Over a month ago when PENCOM announced the updated guidelines for accessing the balance of Pension Fund Accounts towards the payment of Equity Contributions for Residential Mortgages by Retirement Savings Account (RSA) Holders, there was excitement all around.
The media was awash with congratulatory messages and ‘how-to’ explainers for RSA holders. Within a week, Pension Fund Administrators were sending out bulk messages to their customers encouraging them to make inquiries on how to access 25% of their RSA balance as part equity in their homeownership aspiration.
In an ideal situation, the speed of adoption by the PFAs is incredibly laudable. The media engagement has been significant as well, as it is rightly a welcome development after years of advocacy for this guideline. While this new update is a brilliant idea in itself, the contextual application and its ability to move the needle in solving Nigeria’s over 28 million housing deficit is what has been at the forefront of my mind.
Who needs this 25% equity contribution toward home ownership? Certainly not the high-income earners in Nigeria who make up less than 5% of the country’s over 200 million population. By virtue of their personal balance sheets, credit scores with the banks, and network across countries – accessing capital to build or buy a house has historically not been a challenge for this demography.
For middle-income earners though, who make up over 27% of Nigeria’s population, a scheme like this seems like the light at the end of the tunnel – until we get into the practical details of home ownership, access to and cost of capital, and the cost of building materials.
For the third time in 2022, the policy-setting committee of the Central Bank of Nigeria (CBN) raised the monetary policy rate (MPR), which measures interest rate, from 14% to 15.5%. Without a staff identity card showing that a person works with a recognized (read multinational) organization in Nigeria, or collateral equal to or greater than the sum being asked for – no financial institution will provide a loan to a middle-income earner.
So, while on the one hand there appears to be increased access to funds to own property, on the other hand, double-digit interest rates and extremely limited access to capital make it practically impossible for that aspiration to be fulfilled.
As a real estate development expert with over two decades of experience building residential estates, commercial and recreational spaces, as well as mixed-use facilities, my understanding of the industry and housing policies is that if adopted contextually in Nigeria, can help to meet the housing needs of Nigerians at home and in the diaspora while unlocking value across the real estate value chain. It is also one of the reasons I constantly explore alternative financing and building models to improve affordability while retaining quality, as well as investigating the merits of decentralized finance, tokenization, and shared ownership.
Multi-level stakeholder engagement is critical to ensure that policies are not counter-intuitive to the real objectives and goals professionals in the industry are desirous of – the provision of residential housing options to address this fundamental need by Nigerians for shelter.
About the author:
Moyo Ogunseinde is an international real estate developer, chartered architect, hospitality expert, and a leader in the business of sports with over 20 years of experience in designing and developing multi-million dollar architectural and real estate projects including Radisson Blu Anchorage Hotel and parts of the 2012 Olympics Master Plan project. She is the Chief Operating Officer & Executive Director of the Board of URAGA Real Estate, managing the operations of commercial and residential real estate portfolios in key locations within Nigeria.
Mortgage homes has no loan to offer workers, mostly contract workers who make over 80% of Nigeria workers.
National Pension Commission should give workers this money direct to do whatever they likes with it.
Good day, I want to commend the pencom boss for transforming the Agency but please why are they not doing enough in sanctioning those PFAs frustrating retirees movement to Annuity? It is really really disheartening.
The speedy passage and adoption by commission is because they know it’s impracticable to implement and thus won’t be picked up by contributors. The has so many grey areas.
1. What if I have an existing mortgage?
2. What can 25% actually take care of in owning a property?
3. Why is the policy skewed to only purchase what about those who wish to build, assuming I am a builder myself?
4. Why should mortgage be the only outlet and not a spectrum of different but viable investment?
5. Why can’t we have the option of aggregating 2 or more contributors and buying long-term FG Bonds say 20 or 30years too? And have the benefits of periodic payments and capital preservation? Since the commission have our best interests at heart