Stories by Maduka Nweke
Nigerians have been finding it difficult to access mortgage facilities for buying or building their own properties for several reasons. Apart from the fact that collaterals for getting such mortgages are far fetched, regulatory bodies have not deemed it right to moderate it for the benefit of the low income earners.
Also, mortgage facility can only work when a percentage of one’s income can pay the mortgage. So that tells one the kind of house he can afford. So if, for instance, one earns N20,000 a month as a low income earner, in a year he will earn N240,000. The maximum he can contribute is 30 per cent of that income to housing. If he is going to contribute 10 per cent of N240,000, then we are talking of N72,000 a year.
That is the lowest for a person who is on N20,000 a month. Now, if he is going to contribute N72,000 a year, you can imagine what he can afford. That will be a percentage of the interest he is paying and he also needs to pay the capital back. So we can start to do the calculation to see the kind of house he can afford. Therefore, if, for instance, his mortgage is 5 per cent of the property he is acquiring to own, then if N72,000 is 5 per cent, it means his property would not worth more than 20 times of N72,000. So he cannot afford to buy a house that is more than N1.5 million. So what kind of house can he get with N1.5 million. Such person probably can only afford a room where he is going to share a toilet and kitchen with other tenants. It is called communal housing in the US. And some of these communal houses can only become two bedrooms, three bedrooms and four bedrooms for larger families. So this is how you build a mortgage system. It has to be tailored to the income of the person.
In the views of Mr. Ladipo Lewis, Chairman, national Institute of Architects (NIA), Lagos chapter, the picture painted above is the worst case scenario. He said, “I am sure most people earn more than this. But imagine if it were a little bit better, then such things can work but as I have said, government does not have all the money to build houses. In fact, governments run into deficits when they do such things and if you look at what happened in the Soviet Union, that type of largess affected them.
“If you look at today, countries like Venezuela did it. Now they are reversing the policy where the government used its money to build houses for the people and practically gave the houses to them for free. Now those properties have appreciated in value, the owners want to sell them because they can’t afford to live in them anymore. So what we are looking at is because it is an economic system, you can’t bypass it; you need to work at it to create it.
“And when you create it, it creates revenue. The truth is this, if we actually develop the infrastructure and an enabling environment, people who collect interest rates at 1 per cent, 2 per cent abroad would come to Nigeria and be able to provide affordable housing for the poor. If we do that, if we create that enabling environment, then the investment would come in, then cost of housing would drop. There would be an abundance of it but we also have to watch it. Do you know why?
“When we create that enabling environment, we can also create a bubble and when the bubble bursts, it would also be bad for the economy because if there is too much investment in housing, you overbuild and the price would crash. That is what happened in 2008 that affected the whole world.
There was too much investment in real estate and it was manipulated, debts were being accrued and there was no security backing them. You just have to sign an agreement and move into a house and start to pay the mortgage.
“A lot of that affected development. It created a burble. So one has to be careful about that. So it has to be something that is structured and monitored. There were zero down payment packages created in America and investment in real estate was being seen as the most viable. Then these debts were bundled and sold to other people who did not look at it that these things were not backed with any security. When you do a mortgage, the security is the property but the engine is the person who lives in it. Income is what you are dependent on. If you recover the house, it is worthless if there is nobody to pay the mortgage for it,” he concluded.
Infrastructure devt: Reasons Nigeria isn’t utilising N1.06trn pension assets
There is no denying the fact that Nigeria’s infrastructure deficit requires urgent attention to achieve meaningful national development. The long term nature of pension fund assets properly aligns with the long term profile of infrastructure and real estate/housing projects. Pension fund investments in infrastructure and real estate development also provide veritable avenues for portfolio diversification for pension funds.
Infrastructure financing is an allowable asset class for Nigerian pension funds as provided for by the PRA 2014 and Investment Regulation issued by the commission. The minimum requirements/criteria for pension fund investments in infrastructure, through infrastructure bonds and infrastructure funds, as stipulated in the Investment Regulation, are very robust and provide adequate safeguard for pension fund assets.
Despite the availability of about N1.06 trillion for infrastructure financing, only N1.36 billion has been taken as at December 31, 2015, leaving N1.059 trillion untapped. This is largely due to non-availability of investment instruments that qualify for pension fund investment as stipulated in the Investment Regulations.
Pension fund investment in infrastructure projects in Nigeria is a “win-win” for all stakeholders, especially for the contributors. For the pension funds, it would generate consistent streams of income and relatively higher/above-inflation returns. For the contributor, it would provide a platform for employment creation and sustenance as well as improved standard of living for the citizens.
In the light of the statutory and regulatory framework for investment of pension fund assets, there is an urgent need to refocus the discussion to a call for development of bankable/eligible infrastructure-financing structure in Nigeria that can attract pension fund and other institutional investments. Thus, to attract pension funds investment, infrastructure projects in Nigeria must be shown to be commercially viable and self-financing. The bid/concession processes for the projects must also be open and transparent. There must also be a cover against political risk, to be provided by the Federal Government and/or multilateral finance institutions, e.g. IFC/World Bank, AfDB, among others.
In view of the foregoing, the National Pension Commission (PenCom) recommends that relevant Federal Government agencies should immediately embark upon:
•Determination of key infrastructure segments to focus on, for instance, roads, rails, power and ports. The need to identify potential projects and create PPP vehicles for these projects.
•Put in place appropriate government guarantees that would improve ratings of infrastructure projects and thereby increase their attractiveness to institutional investors.
3. Provide other government support such as long-term policy planning and tax incentives to encourage investors to invest in less liquid, long-term infrastructure investments.
4. Create a public/private intermediary that provides instruments such as takeout financing, co-financing in the form of long-term or subordinated debt and a variety of guarantees.
5. The intermediary would need to have a credible governance and management structure in place that provides oversight as well as checks and balances to maximally insulate its operations and decision-making from political influence.
6. The intermediary should provide the credit assessment and arranger functions.
7. Improved coordination between key stakeholders such as the Central Bank of Nigeria, the Ministry of Finance, the Infrastructure Concession Regulatory Commission, Securities and Exchange Commission, and various line Ministries, Departments and Agencies to ensure that the right projects are initiated, financed and successfully completed.
N200bn road budget: Nigerians blast Buhari over lean provision
Stories by Maduka Nweke
Nigerians have risen in condemnation of the N200 billion, which the Federal Government allocated to road, saying that the amount would not make any impact considering to the level of dilapidation of roads nationwide.
They argued that one major road network was capable of taking up to 76 per cent of the entire road budget beside various others yearning for rehabilitation in various states.
According to Onuora Obodoeze, an interior decoration expert, the fact that the Buhari administration has jettisoned the 2nd Niger Bridge on grounds of hatred for the South-eastern people shows that the roads he is interested in are the few that may not greatly impact on the people.
Obodoeze stated that road network is not targeted at anybody as no one knows who may have cause to travel the route for business or some other things. “As the President of the federation, Buhari should grow above petty politics. Amenities and facilities should be created and developed in all corners of the federation to better the lot of the people,” he said.
In his submission, Mr. Ayo Bamgbose, a civil servant in Kogi State said, if the Federal Government is to fix just Oshodi-Apapa Road and make it solid such that tankers and other traffics could ply it and keep the life span longer, the whole budget would go into it.
“How many roads is the administration targeting? Is he also going to be selective in the choice of roads to repair? See Lokoja-Abuja Road, get to other states and see the federal roads there. How many shall we mention. He should sit up and bring those things he promised Nigerians that made them to vote him into power,” he concluded.
Before signing the 2016 budget into law, President Muhammadu Buhari disclosed that his administration has prioritised the repair and construction of roads within the country. “To illustrate our renewed commitment to infrastructural development, the 2016 budget allocates over N200 billion to road construction as against a paltry N18 billion allocated for same purpose in the 2015 budget,” President Buhari said.
The President also said his administration earmarked N350 billion for capital constructionist projects, with the hope that the figure will help stimulate the country’s ailing economy.
“The signing of the budget would trigger concerted efforts to reflate the Nigerian economy, a key element of which is an immediate injection of N350 billion into the economy by way of capital projects,” he said.
NIA to check unprofessional practices via tribunal
For not adhering to the architectural practice in the country, the Nigerian Institute of Architects (NIA) said it is finalising plans to establish a tribunal to try all unethical issues within the profession.
President of Architect Registration Council of Nigeria (ARCON), Umar Aliyu, noted that the Chief Justice of the Federation, Mahmud Mohammed, would in no distant time inaugurate the tribunal in Abuja.
Speaking on the tribunal during a media chat, which preceded the take off of the 2016 Lagos Architects Forum, tagged Lagos 7.0 held at Eko Hotels and Suites, Victoria Island, Lagos and organised by the Lagos chapter of NIA, Aliyu stated that when it eventually takes off, it would deal with cases of quackery, defaulters, or any act of indiscipline, supplanting and related offences perpetrated in the profession.
He noted that experts within the construction industry, particularly the architects, gathered to discuss “Evolving Architecture”, which was the 8th in the series.
Aliyu said although the Act establishing the council empowers the take-off of the tribunal, it was regrettable that past heads of the nation’s judiciary had not assented to the institute’s request.
“Since 2012, we have been writing to the Chief Justice of the Federation to do the needful by giving effect to the tribunal but we are grateful to God for making that a reality now as the current CJN has agreed to act,” he said.
“CJN’s favourable disposition to our request,” he said, “would further strengthen professionalism, particularly the practice of architecture in Nigeria.”
The President also decried some unwholesome practices within the profession and called on the nation’s architects and other allied professionals to support every right step taken against unethical practices in the field of architecture.
He also appealed to the Lagos State government to give speedy approval to the adoption of Architect Project Registration Number (APRN), adding that the tribunal would tackle issues of quackery, defaulters, or any act of indiscipline, supplanting and related offences perpetrated by any architect in the country.
“Once the tribunal takes off, the perceived silence over professional misdemeanour would be over while all these pending cases would be handled by the tribunal,” he said.
The occasion was declared open by the Lagos State Governor, Mr. Akinwunmi Ambode, who said his government believes in professionalism and would do everything possible within the law to ensure irregularities within the construction industry are checked.
Ambode, who was represented by Mr. Dipe Bayo, a Permanent Secretary in the Ministry of Housing, assured that Lagos was working closely with ARCON to ensure that submission of drawings and other issues, which are solely the task of architects are done by registered architects alone.
Keynote speaker at the Lagos Architects Forum (LAF), Dr. Olisa Agbakoba, said Nigerian architects must of necessity and as fast as possibly have a global rethink of the profession if the professionals must gain international recognition, adding it was the architects’ responsibility to ensure their profession did not go into irrelevance.
According to him, architects should see themselves as more than house designers but providers of housing solution, challenging them to go more into building production, as the age of information communication technology, poses a threat to the profession if they did not think outside the box.
NIA President, Mr. Tonye Braide, in his speech during LAF said to be in line with the new wave sweeping across the world, there was need to re-engineer its approach to the practice of architecture.
“There are changes everywhere from the conception of urban space to the treatment of interior details. There are new technologies, which improve environmental comfort and conserve energy. There are materials, which greatly improve the cost in use with very low maintenance indices. The living experience has moved from the milestones of our grandfathers to the cyber age of our toddlers.”
PROWA commissions multi-million Naira shopping complex, gas station
By Peter Anosike
Prison Officers Wives Association (PROWA) has commissioned its multi-million naira ultra-modern shopping complex and gas station all located in the Kirikiri area of Lagos.
Speaking at the commissioning, which attracted dignitaries in the para-military service, the Chairperson of the association, Mrs. Folashade Tinuoye, said the shopping complex, which can be compared with the ones in Dubai, Barcelona and Karakas, is of two categories, the single stores and the executive stores.
According to her, the store has an in-built office with rest room for top flight entrepreneurs.
She said the structure is fortified with quality materials of British standard and was constructed by Uju Nolue of Pipeline Group West Africa.
The PROWA chairperson said the idea of having a shopping complex to boost the financial status of the association was initiated by the former National President of the association, Mrs. Tolu Ogundipe, in 2002, who mobilised eligible PROWA members to form an active association.
However, she said that it was Mrs. Adeleye and her team that completed the first PROWA shopping complex in 2003, which was commissioned by the then First Lady of Lagos State, Mrs. Oluremi Tinubu.
Her word: “The structure was raised four feet above the ground level that was fortified with granite boulders with inter-locking surface. This allows for proper drainage during rains. There is ample parking lot for shop owners and visitors. The shopping mall is supplied with potable water and regular power supply. These two facilities no doubt would encourage upcoming businessmen and women to venture into the world of commerce.
“The gas station has four service pumps for PMS, diesel and kerosene. I am assuring you that this gas station will be an example in best practices in the oil and gas sector as efforts would be made to curtail any unholy profiteering by selling above regulated prices.”