Assessment Of Housing Finance By Primary Mortgage Institution (Study Of Lagos Metropolis)

ABSTRACT

In Nigeria, successive administrations have enacted policies towards the provision of housing to the ever increasing populace. The policies ranged from direct construction of dwelling units, to legislating the framework for providing financing to prospective house owners. This paper accesses the role of mortgage finance on housing delivery in Nigeria. One of the major goals of PMIs is to boost investments and engender increased housing growth among 36 States of Nigeria and the Federal Capital Territory. In this study, we investigated how primary mortgage institutions had impacted on investments in housing sector in Nigerian. We employed the ordinary least square (OLS) estimation in analyzing a modified finance model. The Johansen co-integration test was also utilized. From the unit root test, evidence of long-run relationship was found to exist between mortgage finance and housing delivery over the period studied-both at the instances of the Trace statistic and the Max-Eigen test statistic. The results of the OLS found that mortgage deposit had a positive and significant impact on housing delivery in Nigeria, while mortgage loan exerted negative and non-significant influence on housing provision in Nigeria. This study concludes that while housing is an important sector that can drive the Nigeria economy, inadequate supply of mortgage finance to the sector stifles its growth and overall economic impact. We therefore, recommend that the government and monetary authorities should make crucial policies to improve activities of PMIs for optimal performance; access to PMI mortgage loans should be made easier and at lower interest rate.

TABLE OF CONTENT

COVER PAGE

APPROVAL PAGE

DEDICATION

ACKNOWLEDGEMENT

TABLE OF CONTENT

CHAPTER ONE

INTRODUCTION

• BACKGROUND OF THE STUDY
• AIM AND OBJECTIVES
• SIGNIFICANCE OF THE STUDY
• SCOPE OF THE STUDY
• LIMITATION OF THE STUDY
• DEFINITION OF TERMS

CHAPTER TWO

2.0 CONCEPTUAL THEORETICAL FRAMEWORK AND LITERATURE REVIEW

2.1      CONCEPTUAL THEORETICAL FRAMEWORK

2.2 CONCEPT OF HOUSING DELIVERY

2.3       FORMS OF HOUSING PROVISION

2.4       HISTORY OF HOUSING PROVISION IN NIGERIA

2.4.1    THE 1^ST NATIONAL DEVELOPMENT PLAN PERIOD (1962-1970)

2.4.2 THE 2^ND NATIONAL DEVELOPMENT PLAN PERIOD (1970-1974)

2.4.3     THE THIRD NATIONAL DEVELOPMENT PLAN PERIOD (1975-1980)

2.4.4    THE 4TH DEVELOPMENT PLAN PERIOD (1980-1985)

2.4.5    THE 1^ST NATIONAL ROLLING PLAN PERIOD (1990-1992)

2.4.6    NATIONAL HOUSING PROGRAMME (NHP 1994- 1995)

2.4.7    CURRENT HOUSING DELIVERY APPROACH

2.5       AFFORDABLE HOUSING SCHEME

2.6       HOUSING NEED IN NIGERIA

2.7      OVERVIEW OF HOUSING FINANCE ARRANGEMENT IN NIGERIA

2. 8 HOUSING NEEDS /REQUIREMENT

2.9       THE PROBLEMS OF HOUSING DELIVERY IN NIGERIA

CHAPTER THREE

3.0       RESEARCH METHODOLOGY

3.1       RESEARCH DESIGN

3.2       DATA TYPES AND SOURCE

3.3       INSTRUMENTATION FOR DATA COLLECTION

3.4.        SAMPLE FRAME SAMPLE SIZE ANMD SAMPLE PROCEDURE

3.4.1      SAMPLE FRAME

3.4.2    SAMPLE SIZE

3.5       METHOD OF DATA COLLECTION

3.6       METHOD OF DATA ANALYSIS

CHAPTER FOUR

4.0       INTRODUCTION

4.3       AWARENESS OF PRIMARY MORTGAGE INSTITUTION IN THE CASE STUDY

4.4         RESPONDENT PATRONAGE TO PRIMARY MORTGAGE INSTITUTION

4.5         PROJECTS EXECUTED WITH PRIMARY MORTGAGE INSTITUTION LOAN

4.7        FINDINGS

CHAPTER FIVE

5.0       SUMMARY CONCLUSION AND RECOMMENDATION

5.1       SUMMARY OF FINDINGS

5.2       CONCLUSION

5.3       RECOMMENDATION

CHAPTER ONE

1.0       INTRODUCTION 

1.1       background of the study

Housing is globally acknowledged as one of the fundamentally important requirements for existence and survival of human race, as well as a critical component of a country’s economy; Okidi and Ellah (2013 citing Abraham Maslow’s hierarchy of needs) regards housing as one of the three primary necessities of humanity and is the most essential requirement for physical survival of people together with food and clothing. A robust housing programme creates the enablement for stable rural and urban communities in combination with social inclusiveness (Amao and Odunjo, 2014). In that regard, the right to occupy a decent shelter is paramount and the availability of decent and affordable housing should be one of the distinguishing marks of a developed economy. On the contrary, significant growth in the housing sector in developing countries including Nigeria seems one of the “complex issues” hampering human and national development.

Since there is no “free lunch” anywhere, economic agents (individual, household, firm and government) usually obtain loan to acquire assets like real estate. They depend on informal financial institutions such as age-grades or formal institutions like mortgage bankers for financial support. In most cases, loan recovery strategies are put in place by lending institutions to guard against default. As a precautionary measure, properties are mortgaged and the lender enjoys the lien (legal claim on borrower’s property) to keep or sell the property as security for the debt (Microsoft Encarta Dictionary, 2009). Nwankwo (2014) sees mortgage financing model as a panacea (model that will solve) the housing related problems in Nigeria.

In compliance with the position of housing in the very well-known Abraham Maslow’s hierarchy of needs hypothesis, the government of Nigeria has apparently created the National Housing Fund (NHF) Scheme in 1991. In order to actively drive this financing model for greater efficiency, FGN established the Primary Mortgage Institution (PMI) so as to deepen liquidity of housing business (Acha, 2007). Sanusi (2003) and Nwankwo (2014) clearly substantiate the essence of housing thus: “… it is one of the three most important basic needs of mankind, the others being food and clothing. Second, housing is a very important durable consumer item, which impacts positively on productivity, as decent housing significantly increases workers’ health and well-being, and consequently, growth. Third, it is one of the indices for measuring the standard of living of people across societies.”

PMIs gather long-term funds for the development of housing (Onoh, 2004 cited in Acha, 2007). For this reason, the National Housing Policy (NHP) launched by the government in 1992 was intended to further improve activities in this sector. Workers in public and private service, banks and non-bank institutions were required to contribute to housing development. These funds were to be lent to PMIs by the Federal Mortgage Bank of Nigeria (FMBN) for on lending. The PMIs besides gathering their own deposits also grant borrowers access to loans in line with NHP. However, the performance profile of PMIs so far towards desirable housing delivery in Nigeria is below expectation (Amao and Odunjo, 2014). Acha (2007 citing Umoh, 1997) ascribes the causes partly to weak corporate governance, for example lending for non-housing purposes. Similarly, Okonjo-Iweala (2013) observed that in spite of the various reforms introduced in the mortgage institutions in Nigeria by government, the sector has remained inactive and irrelevant owing to inability of the market to lend considerable financial support to potential house owners. Moreover, Sanusi (2003) opines that the perception that PMIs mandate to intermediate funds for adequate housing delivery has been satisfactorily accomplished to date is arguable.

The increasing trend of housing deficit in Africa raises much concern and interest in delving into housing delivery in the continent. As much as 90% of Nigeria’s housing stock has been produced through self-build, and in the cities, overcrowding has become intolerable and many end up sleeping outside. An estimated 53% of households in Nigeria occupy a single room. The description many analysts give to the housing challenge that confronts African cities is “crisis” (Tipple 1994; Songsore 2003). Statistics have proved that our annual demand for housing which stands at 100,00 units is in a short fall, with just about 40,000 of these housing units being provided currently.

The state’s effort alone has not been significant in curbing the problem and therefore calls for private individual involvement in the housing delivery. 90% of the housing stock in Nigeria is provided by private individuals. This gives an indication that the provision of housing is mainly the effort of private individuals and real estate developers. These households produce housing through self-help approach – the construction of houses by private individuals for their own occupancy mainly through incremental housing strategies. These strategies depend much on the income level of the household. Some banks in the country are involved in mortgage lending; this is against the backdrop that, the mortgages as a product has demonstrated to be the most proficient and higher financial solution of housing in advanced countries.

It is against this backdrop that this paper examines the extent to which PMI activities had promoted or brought growth to housing sector in Nigeria

1.2       STATEMENT OF THE PROBLEM

Housing is recognised as man’s basic need, it remains one of the most persistent and serious problem facing people in every society. However, provision has been one of the paramount concerns of policy makers in the various countries across the world in recent times. Despites all efforts couples with circulated, well planned and excellent housing policies over the years, there has been a reoccurrence of the problem of housing shortage and insufficient within our society.

It is also pertinent to look into the factors responsible for persistent to look into the factors responsible for persistent housing problems facing people most especially in developing nation like Nigeria. These factors are

1. High cost of building materials
2. Level of urbanization

• High construction rates

1. Unavailability of adequate finance
2. High birth rate resulting into overpopulation in the urban          centre
3. Poor implementation of housing policy

It is on the strength of this situation that this appraised the government institution on housing  development in Lagos but despite the fact that the efforts were made in favour of urban centre, that is of primary mortgage intends to examine the contribution of primary mortgage institution in solving housing problems in our urban centers and access the problems they encountered.

• AIM AND OBJECTIVES

The paper aims to assess the performance of primary mortgage institution (PMIs) in housing delivery in Lagos state of Nigeria.

The following objectives will be revised in order to achieve the aim;

1. To access the no of houses constructed through the primary mortgage institution
2. To determine the mortgage facilities offered by PMIs

• To access the impact of primary mortgage institution on house delivery

1. To access the condition attached to loan granted
2. To identify the problems encountered by savings and loan limited
3. To provide recommendation to the problems

• SIGNIFICANCE OF THE STUDY

The research study will highlight various challenges which primary mortgage institution faces in the provision of mortgage loan in the case study area. Also it will access the impact and efforts of coop savings and loan limited in housing delivery provision in Ibadan.

Therefore research work will proffer solution to

1. Low level of awareness of the activities of primary mortgage institution in Nigeria society
2. Shortage of adequate housing facilities
3. Uneven distribution of primary mortgage institution across Nigeria
4. And other various difficulties encountered by loan applicants in the course of seeking loan facility.

• SCOPE OF THE STUDY

The major focus of the study is to examine the process and how housing units are being provided in Lagos metropolis with the help of cooperative savings and loans limited (PMI) through the national housing funds (NHF) provided by the federal mortgage bank of Nigeria (FMBC)

Lagos metropolis is chosen because of the researchers familiarity with the city and coop savings and loan limited as a case study because one of the notable primary mortgage institution in Ibadan

• LIMITATION OF THE STUDY

It was the intention of the writer to give a comprehensive research work but during the course of this study, some constraints were encountered.

Apart from the problem of funds, another major set back in the production of this work is the lack of time. It was really a strenuous and frustrating experience combining normal classroom work with the preparation of this dissertation

The availability of information was also a bad experience.

• DEFINITION OF TERMS

Housing:- Is defined as shelter or structures of dwelling which include residential environment, neighborhood, micro district provided with all necessary services and facilities equipment useful for man’s living.

Development: – this is the carrying of an operation or construction work which is associated with a change in the use of land or with a re-establishment of existing use such as alteration, erection or re-erection of building roads and sewage e.t.c

Developers: – this could be an individual corporation or institution or group of individual of engineering or building works. Developers can be grouped into two namely private and public developers.