Interest rate worsens housing crisis, slows investment

<p>Nigerians’ access to mortgages and investment in real estate has been negatively impacted by the Central Bank of Nigeria’s frequent interest rate increases, JOSEPHINE OGUNDEJI writes</p>, <p>To tame the accelerating inflation rate in the country, the Central Bank of Nigeria has hiked the interest rate from 11.5 per in April 2022 to 18.5 per cent in July this year. The increase in benchmark interest rate has been taking its toll on the country’s economy, worsening its housing crisis. It has also made investors take a watch-and-see approach as the prices of buildings continue to skyrocket.</p>, <p>The price of cement, which is a major input in construction has risen by over 34 per cent to N4,700 as of mid-July Tuesday from N3,500 in January 2022.</p>, <p>The International Human Rights Commission claimed more than 28 million Nigerians lack access to decent and affordable housing. Similarly, the Federal Mortgage Bank of Nigeria has stated that the country has at least 28 million housing gaps.</p>, <p>The country’s housing shortage has worsened from 7 million housing units in 1991 to 28 million housing units last year.</p>, <p>The country’s mortgage system has been struggling with slow growth in the last two decades, exacerbated by high-interest rates. Mortgage rates have surged to a range of 22 to 27 per cent per year from 20 to 24 per year. This has put considerable strain on the real estate sector, leading to challenges such as soaring building material costs, disrupted supply chains, and a dwindling number of potential buyers.</p>, <p>At a recent virtual forum organised by the Central Bank of Nigeria Financial System Strategy with the theme “Navigating Current Challenges in the Nigerian Mortgage Market”, the focus of the discussions was on how to improve the funding status of the sector.</p>, <p>The Managing Director of the Federal Mortgage Bank of Nigeria, Madu Hamman, noted that the CBN rate hike had not only increased the cost of borrowing in the sector but also affected the prices of building materials and