JRICHTER
STATE PASS OPIC FOR DERB, ZHAN, MSTUCKART, JEDWARDS
STATE PASS TDA FOR LFITTS, PMARIN

E.O. 12958: N/A
TAGS: EINV EAID EIND EFIN NI

SUBJECT: NIGERIA: FEDERAL, STATE SOLUTIONS TO ADDRESS NATIONAL
HOUSING DEFICIT, BUT MORE REFORM NEEDED

Ref: A) Septel Lagos 258
B) 07 Lagos 621
C) 07 Lagos 553
D) 07 Lagos 549
E) 07 Lagos 472

1. (U) Summary: Federal and state governments have adopted policy
solutions to encourage more private sector participation in housing
construction and delivery throughout Nigeria. While some states,
including Lagos, have taken the lead in pioneering housing financing
and construction schemes, existing housing construction projects are
stalled, signaling that the housing gap will be hard to close in the
short to medium term future. End Summary.

National Policy: Bigger Role for Private Sector
--------------------------------------------- --

2. (U) In 2002, Nigeria's National Housing Policy (NHP) was adopted
to promote private sector-driven mass-housing by improving the
availability and accessibility of land. Unlike the 1982 and 1991
housing policies, NHP 2002 incorporates the private sector as the
engine of housing development and delivery, representing a major
shift in the government's approach.

3. (U) Housing experts from Pison Housing Company, a Nigerian firm,
told EconOff several months ago that one major component of the NHP
2002 is already in force. NHP 2002 eliminated the Housing Ministry's
home building mandate and charged the Ministry with policy
formulation and creation of an enabling environment for investors in
the housing sector. The Federal Housing Authority (FHA), the
Ministry's construction arm, is charged with the responsibility of
building homes with the private sector. Pursuant to the 2002 NHP
policy, Lagos State Government (LASG) recently advertised the "New
Private Estate Developers' Scheme". Under this program, LASG will
make available to developers parcels of land ranging from 1 to 25
hectares on which to develop housing.

4. (U) However, additional reforms are needed. Francis Sheen,
Executive Director of U.S.-based TransAtlantic, told Pol-Econ Chief
July 8 that two bills have been introduced in the National Assembly
that will address inadequacies in the system that prevent the
expansion of housing construction and finance. The first bill
provides the legal framework for securitization of mortgages and
establishes a system of non-judicial foreclosures in the event of
mortgage defaults. The second bill modernizes Nigeria's land use
regime, and provides for, among other things, a new system for
dealing with resources found in and under the land. Both bills
reached second reading in February, and Security and Exchange
Director General told Ambassador June 3 that the National Assembly
has promised to take up issue more vigorously in its upcoming
session. No subsequent action has been taken on them.

Lagos Streamlines Land Registration and Titling
--------------------------------------------- --

5. (U) In the absence of national land use reforms, the Lagos State
Government has made efforts to streamline the registration and
titling of land, Mohammed Santuraki, Managing Director of First Bank
of Nigeria Mortgages told EconOff on May 28. While there is
"seeming clarity" about the process, "much uncertainty" remains as
developers actually go through the process. For instance, obtaining
approval for a housing project can take anywhere from one to six
months, he lamented. He believes overcoming these challenges will
be tougher in Lagos given the high demand for housing and the high
cost of land.

Lagos' Mortgage Division, Land Registry Established
--------------------------------------------- ------

6. (U) Lagos State Government (LASG) also has set up a Fast-Track
Mortgage Division in the High Court of Lagos State and created a
Mortgage Registry and separate Mortgage and Survey Desks in the
Directorate of Land Services. (Note: With respect to these
initiatives, Sheen said the "machinery" has not been put in place to
execute their mandates. Santuraki claimed he had not heard of these
initiatives, and if implemented, the banking sector had not felt
their effects. End Note)

Lagos Establishes Loan Securitization Scheme

LAGOS 00000259 002.2 OF 002


--------------------------------------------

7. (U) TransAtlantic Chairman Mike Williams told EconOff, in other
past conversations related to this issue, that the company plans to
build a mixed-use community that includes 4,000 to 5,000 low to
high-income housing units, primary and secondary schools, and retail
shops in Ilasan, a community located about 40 minutes drive outside
of Lagos' commercial center. (Note: TransAtlantic uses the Nigerian
Federal Government's definition of low-income housing, i.e. housing
costing between Naira 2.5 million to 5 million (USD 20,000 to
40,000. End Note) The construction in Ilasan would create
approximately 2,000 local jobs, Williams estimated. TransAtlantic
will partner with the Lagos Building Investment Company Limited
(LBIC), a primary mortgage institution and private-public venture
supported by the Lagos State Government. Under this partnership,
LBIC would offer potential buyers home loan financing, provide
TransAtlantic the estate property, and thereby own 30 percent of the
project. In light of Nigeria's housing laws, TransAtlantic will
utilize Asset Backed Commercial Paper (ABCP) conduits. In using
ABCP, LBIC would purchase individual loans from Nigerian banks,
securitize them, and sell them to investors in order to replenish
the banks' credit line.

Police, Military Housing Programs Stall
---------------------------------------

8. (U) However, public and private housing projects with promise
have faltered. TransAtlantic's Sheen told EconOff that state
governments received appropriations from the Federal Government in
early 2008 for a police housing program. That program has fallen by
the wayside as state governments failed to allocate land and to see
through the projects. TransAtlantic had planned on building 100,000
housing units for the Nigerian police in each of Nigeria's 36 states
as part of the program, he said.

9. (U) The Nigerian military had devised a similar housing scheme
for its retirees in partnership with United Bank for Africa (UBA).
Under this program, 20 percent of the government's allocation to a
retiree's pension would be diverted to payments on a mortgage for a
period of 15 to 25 years. Conceived four years ago, the scheme took
off in 2007 with the construction of 50 houses in Kogi State, but
has been grounded since because the military has not been paying its
retirees either pensions or post-service separation incentives.

10. (U) Private low-income housing projects in Kaduna, Rivers, and
Anambra states have stalled as well, Sheen said. The state
governments have allocated the land for the projects, but U.S.
investors have not moved forward with the discussion. TransAtlantic
hopes to conduct a second housing feasibility study in partnership
with the U.S. Overseas Private Investment Corporation to update one
done approximately five years ago.

Developers Run Gauntlet of Extra-legal Taxes
--------------------------------------------

11. (U) Despite advances in other areas, private developers continue
to suffer at the whim of government officials, First Bank's
Santuraki said. In Lagos State, government officials frequently add
on additional levies, and developers have to absorb some of the
costs and hope to pass the remainder onto the customers. This is
easier to do with prime property, he noted.

12. (U) Comment: State governments need to realize any effort made
at reducing bureaucratic bottlenecks and streamlining policies at
the state level will be undermined by a lack of accountability and
transparency in the system. Moreover, patchwork housing development
schemes will only be a drop in the bucket in terms of the national
housing deficit. Without real reforms to existing land and housing
policies, good business sense will deter private investors and
developers from making long-term investment. End Comment.

13. This cable was cleared with Embassy Abuja.

BLAIR

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