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NHF Bill: Experts differ on implications for the economy

Nigeria’s housing sector has been characterized by a housing deficit estimated at 18 million units.



Lagos says defaulting allottees of housing schemes in Lekki, Ikeja, others to lose houses, real estate, Proposed NHF Law takes a twist, as top Nigerian experts differ on its impact, Richard Olodu, affordable homes 

Among the 17 sustainable development goals (SDGs) adopted by the United Nations (UN) and its Member States, “housing for all” forms one of the specific targets to be achieved by 2030. But 2030 is almost here,  even as the issue of housing deficit continues to become worse; despite claims by successive governments to have tackled the perennial problem in their bits.

Recently, there have been debates coming from different quarters in Nigeria regarding the proposed National Housing Fund (NHF) bill, which is currently awaiting Presidential assent. Several top financial and tax analysts have rightly argued different sides to the NHF bill and its possible impacts on Nigeria. And while some are calling for the bill to be scrapped, others are throwing their weights behind it.

How housing development impacts the economy 

In economic terms, the development of the housing sector forms an integral part of any country’s economic progress. Whether it is construction, rental or sale, each layer contributes spiral effects on the economy.

Basically, the influences of the housing sector on national economies can be summarised. Firstly, while housing fulfills a basic human need for shelter, it also provides the base from which households participate in the economy. Secondly, housing is the largest single asset most households will accumulate during their lifetime. Therefore, housing constitutes an important part of most countries’ stock of wealth.

An overview of Nigeria’s acute housing deficit 

Despite having an estimated population of over 190 million population, Nigeria’s housing sector has been characterized by a housing deficit estimated at 18 million units. Earlier reports from the World Bank (as cited by Global Property Guide) shows that Nigeria needs about 700,000 additional units each year for the next 20 years.

However, recent Reports have shown that for the nation to upturn the high deficit figure, an additional 2 million housing unit per annum will be required for the next 10 years.

Like Nigeria, other nations equally affected 

The UN-Habitat report for 2016 shows that globally, one in eight people live in slums. In total, around 1 billion people live in slum conditions today. According to the UN, the numbers are continuously increasing.

The majority of the slum dwellers are in developing economies. In spite of great progress in improving slums and preventing the formation of slums, 30 percent of the urban population living in slums in developing countries. It was further reported that 35% of the world population lives in unimaginable housing situations, representing over 2 billion today.

Recent declines 

It has been revealed that the Nigerian housing sector has recently been declining, especially so during the better part of the last 5 years. Moreover, when compared to the housing sectors of some of the most advanced countries in the world, the Nigerian housing sector still has a long way to go. For instance, the Housing sector in countries like the US and Australia boasted largest in terms of the sector’s contributions to GDP and the highest employer of the labour force.

More investments needed to close housing deficits 

Recent online statistics have revealed that the Nigerian housing sector would need about $400 billion investment over the next 25-30 years to reconcile this deficit.

Also, reports have shown that the World Bank stated N59.5 trillion would be needed to adequately meet the housing needs of Nigerians. To corroborate this, the Special Adviser to the Nigerian President on Economic Matters, Mr. Adeyemi Dipeolu, during the second Nigeria Housing Finance Conference in Abuja in 2018, stated the following:

“Government is giving FHF N100 billion yearly for the next five years with anticipation that it is going to leverage one trillion Naira of private resources.”

Analysts at loggerheads on the impact of proposed NHF law

Recall, that the revised National Housing Fund Law was recently passed by the National Assembly and submitted to the President. Nairametrics also joined in the debate, highlighting the possible elevated costs it could entail for several businesses in the country.

Global tax and consulting conglomerate, Price Waterhouse Coopers (PWC) has also opined that the “proposed law is a bad idea”.

The Head of Tax and Regulatory Services at PwC Nigeria and Tax
Leader for PwC West Africa, Mr. Taiwo Oyedele, called for the total withdrawal of the bill. The tax guru stated:

“The main objective of NHF should not be just to make affordable funding available for housing but to create an environment that makes affordable housing possible. To achieve this, Nigeria must adopt a holistic approach to the challenges facing the sector of which affordable financing is only a component.”

He further stated the following:

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“The fact that there is no marked progress to show for the 27 years of establishing the NHF is proof that Nigeria’s housing problem cannot be solved by simply
throwing more money at the problem.”

On the contrary, some people are of the opinion that the NHF law is a good thing for the Nigerian economy. The Founder and Publisher of Nairametrics, Mr. Ugohukwu Obi Chukwu, threw his weight behind the proposed NHF bill thus:

  “NHF is a contribution towards acquiring an asset, in this case, a home. It’s also important to note that NHF is a relief against tax.

“Nigeria’s property market faces a paucity of funds, thus a law that mandates every employee to contribute a part of their earnings towards owning a home is important. Just like pension funds, NHF pools funds from every employee allowing contributors to borrow money against owning a home.”

The financial expert further stated:

“NHF has largely underperformed due to the way it was structured thus the change of the law. Before now NHF was not mandatory which was why it did not have the fund size required to create loans and support the housing sector. By making it mandatory, more funds will be channeled to the fund making it easier for contributors to borrow.
This is a similar model to what esusu’s have used effectively for years now. A robust NHF will also help create new financial services products such as hedging and derivatives which will help reduce lending risks.”

Similarly, a housing industry expert, Mr. John T. Ikyaave, described the recent passage of the revised NHF bill as a positive development. According to him:

“the new NHF bill, which is now awaiting the assent of President Muhammadu Buhari, would support the provision of housing loans at best and lowest market interest rates of between six and nine percent that can be paid for a  period of up to 35 years.”

Meanwhile, the CEO of AfriSwiss Capital Management Limited, Mr. Kalu Aja, faulted the NHF proposed law;

“The proposed NHF law takes private sector profits and transfers to a Government program, without imposing a tax. If the Federal governemnt can unilaterally debit Profit before Taxes (PBT), then what stops another Government debiting PBT to fund “Water for All?

“The proposed law accumulates savings at a negative rate , thus a huge opportunity cost to  “savers”. All these without a mention of the Land Use Act, credit rating even cost of homes.”

He stated further,

“Rather than a punitive fund, take the unclaimed dividend fund and “lend” to the NMRF at 2% Per annum for a 30 year zero coupon bond. Transfer the NLNG dividends to this fund as well. Create a N1trillion refinance fund, let developers build affordable homes…..THEN securitize the rentals into a Mortgage Backed Security and sell to the NMRF….as was designed.”

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

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Dangote Sugar records revenue boost despite inflation and Apapa gridlock

Dangote Sugar has revealed it increased prices in the first quarter of 2021 to mitigate the problems of rising inflation and depreciation.



Dangote Sugar proposes N18.2 billion as final dividend for 2020

One of Nigeria’s largest Sugar manufacturers, Dangote Sugar revealed it increased prices in the first quarter of 2021 to mitigate the problems of rising inflation and depreciation.

In a note to investors, the company revealed its recent 41.5% surge in revenues was due to an increase in sales volume as well as an uptick in price. In the first quarter of 2021, Dangote Sugar posted a revenue of N67.39 billion compared to N47.6 billion, the same period in 2020. The increase in price was driven by 5.7% pop in sales volume as the company sold 200,510 tonnes of sugar in the quarter compared to 189, 724 the same period in 2020.

But while sales value surged by 41.5%, volumes only rose 5.7% suggesting that price increase was a catalyst for the growth in revenue and the company alluded to this in its statement.

READ: Dangote set to earn N13 billion in dividend from his sugar business

Dangote Sugar’s performance

“Group sales volume increased in the quarter by 5.7% to 200,510 tonnes (2020: 189,724 tonnes). Growth continued to benefit from the sustained efforts to drive customer base expansion, several trade initiatives and investments. Group production volume also increased by 4.3% to 200,783 tonnes (2020: 192,584 tonnes) due to our operations optimization strategy despite the challenges of the Apapa traffic situation. Group revenue increased by 41.5% to N67.39 billion (2020: N47.64 billion). Growth in revenue advanced ahead of volume growth due to pricing benefits. Gross profit increased by 41.8% to N18.04 billion (2020: N12.72 billion) on account of better topline performance. EBITDA increased by 34.7% to N17.02 billion (2020: N12.64 billion) on account of increased earnings. Group profit after taxation for the period increased by 30.3% to N8.30 billion (2020: N6.37 billion) reflecting management’s unrelenting drive to deliver consistent shareholder value.”

The company also explained it had no choice but to increase prices because of the impact of the 2020 devaluation, higher inflationary environment, port congestion issues and a rise in global sugar prices. The company imports raw sugar from Brazil, under the government’s backward integration plan.

“We have continued to witness high cost of raw materials, energy costs and other input costs due to rising inflation and FX rate fluctuation. Further cost escalation is anticipated in the year as inflationary pressure mounts,” the company said.

READ: Dangote Sugar yearly revenue surge by 33%, announces a dividend of N1.50


Dangote vs BUA Sugar Scarcity Controversy

Just last month, the company’s adversary and competitor BUA Group accused Dangote Sugar of conniving with Flour Mills of Nigeria (FMN) in price-fixing and arbitrary collusion to create sugar scarcity and keep the price of the commodity high.

This triggered Dangote Sugar and FMN into issuing a joint press statement denying the accusations.

The allegation made by BUA was triggered by a joint letter written by John Coumantaros of FMN Plc and Aliko Dangote of Dangote Industries Limited, reporting key developments in the Nigerian Sugar Industry to the Minister of Industry Trade and Investment, Niyi Adebayo.

The duo in the letter dated January 28, 2021, pointed out how BUA’s new sugar refinery in Port Harcourt may lead to a spike above the import quota as stipulated in the National Sugar Master Plan (NSMP), and how BUA’s investment in the sugar industry via the new refinery is non-compliant to the undertakings under its Backward Integration Programme, in line with local production.

READ: Dangote’s stakes in his sugar enterprise has earned him N90 billion in 365 days

BUA’s response however led to an immediate reply by the duo of Dangote Sugar and Flour Mills of Nigeria.

“In line with this, the Dangote Sugar Refinery wishes to vehemently refute the allegations and assertions made by BUA Sugar Refinery as they are not only false but defamatory, malicious and libellous, as they were geared at tarnishing the good name and brand of Dangote Sugar Refinery Plc and Dangote Industries Limited.”

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The Group Managing Director, Mr Ravindra Singhvi, explained that the Dangote Group is socially responsible and considers price-fixing to be unethical and disastrous to the nation’s economy, and as such, the allegations made by BUA is highly mischievous and defamatory and should be considered a malicious attempt to smear the reputation of DSR.

“DSR does not engage in artificial price manipulation of its products, either during the Holy month of Ramadan or at any other time. We have never ever increased the price of our food items or commodities during the Holy month of Ramadan in the history of our operations,” Ravindra Singhvi said.

Outlook for Dangote Sugar

Despite the operational headwinds, the company insist it is on track to improve its operations and seek growth in its sugar sales volumes. It also recently received approval from the government to revise its local sugar production targets to 550,000 metric tonnes annually from over 1 million metric tonnes annually.

“Despite these uncertainties, achievement of our Sugar for Nigeria Backward Integration Project goal remains a key priority, though we anticipate increase in cost to completion in Naira-terms and some delays in Letter of Credit establishment for the importation of plant and equipment. The focus is to achieve the Federal Government’s revised sugar production target of 550,000 metric tonnes annually by 2024. We remain confident of the huge benefits the Backward Integration Programme would deliver and the positive impacts it will have on the economy.”

Find out why Dangote Sugar is recommended as a buy in our Stock Select Portfolio Newsletter? Click here.

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GlaxoSmithKline in big trouble as losses mount

The results were less than impressive with several key indicators showing a year-on-year decline.



GSK Consumer Nigeria Plc records 3.34% increase in 2020 9M revenues.

GlaxoSmithKline Consumer Nigeria Plc (“GSK Plc” or “the Company”) is a public limited liability company with 46.4% of the shares of the Company held by Setfirst Limited and Smithkline Beecham Limited (both incorporated in the United Kingdom), and 53.6% held by Nigerian shareholders.

The ultimate parent and controlling party is GlaxoSmithKline Plc, United Kingdom (GSK Plc UK). The parent company controls GSK Plc through Setfirst Limited and SmithKline Beecham Limited.

The Company recently published its unaudited first quarter (Q1) 2021 consolidated financial statements for the period ended 31 March 2021.

READ: GSK Consumer Nigeria Plc records 3.34% increase in 2020 9M revenues

The results were less than impressive with several key indicators showing a year-on-year decline. For example, Group revenue (turnover) declined from ₦4.99 billion in Q1 2020 to ₦3.46 billion in Q1 2021 a drop of over 30.66%. The revenue drop was due to a sharp decline in the local sale of its healthcare products.

Total loss after tax as of Q1 2021 was ₦238.07 million compared to a profit after tax of ₦113.47 million for the same period to Q1 2020.

The company is essentially divided into two segments viz: Consumer Healthcare and Pharmaceuticals. While the Healthcare segment was largely profitable in Q1 2021 (making a profit before tax of ₦ 8.73 million by March 31, 2021, the pharmaceuticals segment made a loss of ₦262.93 million in the same period.

READ: GlaxoSmithKline Nigeria announces changes in its board


The Consumer Healthcare segment of the company consists of oral health products, digestive health products, respiratory health products, pain relievers, over the counter medicines, and nutritional healthcare; while the pharmaceutical segment consists of antibacterial medicines, vaccines, and prescription drugs. While goods for the consumer healthcare segment are produced in the country, the pharmaceuticals are all imported.

The largely imported pharmaceutical products are thus exposed to the vagaries of foreign currency fluctuations coupled with a negligible to no revenue from the foreign sale of its healthcare products (same as in Q1 2020) as it barely exports its products out of the country.

The cost of importing the antibacterial, vaccines and prescription drugs, and the significant local operating expenses wiped off the marginal gross profits made by the pharmaceutical segment of the company. In effect, the gross profit of ₦508.12 million made by the pharmaceutical segment of the company was eliminated by an operating expense of ₦735.7 million and this resulted in a net loss for the pharmaceutical segment of the business.

READ: Nigerian Breweries posts N7.66bn as Q1 2021 profit, shares gain 2.2%

Apart from the impact of imported pharmaceutical products as already discussed, other issues that affected the company’s Q1 2021 results and are likely to continue to affect its performance in future include:

  1. A limited product mix that has only the likes of Macleans and Sensodyne (Oral Healthcare); Pain relievers (Panadol and Voltaren); Digestive Health (Andrews Liver Salt); and Respiratory Health (Otrivin and Panadol Cold and Catarrh) all within the Consumer Healthcare segment.
  2. Increased competition, particularly from local pharmaceutical manufactures of similar over the counter medicines and other prescription medications and vaccines.

In addition, in October 2016, GSK Plc divested its drinks bottling and distribution business that manufactures and distributes Lucozade and Ribena in Nigeria, and other assets including the factory used for the drinks business to Suntory Beverage & Food Limited. The loss in revenue from these popular brands continues to impact its topline.

GlaxoSmithKline (GSK) is a global healthcare company and is well-known and acknowledged for its pioneering role in discovering and distributing vaccines for the likes of hepatitis A and B, meningitis, tetanus, influenza, rabies, typhoid, chickenpox, diphtheria, whooping cough, cervical cancer and many more.

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It is also renowned for its manufacture and distribution of prescription medicines such as antibiotics and treatments for such ailments as asthma, HIV/AIDS, malaria, depression, migraines, diabetes, heart failure, and digestive disorders.

Perhaps GSK Plc’s fortunes may change if the company is able to obtain the parent company’s licence to manufacture GSK-owned vaccines and prescription medicines within the country while also exploring the possibility of extending the sale of its products outside the shores of the country.

Since different expertise is required for vaccines and prescription drug manufacture and distribution as compared to manufacture and sale of consumer healthcare products, perhaps another alternative may be for the company to create two separate companies with one company being a 100% vaccines and prescription drug pharmaceutical manufacturing and distribution company while the second company specializes entirely in the manufacture and sale of consumer healthcare products.

As a result of the Q1 2021 performance, the company’s earnings per share (EPS) dropped to -20 kobo compared to the 9 kobo earnings per share reported in Q1 2020. At the start of 2021, GSK Plc’s share price was ₦6.90 but the company has since lost over 10% of its price valuation as the company’s share price closed at ₦6.20 on April 30, 2021.

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