CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Everyone dreams of owning property someday but with the constant rise in Nigerian property prices, saving towards buying some piece of real estate seems almost impossible- particularly for young people in Nigeria. Although saving towards acquiring property is one option, it may often be disheartening because each time a certain amount has been saved, one discovers that the property prices have risen and once again the asset is just out of reach. Mortgaging property may break this frustrating cycle.
Housing has been universally accepted as a very important and essential human need. In fact, world acclaimed American psychologist Abraham Maslow ranked shelter as second only to food in his hierarchy of human needs. This form of security is thus a basic necessity of life which every Nigerian should readily have access to without deprivation. One of the most worrisome features of Nigerian urban centers is the growing level of over-crowding and in some cases outright homelessness. It is common place to see families of eight persons in a single room in a tenement building usually referred to as per room per room or face me I face you. One index used to measure the quality of life is housing, and improving the quality of life is the whole essence of government and governance.
The housing sector plays a more critical role in a country’s welfare than is always recognized, as it directly affects not only the well-being of the citizenry, but also the performance of other sectors of the economy. Adequate housing provisions has since the early 1970s consistently engaged the attention of most countries, especially the developing ones, for a number of reasons. First, 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. Consequently, programs of assistance in the area of finance, provision of infrastructure and research have been designed by governments to enhance it adequate delivery. The focus in finance has however been very prominent for obvious reasons. This is because housing provision requires huge capital outlay, which is often beyond the capacity of the medium/low income groups.
In the advanced nations of the world, particularly in Europe and America, mortgage is a critical index of economic development and growth. The Margaret Thatcher administration used mortgage to move the British economy to a new level which was improved upon and sustained until the present credit crisis which could be traced to the sub – prime mortgage crisis of the past couple of years. The entire American economy went on its knees following the sub – prime crisis which underscores the central role mortgage can play in the economy of any nation.
In Nigeria, mortgage is still at infancy and a number of factors are working against its growth and development to a point where it can impact positively on the economy. There is no conscious effort to develop this important sector. Investment in the sector is still very low and this explains why after the recapitalization and consolidation of the banking sector to the tune of #25 billion, we are yet to see the impact of the consolidation on mortgages.
In most African societies, long before colonialism, the provision of housing or shelter was an individual responsibility and this trend obtains to the present day. Post – colonial days, it has always been assumed that since we are now practicing a foreign system of government and administration, the government should now be responsible for providing all basic needs for their people. Currently and fortuitously, housing seems to be a priority for the federal government of Nigeria and this is captured in president YarAdua’s 2020 Agenda, where the president attaches the highest priority to affordable housing for the masses.
There is more to the hosing industry than just building houses. In advanced countries, the industry includes anything related to real estate and home ownership from land title preparation and mortgage financing to material sourcing and manufacturing – the housing industry is an enormous market. A vast housing market exist in Nigeria given the massive home deficit estimated at about 14 million by the Federal Mortgage Bank of Nigeria.
Mortgage financing is a major area of concern which has often been fingered as one of the most formidable constraints in the housing sector. It is in recognition of the critical importance of finance in housing delivery that we have decided to research on this topic.
1.2 STATEMENT OF RESEARCH PROBLEM
The desire to reach a conclusion on the reason why there is a massive home deficit estimated at about 14 million by the Federal Mortgage Bank of Nigeria is what led to this very important study.
The above issue necessitated the following research questions:
What is the level of awareness of the average Nigerian regarding mortgage financing.
What is the attitude of people towards using a mortgage to finance the purchase of private homes.
What is the opinion of members of the public to the level of provision of homes for low income earners by Banks and other primary mortgage institutions.
What is the impact of the housing sector on the Nigerian economy.
1.3 OBJECTIVES OF THE STUDY
The following are the objectives of the study:
To determine the level of awareness among Nigeria’s on financing their real estate purchase through mortgage.
To determine the extent to which people are willing to purchase their homes using mortgages.
To determine whether there are adequate products provided by banks and other primary mortgage institutions for low income earners.
To determine how much impact the housing sector has on the Nigerian economy.