EVALUATION OF SIGNIFICANCE OF HOUSING FINANCING MODELS TO DELIVERY OF SUSTAINABLE HOUSING PROJECTS IN NIGER STATE

ABSTRACT

Housing is an integral element of a nation economy. Thus, focus on finance for housing projects has been more prominent due to huge financial resources that is required for provision of decent houses which is practically not at the disposal of low income earners in Nigeria. The aim of this study is to evaluate the effect of housing financing models on the delivery of housing project with a view to enhance availability and affordability of houses for low and middle income class. Literature review has revealed that Niger State Government, at all levels, accorded high priority to the provision of low-cost housing. Thus the government has adopted PPP as a procurement method for affordable housing development and it has not been fully realized. Quantitative approach through questionnaire survey was used to collect data from Developers, Government representative, Financial Institution, Primary mortgage institution and Professional in the build environment such as Architect, Quantity Surveyor and Builders. This study employed the use of random sampling technique in the selection of the study respondents. A total of 200 questionnaires were administered and 150 were retrieved, this number was considered adequate for analyses. The data collected were subjected to descriptive statistical analysis using mean score and data reduction techniques on SPSS.  From the results of quantitative analysis, mean and ranking were used to arrive at a decision which affirm the use of Mortgage payment subsidy model (mean score of 4.40), down payment grant financing model (mean score of 4.03), Secondary market mortgage finance model (mean score of 3.84), Housing cooperative model (mean score of 3.53) and Unbundle mortgage finance model   (mean score of 3.52) as viable alternative to financing model currently in use to finance affordable housing project by Niger State government. This study identified most severe factors influencing the models such as; stringent condition with (Eigenvalue of 7.461), funding with (Eigenvalue of 1.342), research and development with (Eigenvalue of 1.290), government programme and policies with (Eigenvalue of 1.152) and project to be financed with (Eigenvalue of 1.017). It also identified the most severe challenges associated with the models such as; capital base, access to finance, poor government policies inflation, building materials, land use act, property registration and infrastructural challenges. The study developed a frame work to show the effective financing models and the factors and challenges associated with selected models. It was concluded that all the selected factors and challenges should be considered when choosing a model. The study therefore recommends that, Government, housing providers and Developers should adopt the framework for effective and successful delivery of housing project in Niger State.

CHAPTER ONE

1.0   INTRODUCTION

1.1    Background to the Study

One of the vital components of the national economy is housing and its relationship with various parts of the economy binds people’s needs, their demands and social activities (Abdullahi, 2015). This makes housing a significant force in the attainment of sustainable development and it is a driving force toward poverty alleviation in the economy.   No significant development can be achieved in the absence of efficient and effective housing sector both in urban and rural settlement. It has been reported that in order to have a suitable and sustainable housing system, an effective/ functional housing sector must be in place in order to achieve the envisioned housing system that is affordable and sustainable (Abdullahi, 2015).

It is a general recognition that housing is one of the very important necessities to man and a vital national economic asset. It on the basis of sufficient housing that community stability and social inclusiveness can be achieved either at local level or national level (Omirin, 2007). Other researchers (Sanusi, 2010) noted that a significant association exists between the state of housing and people’s physical and mental wellbeing. But in the case of Nigeria and many developing countries of the world, housing has remained a difficult challenge confronting man and the national economic progress. This is why Lanrewaju and Oluronke (2014) noted that the one of the reasons why efforts made by previous stakeholders (this include governments and experts in built environment) to provide required techniques to solve housing problems have not been successful.

In 1976, Niger State started to make provision for public housing for members of staff of the civil service. This includes the construction of government quarters which was supervised by the designated Ministry of the government of Niger State. It was based on this need for the provision of housing that the Niger State Housing Corporation (NSHC) was created in the year 1979. Within 31 years (1976 to 2007) not more than 3,000 housing units were built by the state government.  In an attempt to overcome this ever present challenge confronting the government of Niger state, the government adopted the system of involving the private sector under the umbrella of the Public Private Partnership (PPP) in the year 2007 and this was to be an alternative means of achieving adequate housing delivery in the state. This was in response to the Human Settlement Conference on Human Settlement of June, 1996 and this key emphasis was efficient/ affordable housing by means of PPPN (NSESSH, 2007). One of the eleven goals of the UN’s Sustainable Development for the year 2030 increase access to adequate, safe and affordable housing the class of people that have been termed “the world’s poorest people” who live in slums.

Despite Nigeria’s record of increasing urbanization coupled with being the biggest economy in Africa has experience inadequate housing to match her ever rising population due to rising number of rural-urban migration and population growth that is rising exponentially (Ahmad, 2009). This has resulted in the creation of a large number of slums and squatter settlements in urban areas.  Another pressing challenge is finance because most of the desired housing systems needs can be actualized with huge amount of fund while the lowest income earners do not have the capacity to make it come to reality in need of huge resource for implementation (Sanusi, 2010). This is why it is a common statement in Nigeria that housing needs is far more than its supply and this has resulted to the fact that majority of Nigerians do not have access to comfortable accommodation. Another known facts is that the capacity of most mortgage industries have not be properly utilized because it has confronted some shortcomings like poor citizen’s hindrances to access mortgage finance in (Omirin, 2007).

The work of Warnock (2008) assessed the impact of housing market especially in providing housing finance in 12 countries like Indonesia, China and Malaysia. His findings showed that effective legal system, convenient and stable macroeconomic environment and availability of the knowledge of credit system has positively influenced mortgage finance.   On the contrary, Omole (2010) further noted that unfavourable legal, regulatory and macroeconomic system adversely influence long term availability of fund for housing. Based on this, several researchers have made attempts to study the challenges confronting housing financing models in Nigeria and one of such studies is the work of Omirin (2007) who examined the access to mortgage finance by people of low income and the rapidly increasing cost of construction of houses in Nigeria.  Some of these studies have influenced a shift in focus from mortgage-backed security of credit worthiness to selling (advertising) of financial instruments. The implication of this is selling of mortgage instruments which are centered on seeking sources of profit instead on focusing only on housing itself. This instead of alleviating the crisis of housing has aggravated the existing risks of financial crunch as a result of its spillover effects (Omirin, 2007). It is against this background that this research tends to examine financing models employed in development of housing in Niger State, with a view to evaluate the effect of housing financing models on the delivery of housing project to enhance availability and affordability of houses for low and middle income class.

1.2       Statement of the Research Problem

The ever rising rural-urban migration has increased the demand for housing and this demand has become  greater than it  supplies which as  a consequence has  given rise to slums, overcrowding, dilapidation of structures, flooding, presence stinking stagnant waters, poor sanitary conditions, exorbitant prices of building materials which is one of the causes of increasing cost of owning a house in Niger State. Another noted reason why many people lose interest in borrowing fund to develop housing in Niger State is high interest rate (Udoko et.al., 2017). It has also been noted that single digit interest specified by the National Housing Fund  (NHF)  has  made  many financial  institutions  unwilling to  disburse loans  for the development of housing due to the fact that it reduces their profit margin (Udoko et.al., 2017). Some of the parametesr that makes someone eligible to access mortgage finance according to Omole (2010) does not favour low-income populace of Nigeria and some of these include:

i.      20-30% contribution in terms of equity

ii.      Setting of the maximum tenure between ten to fifteen years iii.      Unrealistic interest rate set at as much as 22%.

By careful observation according to Omole (2010), the nature of housing finance requires continues saving by means of personal finance and this makes it almost impossible to be actualized  by low  income  earners  because  it  is  capital  intensive.  This  has  placed  the government of Niger in as state of difficulty in the choice of appropriate financial model to be adopted in order to achieve efficient housing delivery and base on this, the state has adopted the PPP approach where Developers involve themselves in designing, and building and then transfer the completed housing units to the government of Niger State.   The Developer will source for the money and financing the construction of the houses while the Government will provide the land and infrastructures. After the completion of the project the Government will pay 30% of the total construction cost and the remain 70% will be pay through monthly deduction from the beneficiaries of the houses but the Developers failed due to lack of funding, technical knowledge of PPP and financial models adopted. Some housing estate that where completed was done by State Government (Niger State Evolving Strategy for Sustainable Housing NSESSH, 2007).

1.3 Research Questions

Based on the stated problems, the following research questions will be answered:

i.      What models in the financing of housing are efficient in order to deliver housing project that as both affordable and sustainable?

ii.      What are the factors influencing the choice of housing financing on successful delivery of housing project?

iii.     What are the challenges associated with the identified financing models?

iv.      What are the financing models for sustainable housing development in Niger

State?

1.4     Aim and Objectives

1.4.1    Aim

The study aim is to evaluate the effect of housing financing models on the delivery of housing project with a view to enhancing availability and affordability of housing for low and middle income class.

1.4.2   Objective

v.      To identify and ascertain the efficient housing financing models suitable to deliver a housing project that can be afforded and sustained.

vi.      To identify and establish the factors influencing what kind of housing financing model chosen to effectively deliver affordable and sustained housing project.

vii.     To identity and establish the challenges associated with the financing models.

viii.     To design a framework to implement a financing model for sustainable housing development in Niger State

.

1.5   Scope of the Study

This study focuses on housing projects executed between (2007 to 2019) in Niger State. The Ministry, Parastatas and Developers involve in housing projects in Niger State are also consider.

1.6 Delimitation of the Study

This study is limited to housing project in Niger State urban centre’s; Minna, Bida, Suleja and Kontogora. These are the places where housing projects are presently executed in Niger State

1.7 Justification of the Study

The study is necessary in order to scale up the scope of housing delivery for civil servants within the range of low and medium income level in Niger State and this will enhance their chances of owning houses based on owner-occupier condition (Niger State Gateway to Land and Housing, 2007). This study analyzed suitable model needed to provide housing for people of low income. There are various kinds of strategies employed in Nigeria to improve the system of housing provision and this was aimed at providing affordable and sustainable housing for people of low income but majority of these strategies have not been effective. This may be associated with dearth of fund to finance housing units for low-income earners and their inability to access housing finance (Sanusi, 2010). This study shall be found useful when formulating policy for housing in Niger State by identifying the main challenges in housing finance. It shall also be useful in the provision of background information stakeholders in housing sector in Nigeria and Niger State in particular especially for adequate understanding of the kinds and features of loans in housing finance available in the market (Abdullahi, 2015). Hence the interface model (which is relational in nature) will enable users to contribute in the financing of housing project. This in essence help to reduce the pressure the government is facing fiscal allocation in the national budget when it comes to constructing houses that are affordable (Akadiri, 2011). There is no way that the provision of affordable housing can be ignored in Niger state if the government wants to meet up with its task to the citizens of the state and the fast rising population of Nigeria has also necessitated the need for the provision of adequate housing strategies to meet the demands of housing in Nigeria. Hence the need for effective house strategy is important in order to address housing challenges in urban areas of Niger state (Adesoji, 2011).

It is expected that the findings of this study would inform the state governments and the developers on the best financing model that will provide adequate funding for the provision of sustainable housing to the state civil servants. The findings will also be relevant to stakeholder in the field of housing and shall show that housing funds is not only available based on the role of demand and supply but are also controlled by other factors like government policies, socio-economic characteristic of the state and other financial factors (Adesoji, 2011). It shall also be useful to individual when making decisions regarding housing finance especially in the examination of various means that can be employed to fund housing development in Niger state and Nigeria at large.

. 1.8      The Study Area

Niger State was created on 3 February, 1976 form the defunct North – Western state. However, the state came into being on 1st April, 1976. At the inception of the state, it was made up of only eight political divisions called Local Government Area (L.G.As). Presently the state is made up of Twenty-five L.G.As which includes two L.G.As (Agwara and Borgu) merged to Niger State from Kwara state sometimes in 1991.Since the creation of the state in 1976, it handles the financial management of its own. The parastatals under the state and local government financial management are entirely the state responsibility. The state does have her annual budget estimate, that is the account expected to be spent for a particular year and subdivided, that is allocated to various ministries, to enable then carryout their responsibility in the state (Abdullahi, 2015). Niger State currently covers a land area of about 76,469,903 square kilometers out of which 85% is arable. The 2006 population census final result put the population of the state at 3,950,249. Farming is the major occupation of the inhabitants of Niger State of about 85% of the active labour force are engage in farming with the remaining 15% engaging in other vocations (Abdullahi, 2015).

The major ethic groups in the state are Nupe, Gwari and Hausa. The state also has numerous settlers from other parts of the nation. The state (also has numerous) settlers boarded to the north by Zamfara state, North West by Kebbi state, South by Kogi, South west by Kwara North – east by Kaduna state, and South – east by Federal Capital Territory. The state also has a common boundary with the Republic of Benin. Niger state falls within latitude 80% to 1130 N and longitude 03 30E to 07 40E (Abdullahi, 2015). About 13 different types of mineral resources e.g. Gold, Iron Kaolin, Tale, marbles e.t.c are available in the state. Niger state is blessed with three (3) major Hydro-Electric power stations of the nation {Kainji, Jebba and Shiroro), hence Niger State is being referred to as the power state. The state has 8 State owned tertiary institutions, eleven (11) Federal Government Education with about 2,275 kilometers length of roads across the state. Niger State must cherish asset in it fertile land which is suitable for the cultivation of most Nigerians staple food crops and cash crops (Abdullahi, 2015).

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