The Role Of The CBN In Ensuring Affordable Housing For Nigerians

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The Role Of The CBN In Ensuring Affordable Housing For Nigerians


This study examines government role in the commercialization and privatization of public enteprises. The issues of Privatization and commercialization of public enterprise could be restated as that of ensuring even accessibility to investment opportunities created by the exercise for all Nigerians irrespective of economic class or geo-polity. The major challenges-to the Bureau of Public Enterprises (BPE), whose duties and responsibilities must be open, fair and transparent to commercialized public enterprises from economic management that must reflect socio-political balance to one that has to be guided by marketing place efficiency considerations. An extensive review of existing literature was made. Some recommendations where put forward that the government should create an environment favorable to private economic activity. This can be done by truly committed to the reduction of the opportunities for corruption and misuse of public property by government officials. Most importantly, there should be infrastructure privatization as this may unleash large inflows of foreign direct investment and help develop local capital marks. In addition, bold privatization programs can send a clear message to international capital markets, the wider investor community and the local populace that governments are committed to improvement economic management.

Chapter One


1.1 Background to the Study

Nigeria is the most populous country in Africa and 8th in the world, with a population of 173 million. Over the past decade the economy has been growing at an average rate of around seven percent yearly and, after Johannesburg, Lagos has the biggest, most liquid market in the region thereby creating the need for massive housing development. A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries. In contrast to a commercial bank, a central bank possesses a monopoly on printing the national currency, which usually serves as the nation’s legal tender (Arthur and Sullivan, 2003). Example is the Central Bank of Nigeria (CBN). The various roles of CBN will however in no doubt have specific impact on housing delivery in Nigeria.

According to, Central banks around the world play similar functions some of which may include- implementing monetary policies, determining Interest rates, controlling the nation’s entire money supply, the Government’s banker and the bankers’ bank (“lender of last resort”), regulating and supervising the banking industry, setting the official interest rate – used to manage both inflation and the country’s exchange rate– and ensuring that this rate takes effect via a variety of policy mechanisms and managing the country’s foreign exchange and gold reserves and the Government’s stock register.

Shelter is one of the basic necessities of life. Indeed, the housing sector plays a very critical role in a country’s prosperity as it directly affects not only the wellbeing of the citizenry but also the general performance of other sectors of the economy. Thus, provision of housing has, since the early 1970‟s, 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. Consequently, programmes of assistance in the areas of finance, provision of infrastructure and research have been designed by governments to enhance adequate housing delivery. The focus on finance has, however, been very prominent for the reason that, housing provision requires huge capital outlay, which is often beyond the capacity of most of the citizens (Akeju, 2007).

Increase in the rate of urbanization has exerted pressure on government and other government agencies like the Central Bank of Nigeria to develop plans for housing development in Nigeria as a result of situation experienced in most cases that the demand for housing units outweighs the supply. To address this gap, individuals, firms, and government must intervene.

The first attempt at institutionalizing housing financing through the apex bank in Nigeria was the establishment of the Nigerian Building Society (NBS) in 1956. Thereafter, regional governments set up housing corporations, savings and loans banks and cooperative banks through the supervision of the Central Bank of Nigeria to provide funds in the form of mortgage credit for housing development (CBN, 2003). Following the Indigenization Act (1972) which aimed, amongst others, at promoting and transferring the ownership and control of foreign enterprises to Nigerians, the Nigerian Building Society, in 1977, was renamed and metamorphosed into the Federal Mortgage Bank of Nigeria, (FMBN) to reflect the 100 per cent ownership of the Federal Government of Nigeria.

Within two years of the establishment of the FMBN, its capital base was increased from N20 million when it was bought over by government in 1977 to N150 million in 1979, reflecting an increase of over 600 per cent. The current equity base of the FMBN is about N5 billion, with only 50 per cent of it paid-up (CBN, 2011). Equity in the bank is split between the Federal Ministry of Finance (FMF) and the Central Bank of Nigeria, (CBN). In 1994, the FMBN was granted the status of the premier and apex mortgage institution in Nigeria under the supervision of the Central Bank of Nigeria. However, the researcher is analyzing the role of CBN in ensuring affordable housing for Nigerian citizens (CBN, 2007).

The Central Bank of Nigeria through the FMBN has encouraged the emergence and promotion of the growth of viable primary mortgage institutions to service the need of housing delivery in all parts of Nigeria; mobilized both domestic and offshore funds into the housing sector; linked the capital market with the housing industry by establishing and operating a viable secondary mortgage market to support the primary mortgage market; and distributed the National Housing Fund (NHF) in accordance with the provisions of the NHF Act” (CBN, 2011).

1.2 Statement of the Problem

The problem of housing has become a daily discussion in all quarters of the public and private sector of the Nigeria economy and has prompt several government agencies to implements plans for housing development for both their staffs and the general public at affordable cost. It has become increasingly glaring that most of the urban population in Nigeria live in dehumanizing housing environment while those that have access to average housing do so at abnormal cost. According to Onibokun (1986), Nubi (1991), rent in major cities of Nigeria is about 60% of an average workers disposable income. With the high cost of house building and the effort of government and its agencies that has been inadequate in the housing delivery, the researcher will analyze the role of CBN in ensuring affordable housing for Nigerians.

1.3 Objectives of the Study

The following are the objectives of this study:

  1. To examine the role of CBN in ensuring affordable housing for Nigerians.
  2. To ascertain the affordability of housing for Nigerians.
  3. To determine the factors preventing Nigerians from getting affordable houses.

1.4 Hypothesis

Hypothesis One
  • Ho: Housing is affordable for Nigerians.
  • Hi: Housing is not affordable for Nigerians
Hypothesis Two
  • Ho: CBN has contributed to the provision of affordable housing for Nigerians.
  • Hi: CBN has not contributed to the provision of affordable housing for Nigerians.

1.6 Significance of the Study

The following are the significance of this study:

  1. The findings from this study will educate the general public on the roles that government agencies and Central Bank of Nigeria can play in the provision of affordable housing for Nigerians.
  2. This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic.

1.7 Scope / Limitations of the Study

This study on the role of the CBN in ensuring affordable housing for Nigerians will cover the contribution of the Central Bank of Nigeria towards sustainable housing development in Nigeria. It will also cover the overview of the services rendered by Federal Mortgage Bank of Nigeria FMBN which can be likened to a subsidiary of the CBN.

1.7 Definition of Terms


Provide with shelter or accommodation.


Houses and flats considered collectively.

Central Bank of Nigeria:

The supreme monetary authority in Nigeria. It issues the Nigerian naira , maintains foreigncurrency reserves and is charged with maintaining monetary stability. It is also thelender of last resort for Nigerian banks . It was established by law in 1958..

1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  • Chapter one is concerned with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
  • Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study

Chapter Five

Summary, Conclusion and Recommendation

5.1 Introduction

It is important to reiterate that the objective of this study was the role of CBN in ensuring affordable housing for Nigerians.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in evaluating examine the role of non-governmental agencies in poverty alleviation and the development of community.

5.2 Summary

During the course of this research work, responses made showed that none of the respondents was ignorant of the existence, operation and benefits of the mortgage banks. It further revealed that the continued enlightenment of the masses would create further awareness for the public. It was also discovered that most respondents have at one time or another benefited from mortgage loans and those who are yet to benefit from mortgage loans have the belief that bankers receive deposits but try to avoid giving loans. A considerable number of the population size studied have the belief that the institutions have helped the economy of Lagos by making funds available to users on both new real estate projects and renovation of existing ones. It was also revealed that both individual and corporate bodies alike have benefited. When asked about the problems facing mortgage finance, the majority of respondents attributed this to corruption and inconsistency in government policy. Few of respondents attributed it to the inability of the borrowers to repay loans.

However, others attributed it to high interest rate charges, while some attributed it to lack of adequate funding of mortgage institutions. On the issues of how mortgage banks should ensure that beneficiaries of their loans channel them to the projects they were meant for, the majority of the respondents observed that this should be done by inspection of the projects before the loans are disbursed in stages as the project progress. When asked what respondents think is necessary to bring about profitable returns on mortgage business, almost all respondents replied that timely disbursement, effective monitoring of site and proper appraisal of any proposal before approval of loan is the best method. On the question regarding the solutions that could be proffered to minimize the problems facing mortgage institutions, most respondents replied that there must be consistency in government policy, stability of interest rates and adequate funding by the government.

Asked how mortgage institutions can improve on their services, majority ascribed that the public should be sensitised on the meaning and importance of mortgage banking and the need to repay loans granted them by mortgage finance institutions. Some however, suggested that the operations of the banks be computerized, while others said that the banks’ repayment period should be extended. Some also suggested that the interest charged on mortgage loans should be reduced.

5.3 Conclusion and Recommendations

This research has shown that the CBN have generally impacted positively on real estate development. It has also shown that the availability of mortgage loans to would-be beneficiaries is a function of certain key variables, namely, availability of sufficient funds, stable interest rates and ability of beneficiaries to pay back. Developers are still willing to obtain loans under the mortgage finance scheme, despite the low income levels in the country, since housing is a basic necessity.

An effective monitoring system of mortgage institutions’ activities by the Federal Mortgage Bank of Nigeria would go a long way in doing away with the bottlenecks and improve housing development. Also, the problems of default would be minimized. Finally, it is worthy of note that there has not been enough funds channelled towards the financing of real estate development by all the organs expected to be done to meet the housing needs of the teeming Nigerian population.

Having undertaken this research work, the following recommendations, it is believed, will better real estate development and housing provision in Nigeria. 1. The allocation for housing sector should be increased to enhance housing purchase and renovation of existing structures.

In order to ensure that beneficiaries are genuine borrowers, adequate, well trained and qualified credit officers should be employed by mortgage institutions to monitor disbursements under the affordable mortgage schemes and thereby ensure their success and boost housing development and delivery.

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