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Nigerian fund will boost homebuilding and economic growth

Housing a continent

Nigerian fund will boost homebuilding and economic growth

Nigeria’s Family Homes Fund is integrating job creation with house building in a joined-up approach to meeting investor requirements as well as national economic development policy. Femi Adewole looks at how collaboration between the public and private sector can help unlock delivery constraints for large-scale housing programmes. 

The story and evidence of a rising middle class in Sub-Sahara Africa’s largest cities is well documented. Following the seminal report by the AfDB in 2011: The Middle of the Pyramid: Dynamics of the Middle Class in Africa several reports have promoted the phenomenon of a bulging middle class as a major opportunity for Africa’s future economic growth.   

However, there is another story which is uncomfortable and often less told: the story of Africa’s urban poor, about 67% of whom live on less than $3.10 a day. The narrative around this aspect of urbanisation in most African cities is more that of an intractable and expensive problem and less of it being perhaps the most significant lever for its economic development.

Almost universally in Africa, housing policy has failed to respond to the need of the urban poor – the cost of new housing, including that built by government agencies, is significantly in excess of what the largest segment of the population can afford.

The consequence is the rapid growth of informal settlements, slums on the edge of Africa’s major cities, with obvious drawbacks for economic development, health, safety and security.

Family Homes Fund has seen this as an opportunity for growth in an under-financed but high impact sector of African economic development, believing that a single-minded focus on a large-scale housing programme is needed from government and others.

The ongoing Covid-19 pandemic has shown us how critical it is to address housing. People on a low income, often making their homes in informal settlements, have been more affected by the pandemic, particularly suffering crippling economic losses.

Creating homes and jobs

Nigeria is working towards doing things differently. The government identified mass housebuilding as an important aspect of its Economic Growth and Recovery Plan, and more recently its Economic Sustainability Plan.

With a commitment to building 500,000 homes, within a N2m (US$5,000) minimum wage range, or for people on a low income, Family Homes Fund aims to create up to 1,500,000 new jobs.

The Family Homes Fund, partly owned by the Nigerian Sovereign Wealth Fund, is a public-private partnership that brings together the complementary capabilities of government in facilitating access to land, creating enabling environments, and the private sector’s discipline and execution capabilities. We believe this gives a strong foundation for success given the nature of the housing market.

To ensure sustainable access to financing for its ambitious programme, the strategy is to create multiple funding sources. In addition to the government’s commitment to a N500bn ($1.2bn) capital injection, the fund will access financing from the capital markets (it is currently issuing a N30bn Sukuk Bond) and borrowing from Development Finance Institutions.

The use of new technology and standardisation of house types or building forms, will aid rapid delivery. To achieve scale, developers must embrace new approaches, if not full industrialisation, drawing on lessons from the auto industry.

Joined-up approach

The Family Homes Fund is integrating job creation with house building in a joined-up approach to meeting investor requirements as well as national economic development policy. It is important that the programme is not just about housing, but delivery includes a clear focus on what the investment can do for the economy.

Through partnership with third parties and its construction partners, Family Homes Fund aims to promote much-needed construction skills training programmes for young people.

In addition, a figure of up to 90% of construction input materials is targeted for local sourcing by 2023. This has the potential for creating significant growth in the construction material manufacturing industry in Nigeria, which has over the years been undermined by cheap imports.

The initial strategy is also to partner with local SME manufacturers of construction materials, providing guaranteed demand for their products, and thereby enabling them to leverage future cash flow to access further financing to grow their businesses.

The biggest lesson from early experiences at Family Homes Fund is that the housing market is really an ecosystem with different but necessary players and in particular, how collaboration between the public and private sector can help unlock delivery constraints for large-scale housing programmes.

Femi Adewole is MD and CEO at Family Homes Fund, Sub-Saharan Africa’s largest housing fund, focused on affordable homes for Nigerians on low incomes.

To read more articles from our special report on affordable housing in Africa, coordinated by AFFORD UK, visit the Housing a Continent webpage.

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