Cablegate: The West African Peer Exchange On Affordable Housing
RR RUEHMA RUEHPA
DE RUEHUJA #3200/01 3481739
ZNR UUUUU ZZH
R 141739Z DEC 06
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC 8068
INFO RUEHOS/AMCONSUL LAGOS 5739
RUEHWR/AMEMBASSY WARSAW 0013
RUEHCD/AMCONSUL CIUDAD JUAREZ 0017
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS SECTION 01 OF 03 ABUJA 003200
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TAGS: ECON EFIN EINV EAID SOCI NI
SUBJECT: THE WEST AFRICAN PEER EXCHANGE ON AFFORDABLE HOUSING
REF: ABUJA 3172
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1. Summary. At the West African Peer Exchange conference on
Affordable Housing, Nigerian representatives discussed plans for
increasing the number of affordable homes in Nigeria and presented
an action plan. Most of the West African countries in attendance
face similar problems on land tenure titling, and foreclosure. The
conference ended without a clear consensus on the way forward, but
participants agreed that an ongoing dialogue is needed as well as
political will, if not, many cites will be swallowed by uncontrolled
urbanization. End Summary.
2006 WEST AFRICA PEER EXCHANGE
2. The West African Peer Exchange on Affordable Housing was held in
Accra, Ghana from November 28 to December 01, 2006. Organizers were
the Government of Ghana (GOG), United States Department of Housing
and Urban Development (HUD), and United Nations Human Settlements
Program (UN-HABITAT). A major objective was to provide
participating countries in West Africa - Ghana, Liberia, Mali,
Benin, Cape Verde, Nigeria, and Senegal - an opportunity to share
experiences on how governments can best support the private sector
and the domestic financial services industry to invest in affordable
3. Leading attendees included John Agyekum Kufuor, President of
Ghana, Alphonso Johnson, U.S. Secretary of the Department of Housing
and Urban Development, Anna Tibaijuka, Under-Secretary General and
Executive Director of UN HABITAT; and Pamela Bridgewater, U.S.
Ambassador to Ghana.
4. The conference agenda focused on three main themes:
-- Government policies and regulatory framework and incentives to
support and strengthen existing housing finance institutions to
stimulate innovations in affordable housing.
-- Private sector approaches to financing affordable housing;
existing initiatives and innovations in products and instruments.
-- The role of public private partnerships and financial
intermediaries (housing cooperatives, micro-finance institutions and
community based organizations); and how strategic institutional
arrangements promote affordable housing.
2005 EAST AFRICA PEER EXCHANGE
5. In 2005 following consultations between HUD and UN HABITAT
regarding new sources of finance for housing and basic services in
the context of rapid urbanization, HUD and UN HABITAT organized the
first peer exchange in East Africa. International experts,
government and private sector officials from Kenya, Tanzania and
Uganda met in Kampala, Uganda. Based on the success of the East
African peer exchange and recent developments of commercial banks
engaging in retail mortgage lending and community organizations,
cooperatives, and micro finance institutions emerging as credible
financial intermediaries in West Africa, participants decided to
organize a West African peer exchange.
6. The Nigerian delegation was led by E. Austine Aikhorin, Managing
Director/Chief Executive of Union Homes (a subsidiary of Union Bank
of Nigeria), and included private and public sector representatives.
(NOTE: Union Homes is making headway in innovative financing for
low-income housing products in Nigeria. END NOTE.) The delegation
presented a country paper during the opening session and then broke
off into a working group to prepare an action plan for presentation
at the closing session.
7. Aikhorin's presentation provided an explanation of constraints to
providing affordable housing, the National Housing Fund (NHF),
planned mortgage bond and recommendations for GON action. He
reviewed the historical context of housing programs in Nigeria since
1985 and the reasons for their failure. The failures consisted of
defective and unduly politicized distribution and selection of
sites, political appointment of contractors, and the allocation of
units to the political elite. Landmark legislation began in 1989,
with the Mortgage Institutions Act which recognized the primary and
secondary mortgage markets. The act also allowed the Federal
Mortgage Bank of Nigeria (FMBN) to operate in the wholesale mortgage
market and primary mortgage institutions (PMIs) to operate in the
retail mortgage market.
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CONSTRAINTS TO AFFORDABLE HOUSING
8. The FMBN estimates housing needs in excess of 14-16 million units
requiring financing of approximately 44 trillion naira with an
average cost of approximately 2.143 million naira per unit.
Aikhorin commented that the task seems insurmountable with
constraints that touch many areas. Nigeria's high unemployment rate
and very low per capital incomes of the employed make most decent
housing unaffordable. He said banks are reluctant to lend because
customer information is difficult to attain and there is no
established credit authority.
9. Aikhorin noted that the Land Use Act of 1978 complicates land
titling and foreclosure, and more importantly, vests only in the
governor of each state the right to transfer property. In addition,
there is a scarcity of long term financing, because PMI's must
compete with other commercial banks in the same markets. Plus,
there are high interest rates with short durations, a very small
primary mortgage market, and a non-existent secondary mortgage
market. He said an exacerbating factor is the high cost of building
materials, primarily due to huge tariffs on imported construction
INITIATIVES TO OVERCOME CONSTRAINTS
10. Aikhorin explained that the NHF act was passed in 1992, and as
part of the act, anyone earning over 3,000 naira per month
contributes a mandatory 2.5% of their income to the NHF. As of July
2006, the housing fund had amassed a total of 21.7 billion naira,
with some 2,876,787 members. The majority of the loan funds were
used for mortgages through PMIs for 6.4 billion naira and estate
development loans (EDLs) for 9.6 billion naira. Although the NHF
contributions have increased to record levels there still is an
erratic collection that is sometimes not remitted due to
inefficiencies in collection and record keeping.
100 BILLION NAIRA MORTGAGE BOND
11. Also, Aikhorin reported that the FMBN is in advance stages to
float a 100 billion naira bond in the capital markets in two
tranches of 50 billion naira each for mortgage financing. The bond
will be guaranteed by the GON as an incentive to attract investors.
Underwriting commitments as of November 2006 were at 273.5 billion
naira. Some of the proceeds will enable civil servants to purchase
the more than 30,000 federal government housing units up for sale.
RECOMMENDATIONS FOR THE GON
12. Aikhorin said the GON needs to do more and listed a number of
-- The present National Housing Policy should be completed an
approved as a national policy document.
-- Amendment of the Land Use Act.
-- GON construction of basic infrastructure (roads, electricity,
water etc.) for all new housing developments.
-- GON tax incentives on pre-tax profits in line with best
-- Injection of government funds to provide low-cost housing to the
-- Introduction of subsidized building materials for targeted groups
and encourage the use of local building materials.
-- GON support for the formation of housing cooperatives, building
societies, thrifts and credit societies that could tap into some of
the emerging micro-finance institutions.
AMBITIOUS NIGERIA COUNTRY ACTION PLAN
13. The Nigerian delegation envisioned that within four years the
GON and private sector will increase the number of loans from both
the private sector and micro finance institutions by 25% and
completion of 20 slum-upgrading projects. The action plan requires
that five objectives are completed, beginning with collection of
data, information and research, followed by policy and legislative
reform, government incentives to the private sector, and
rearrangement of real estate and mortgage related institutions, and
innovative products for enhanced access to mortgage finance. Each
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of the objectives outlined the activities, outputs, resources and
lead agencies with the UN Habitat program support office in Abuja as
the coordinating agency. UN Habitat will be responsible for
bringing together the lead agencies, stakeholders and GON
representatives to put the action plan in motion.
14. The conference provided a good forum for an exchange of
information among countries similarly situated yet confronting
different challenges. There was a diverse group of contributors
from the pubic sector, but no significant private sector
participation. Most countries were grappling with the same issues
of securitization, land ownership, tenure, titling and foreclosure,
and the need to pass key reform legislation. The Nigerian
delegation came prepared to discuss, listen and offered an ambitious
action plan. The question not yet answered is whether the GON has
the political will to undertake major housing reforms as more cities
succumb to urbanization, especially during the last four months of
the current administration.