Posted on: Fri, 14 Mar 2008
Chief Chuka Odom
With a shortage of 12-million homes in Nigeria, Chief Chuka Odom, Minister of State for Environment, Housing and Urban Development has his work cut out. Caterina Bortolussi spoke to him about his plans for the sector.
Describe your ministry and its mandate?
My responsibilities lie in the formulation and implementation of policies on housing in Nigeria. Housing is crucial to our national development and we currently have a shortage of around 12-million homes. There are a lot of structures, frameworks and policies that must be put into place to overcome the housing situation and one of them is by exploring private sector participation in housing delivery. As you may be aware, the land use decree vests all lands in the state on the governor and the chairmen of the local councils, while lands at federal level are vested in the president.
One of the problems that have militated against effective housing delivery in Nigeria has been the problem of titling to land. This is very important because lands constitute a bulk of dead capital in our economy. If we do not implement an efficient and effective titling process, it will be very difficult to create a credit system to drive our mortgage institutions. We are looking to develop a template that would guarantee available resources through primary mortgage institutions, backed up by reasonable funding from secondary mortgage institutions.
Currently, the British Council under the Department for International Development is assisting the country in upgrading processes in our various land registries. The Federal Registration System (FELIS) is also expanding its scope of operation. We intend to ensure that in the next couple of years all lands in urban centres are captured in the database. If we can achieve this, it would drive the building and housing delivery processes.
We are encouraging developers to come and assess our lands for development purposes. Over the past years our system has been delivering urban slums instead of well planned cities. So we need to reappraise our processes and re-evaluate what we are doing.
Even though there is a huge shortage in housing, it doesn't mean that we should adopt panic measures. So to that extent we have developed a couple of approaches. The first approach is to encourage private sector participation while government comes in with its own equity involvement; this is amortized through the availability of land to the developer.
The second approach is to work through mortgage institutions. Right now our mortgage sub-sector is very weak and we are working on reforms in that direction. What we really need is a huge capital inflow into the Federal Mortgage Bank to be able to recapitalise it and create a veritable Special Purpose Vehicle (SPV) to drive the process of loan delivery to primary mortgage institutions. Home owners will then be able to easily access funds at very low interest rates and spread the repayment schedule over 20 to 25 years.
There is a Presidential Committee on housing, of which I am a member, and we are working hard on a document for approval by President Yar'Adua. It will be a working document on housing delivery for the next few years. We know that a 12-million housing deficit is quite large and that the population is growing every year but we are counting on the economic underpinnings of this drive. Developers who start building houses will be a catalyst for further economic growth. More momentum in other sectors will compliment efforts in the housing sector.
Do these plans include the whole sector, or only affordable housing?
Right now we are only talking about affordable housing because there is a great need to provide affordable houses to the mass of our population. Luxury homes are not our concern right now because individuals within certain income brackets are capable of providing for themselves. Our target market is first time home owners. We believe that as soon as somebody graduates and has a job, he should start planning his life and that starts with home ownership. People should have access to soft loans, to be able to own a house and spread out the responsibility of repayment over a period of time. This is the only way that we can put as much houses into the market as possible.
How is the government going to provide housing to the poor?
You are talking about social housing for which we don't have a current strategy. We still need to progress to the stage of providing housing to people without jobs. What we are dealing with now is a class of people who have jobs but don't have the money to pay for the face value of a house. They have disposable income which they can use to pay off their homes in installments. This group constitutes around 60% of effective housing demand.
We will one day graduate to provide social housing where government will build these houses and use them to accommodate the unemployed. Social housing, however, does not constitute much of a problem to us here in Africa because we have a system where people live in their ancestral homes and have developed some kind of modalities for adaptation. Most people eligible for social housing live in the rural areas and they have accommodation, even though this might not be the kind of accommodation that will pass UN standards.
There are many investors looking at Nigeria as an investment destination but bottlenecks and bureaucracy seem to be pulling them back. What have you been doing in order to address issues of this kind?
Every system has a healthy dose of bureaucracy and bottlenecks, but what we are trying to do here in Nigeria is to reduce it to the barest minimum. There is no way you can do business without documentation, there must be some checks and balances, and there must be processes to ensure transparency. These processes or structures are meant for the protection of the investor so that you don't come and dump your money without proper documentation and safety nets. Some people view it as bottlenecks but we look at it as a guarantee of the sanctity of the transaction, to protect investors from getting into trouble later on.
We are working very hard to increase our intellectual capacity base for service delivery by establishing training programs for our staff to ensure that they appreciate the dynamics and the changes that are occurring in the industry. To remove bottlenecks completely is not possible. What we need to do is to fine-tune the system and ensure that it is not exploited or abused.
We have a Business Development Department in the ministry that is responsible for public-private partnerships in housing delivery. If there are investors that are interested in the housing industry, this is where they need to go to get information. We have received interest from many developers across the world such as China and South Africa, and are working very closely with them.
How are the various parastatals under your ministry, such as the Federal Housing Authority and Federal Mortgage Bank of Nigeria (FMBN), working together to achieve the target of providing one million affordable housing units in four years?
The problem we've had in the past is that some of these institutions are run by government appointees and we have found that government is not good at doing business. We are looking at taking some of these institutions out of government control.
In the 30 years of its existence, the FMBN has had 19 managing directors. That is an average of one every two years. No meaningful planning can be made when there is such a high turnover of leadership. There should be some level of stability. Part of the reforms we are thinking of is a situation where the FMBN can go to the capital market and where a percentage of its ownership goes into private hands. It will then be managed like a private organisation with responsibilities and targets. The government can come in and provide guarantees for loans but it won't be playing Father Christmas. We are looking at this template to avoid a situation where each administration that comes in, appoints managers who mismanage the fund, just to be replaced by new management.
Our institutions are still very weak in human capacity and policy implementation. Investors want to be assured that their funds are safe and that they will realise a return on their investments. We are looking for partners to assist us in creating the human resource capital and technological know-how to be able to drive these processes.
What is your vision for the housing sector and what message would you like to send to local and international investors?
I think the housing industry is one of the fastest and most lucrative industries in our economy today. This is an industry where you can't loose money because the critical infrastructure in housing development is land and land has never been known to depreciate, it only appreciates. So, I think we should de-emphasise the quick return approach to investment.
Banks should dedicate a certain portfolio of their funds to housing development and make these available to genuine developers. I have a feeling that in the near future, the housing industry in Nigeria will attract a whole lot of funding both from within and outside the country. In the next couple of years, given the zeal with which we are attacking the problem, we will create a credit mortgage system that is functional and adaptable to local circumstances and one that will drive housing delivery. I encourage investors to come to our private partnership department to access the information that is relevant and important for their investment.
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