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Nigeria Should Leverage On Capital Market To Address Housing Deficit – Chimphondah



United Nations expects Africa’s population to hit 2.5 billion by 2050—almost double the 2020 population size of 1.34 billion. This projection portends many challenges but also signifies enormous opportunity for some sectors. How do you see this boom panning out for the real estate sector in Africa as a whole, and Nigeria in particular?

The impending population boom speaks to the investment horizon for Africa; the African continent is increasingly young and is poised to enjoy a population dividend. Simply put, Africa will have more people entering the workforce than leaving it. This is a situation that many developed countries in the West would rather have; Japan, for instance, is dealing with an incredibly ageing population. Across the West, America and Europe are all experiencing decreased fertility rates which demographers and economists will tell you have a direct bearing on future projections.

Africa finds itself on the other side of the debate, but this comes with opportunities as it does challenges. This is likely to put more pressure on our urban centres; according to the UN-Habitat, urbanisation in Africa is projected to hit 60 per cent by 2050, the same year that we anticipate the population boom. That is not a coincidence. At the same time, the housing deficits across Africa will not remain static. Here in Nigeria, although contested, our Centre of Excellence (COE) estimates a deficit of 17 million houses, Ghana has a shortage of 1.7 million; in East Africa, Kenya needs 2 million units. Our COE estimates that the current housing deficit across the continent stands at 56 million.

In Nigeria, like many other countries, the challenge is managing rapid urbanisation and the expectations that come with it—namely gainful employment and decent housing. Without proper planning, in our experience, informal housing settlements sprawl and with that comes the associated social ills.

The increased demand also means that construction can drive economic growth. We believe real estate will be central to this enormous growth prospect, but whether the boom is realised as an opportunity or a challenge is down to planning. We, as an organisation, have made this advocacy central to our strategy.

Since its inception, Shelter Afrique has facilitated affordable housing on the African continent. What would you say have been the major highlights of this 40-year journey?

The attainment of a 40th year is an achievement in itself. It means that we have remained a going concern as a business but, more importantly, remained relevant to our shareholders. It is my privilege to be at the helm of affairs now, I have not been here for 40 years, but the moment is not lost on me. It is most gratifying to see how the organisation redefines itself, how it has adapted and grown. Today, we have 44 member countries, up from 17 in 1981, and three Regional African Organisations, as shareholders. The landscape is different from when the organisation was instituted; many other organisations mimic what we do. Others are on the border of our activities; commercial banks, other development finance institutions, but our member countries still have recourse to us regarding matters of affordable housing and, increasingly, matters of large-scale development. It should give our shareholders some comfort that the organisation will always be fit for purpose and remains committed to its founding vision which is providing affordable housing for all Africans.

We also directly impact livelihoods and quality of life; in 2019, we estimate that we delivered 3,821 housing units and impacted 19,015 beneficiaries and created 26,747 jobs and empowered 242 women with housing units.

In 2020, we delivered 5,101 housing units, housing 25,505 individuals; this translates to 15,303 direct jobs and 20,404 indirect jobs created. This is the real way we impact livelihoods and improve the quality of life in Africa.

We also have a very vibrant stakeholder universe with other organisations such as the UN-Habitat, the African Union, the European Investment Bank, the West African Development Bank, BOAD, the Islamic Development Bank, Commonwealth Development Bank, the German Development Agency, KFW, Trade Development Bank, TDB, Agence Francaise de Developpment, the French Development Agency. We are also equity partners in such institutions as the Kenya Mortgage Refinance Company (KMRC) and Tanzania Mortgage Refinance Company (TMRC), and the Nigerian Mortgage Refinance Company, which we were instrumental in creating.


Based on your engagements across the continent, what are the key challenges facing the real estate sector on the continent, and specifically, here in Nigeria?

Well, there are four broad ways to categorise the challenges on the continent: government policy and regulation, high cost of finance, prohibitive loan tenors, and lack of capacity. Government will need to drastically improve registration of land titles and digitisation of records. Governments need to make housing policy and housing projects a front-of-mind issue which has not been the case.

Relatedly, transportation and infrastructure policy have to be drafted with housing in mind – This has a knock-on effect on housing with regard to the accessibility of land. Governments should also consider incentivising developers and developments and reducing the administrative bottlenecks. We have found that money tends to follow government interest and direction. As an organisation, we have tried to address these gaps with the Yaoundé Declaration; the Yaoundé Declaration is a policy framework agreed to by our 44 member countries at the 40th Annual General Meeting to address affordable housing and governance frameworks.

Secondly, the high cost of finance and short tenors are prohibitive to investing in affordable housing. Typically, we see that developers are discouraged from participation because of the slim margins.

To solve this, affordable housing must be conceived as a volume business to make sense for developers. We have addressed this by proposing Private-Public-Partnerships (PPPs) of no less than 1,000 units; this is our primary product under our revised strategy. We are seeing traction in Rwanda, Togo, Cameroon and are concluding conversations in Nigeria to deliver similar projects.

We are also advocating for strengthening the capital markets as a source of financing. Many African capital markets lack size and liquidity due to the low depth and liquidity of local markets; trading is often limited to a few stocks, which represent most of the market capitalisation. We have often used the capital markets to raise money for affordable housing, we floated an FCFA10 billion bond on the West African Economic and Monetary Union (UEMOA), which was oversubscribed by 163 per cent in 2014 and the KES 3.5 billion bond that was oversubscribed by 43 per cent on the Nairobi Stock Exchange in 2013.

Through our COE, we are also working to address capacity issues by holding training sessions – masterclasses for developers interested in delivering large-scale affordable housing. We have signed MoUs with Real Estate Developers Association of Nigeria (REDAN) and the Nigerian Institute of Quantity Surveyors to deliver certified sessions to professionals within their associations.


You mentioned limited access to finance – specifically unfavourable credit terms, as a significant challenge that precludes many Nigerians from real estate. How is Shelter Afrique poised to solve this challenge?

We believe the capital markets are an under-utilised avenue for fundraising. Beyond this, we can leverage our partnerships and relationships to crowd-fund for affordable housing. We have relationships with other multi-laterals such as the African Development Bank, the European Investment Bank, the Islamic Corporation for Development, the German Development Bank (KFW), and the French Development Agency (AFD). We also have member countries contributing to the capital. Over the last four years, we have received over $100 million from member countries which commits us to participate in their affordable housing programmes. Indeed, this is our second strategic pillar, Shareholder Value and Developmental Impact. It guides our investment philosophy in our member countries.

We largely participate through two products, project finance, where we directly finance the developers. Currently our investment appetite is to consider large-scale projects of nothing less than 1000 units. Secondly, we provide lines of credit to banks to bolster the provision of mortgages. Recently, we provided $10 million to Wema Bank for this specific purpose.


As a player in the Nigerian market, how have you navigated the challenge of exchange rate volatility and other forex-related challenges?

Since our first investment in Nigeria in 1993, we have been lending to the Nigerian market in US dollars. As the source proceeds of the loan repayment has been in local currency (Naira) especially in the project finance, this has put a lot of pressure on the borrowers due to currency depreciation.

To mitigate the FX risk, the company has established a Naira denominated medium term-programme, to access Naira currency and on-lend in local currency. This will ensure perfect currency match between the borrower’s debt and source of repayment. We are also confident in the program, given our experience and success in the capital markets.


How far has this process gone and what can we look forward to?

The Security and Exchange Commission (SEC) has approved our shelf prospectus of N200billion, we received this on the 18th of Oct 2021. Following that we filed a Series 1 issuance of N40 billion, and we expect to receive approvals shortly.

We will begin to engage with the investor class during our roadshows in January 2022, and we are excited about this as it will provide us with the platform to sell our value proposition. We expect to launch the bond in March 2022.

For 20 years, Nigeria has remained a big player on the African real estate landscape. What factors would you say have been responsible for this sustained trend? Do you expect this upward trend to continue?

The entry point for most investors, and the attraction really, is the significant consumer base. With a teeming population of 200 million and growing, the most populous black nation will always attract investment because the investment horizon is quite wide.

Additionally, there is proven demand for housing at all price points; the financial sector is quite liberalised and dynamic, and in recent years the technology and start-up space has boomed. This is usually an indicator of innovation and diversification of factors of production. These all contribute usually to an uptick in investment, not just in real estate but in the larger economic sector. If they remain constant, you will continue to notice the upward trend.

The population and the youth dividend alone are sufficient for pressure on housing demand; Shelter Afrique believes the investment horizon for Nigeria will remain constant and we are willing to bet on the market. It informed the decision in establishing a regional office for West Africa here and all the other ambitious plans we have for Nigeria.

How has the coronavirus pandemic affected this outlook and how have stakeholders managed to navigate these uncertain times?

The pandemic has affected the industry, and we are not exempted from that. To begin with, the lockdown measures that were enacted by many African nations in response to the pandemic forced the stoppage of work on many construction sites. Additionally, there is a natural aversion to risk, so many companies are unable to access credit or finance, which is likely to remain for the foreseeable future. There has been disruption to supply chains the world over, which has a direct impact on the housing industry, as many of our African countries are still import-reliant economies.

There is also the very heavy toll the pandemic is having on the human resource in the industry. The workers, temporary and permanent who work in the industry or who have created a mushroom industry around construction, have been rendered jobless; many African countries do not have the same welfare safety nets that are offered in more developed nations.

In our day-to-day business and operations, like most businesses, we have created systems that allow our employees to work remotely and initiated strict COVID-19 protocols and measures. Travel, which is an integral part of our work, has been suspended for the year, so we are holding all major meetings virtually, including our Annual General Meeting.

However, we cannot deny that it has had a material effect on our business. Initially, when the pandemic broke and lockdowns were initiated in various countries, the level of new business activities reduced due to the employee-related, social and economic issues customers had to deal with.  Recently, as customers have adapted, there has been an improvement as they embrace technology.

Additionally, our inability to engage with the customer physically (specific to due diligence processes in the underwriting process) has affected the level of new business activities leading to reduced new business underwritingHowever, we also see an opportunity to address the policy surrounding informal settlements; research has shown a direct relationship between the spread of contagion and informal housing where social distancing cannot be successfully enacted. Our COE is considering this as an important area of research. It also forces policymakers and decision-makers to begin developing and encouraging industrialisation, manufacturing and inter-African trade. The pandemic has exposed our lack of self-sufficiency as a continent. We, as an organisation, will be exploring how we can leverage the African Continental Free Trade Agreement for affordable housing.

Beyond these, we acknowledge the human cost of the pandemic. We worked through the Shelter Afrique foundation at the height of the pandemic when most African countries went into lockdown and provided relief materials to 4000 low-income beneficiaries across Africa.


A PWC report states that the housing deficit in Nigeria increased from 14 million in 2010 to over 17 million in 2021. The report further says that 700,000 housing units must be built each year for the next 20 years to bridge the gap.  Would you say it is a realistic forecast to close this gap in 20 years?

It is a mandate we take very seriously; our forecast reveals that to adequately address the housing shortage in Africa’s two largest economies- Nigeria and South Africa- you would require $97 billion of investment. We do not underestimate the quantum of the deficit and its attendant costs. However, we believe the only way to address this adequately is through large-scale development driven by Private-Public-Partnerships, and it has been at the core of our strategy and our flagship project.

It is realistic. However, it will require the commitment of the government all stakeholders in the built environment. There are regulations that may need to be reviewed, relaxed, or rescinded altogether. There are incentives, tax rebates that need to be provided as well as capacity deepened within the industry. More so, it cannot happen without a surge in manufacturing capacity. African is the only continent that is urbanising without industrialising and this has a direct impact on the supply of building materials. It will also require a reorientation in the delivery of large-scale affordable as a national and patriotic service; basically, the thinking that access to affordable and decent housing is an inalienable human right.

In recent times, there has been much discussion around the menace of substandard building control and regulations in Nigeria. What learnings from other African countries can be brought to bear in Nigeria to curb this menace?

Africa generally has a regulatory problem; most of the policies in the built environment are holdovers from the colonial period; many of which have not been reviewed or updated to reflect the realities of African housing which is dealing with rapid urbanisation. Through the COE, we are working with the UN-Habitat, the African Union, and the United Nations Economic Commission for Africa to address this and update building codes and regulations.

An African Model Law on Housing, Urban Development and Human Settlements is being proposed. This is the first ever continental tool that will support African states to harness the opportunities of coordinated and industrialisation-led urbanisation and related affordable housing strategies for increasing communities’ prosperities without leaving any one behind.

The Model law is designed be used as a tool to enhance the implementation of the existing regulations, planning documents and standards, to strengthen their dissemination and enforcement, and to promote sanctions against citizens who break the rule of law with regard to affordable housing delivery and urban development. This is still some ways to go; progress in changing regulation is gradual but it has begun. Nigeria has also begun the process of reviewing its regulations, which is a step in the right direction.

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