Chinwendu Obienyi
The possession of industrial or infrastructural capabilities by an economy is considered important for improved economic growth and development.
Indeed one of the distinguishing factors between developed and developing economies is the acquisitions of industrial know – how.
The benefits of appropriate industrial base for an economy lies in its combination of sustainable technology, management techniques and other resources in order to move the economy from a traditional and low level of production to a more automated and efficient system of mass processing and manufacture of goods and services.
Studies have asserted that finance is the pillar, pivot, key, cornerstone and the most crucial element in housing investment and the availability of which determines access to other key inputs of land, labour, materials and infrastructure.
The financing of housing is a key element of any housing policy. In general, there are key objectives to be taken into account in order to make financing options viable and sustainable.
Thus, the options should offer profitability to market participants, otherwise, it will not be feasible to attract investment, particularly private investment to the housing sector. Secondly, they should be adapted to the potential borrowers’ ability to pay, otherwise, the low-income population will be marginalised from market operations. Therefore, the provision of affordable housing at scale remains a challenge to most countries particularly those in developing country like Nigeria.
It has therefore become increasingly glaring that most urban population live in dehumanizing housing environment, while those that have access to average housing do so at abnormal cost.
According to the United Nations report, Nigeria stands at over 180 million population with an annual growth rate of 3 per cent as of 2015 and an urban population growth rate of 5 per cent. Further data obtained from the World Bank and the National Bureau of Statistics (NBS) states that there is a 17 million housing deficit in Nigeria. Globally, 1.6 billion people live in sub standard housing according to UN statistics while in Nigeria, over 100 million of its 180 million citizens live in substandard housing.
Thus, one of the major engine of economic growth and development of a nation is its capital market as it impacts positively on the economy by providing financial resources through its intermediation process for the financing of long term projects. Hence without an efficient capital market, the economy may be starved of the required long-term fund for sustainable growth.
Also, the Nigeria bond and Real Estate Investment Trust (REITs) market is still at its infancy therefore still underdeveloped as real estate developer/investors and companies traditionally obtain debt through bank loans.
Until a few years ago, was REITs introduced to Nigeria capital market with Skye Shelter Funds and Union Homes Real Estate taking the lead in 2007 and 2008 respectively and when compared with the positive impact of the successful developed market economies, REITs and bonds are not seeming to be replicated in Nigeria and other emerging nations.
There have been arguments that Nigeria’s debt capital market needs to be expanded so as to ensure effective mobilisation and allocation of financial resources to fast-track economic growth albeit with a stable and lower interest rates and foreign exchange regime.
It is, therefore, safe to say the huge potential of the debt capital market on the side of housing sector is yet to be tapped which is why Nigeria has been witnessing unprecedented drag over the last few years.
Experts are of the opinion that for Nigeria to reduce the 17 million housing deficit, then the government should come up with stable policies, framework and also consider the nation’s debt capital market for project financing.
Speaking during a media parley in Lagos recently, the Managing Director, of FMDQ OTC Exchange, Bola Onadele, noted that the government is yet to scratch the surface of the capital market while adding that there is a lot of things to ensure the deficit is reduced.
“In a country with these opportunities and potential, and in most countries, the percentage of the debt to GDP is three digits. In Nigeria, in terms of percentage, it is in a single digit and so we have not done enough penetration and leveraging of the potential of the Nigerian economy so there is still a lot of work to do on that debt capital market side. But we cannot grow that debt capital market side if we do not privatise, drive infrastructure from private capital perspective.
“How are we going to build infrastructure, reduce the housing deficit? it is going to be from the capital market and if we do not understand what is needed to be done, then this goldmine will just be there and remain untapped”, Onadele explained.
According to him, “we have partnerships with the Nigeria Mortgage Refinance Company (NMRC) where we are looking at mortgage bank securities and this partnership has been ongoing for few years now. The latest initiative is the housing development initiative where we will work with key stakeholders and these key stakeholders are not only from the private sector but also from the public sector which looks at every aspect so that we won’t face bottlenecks”.
Chief Executive Officer, Chapel Hill Denham, Bolaji Balogun, urged the Federal Government to use the capital market as a strategic weapon to restructure the economy.
Balogun said given the task of restructuring and the lack of federal resources, the outcome was only achievable with massive private intervention from institutional and development capital utilising capital markets, best of the private sector initiatives, well-educated Nigerians and Diaspora capabilities through remittances and reversal of brain drain.
He stated: “This requires Nigeria to address its infrastructure and housing deficits, education and literacy, and employment and job creation. All these have capital market and sustainable finance solutions.