The Nigerian real estate market is projected to reach a value of $2.42 trillion by 2024, with residential real estate making up the largest share at $2.08 trillion.
However, the sector faces a huge housing deficit, with estimates revealing a shortage of 28 million units, the largest in Africa. This deficit grows by around 20% annually, worsening the lack of affordable housing and pushing millions of Nigerians into inadequate living conditions.
Affordable housing is a seemingly unending challenge, as high costs and limited access to financing place suitable homes out of reach for most Nigerians.
In light of this, let’s take a look at Nigeria’s housing market, examining whether affordable housing is an achievable goal or just a distant ideal in the face of growing demand and limited supply.
The Nigerian Housing Issues: An Overview in Numbers
Nigeria’s Housing Deficit
Nigeria faces an estimated housing deficit of 28 million units, a rise from approximately 17 million in 2019. This shortfall is large compared to other African nations, such as Kenya (2 million) and Ghana (1.7 million).
Addressing this massive deficit would require about N5.5 trillion ($7.1 billion) annually, pointing to the urgency and scale of the challenge.
Affordability Metrics: Global vs. Nigerian Standards
Globally, affordable housing is typically defined as housing costs not exceeding 30% of a household’s income. In Nigeria, however, many households must allocate over 50% of their income to rent, often at the expense of other essential needs like food and education. This makes affordable housing a distant reality for most Nigerians.
Income vs. Housing Costs
For instance, the average annual rent for a one-bedroom apartment in Lagos is approximately N600,000, while the current national minimum wage is N30,000 per month (N360,000 per year), the new minimum wage not yet actualized.
The gap between earnings and housing costs makes it nearly impossible for many Nigerians to afford secure, adequate shelter. Homeownership presents similar challenges, with the median price of a two-bedroom apartment in urban areas reaching N25 million—about 69 times the average annual salary.
Government Initiatives vs. Reality
Despite initiatives like the National Housing Fund (NHF), which aims to provide affordable housing, the impact has been limited. Only a small portion of the population has benefited, largely due to bureaucratic inefficiencies, funding shortages, and corruption. As of 2024, the government’s housing budget remains below the estimated N500 billion needed annually to create adequate change.
Renting in Nigeria: Pros, Cons, and Data-Driven Insights
Current Rental Trends
Rental prices in urban centres like Lagos, Abuja, and Port Harcourt have more than doubled in the past decade, driven by inflation and increasing demand. In 2024, the average annual rent for a one-bedroom apartment in Lagos can reach as high as N1 million. Despite these high rents, vacancy rates remain low due to the intense demand.
Challenges for Renters
Nigerian renters face issues ranging from frequent rent hikes and limited tenant rights to discriminatory practices. Eviction is a constant risk, with few protections against arbitrary increases or removals.
Rent-to-Income Ratio
Nigerians spend, on average, 40-60% of their income on rent, far above the international benchmark of 30%. This high rent-to-income ratio shows a painful affordability problem, forcing many to live in overcrowded or substandard conditions.
Pros and Cons of Renting
While renting offers flexibility and a lower upfront cost, the lack of long-term asset accumulation and security in renting can be significant drawbacks. Many renters remain in a cycle of high rental costs without an opportunity to build wealth through property ownership.
Buying a Home: Financial Viability and Challenges
Cost of Purchasing Property
Buying a home in Nigeria is a big financial undertaking. In Lagos, a modest two-bedroom apartment typically costs between N20 million and N30 million. Rural areas may offer more affordable options, but access to essential services and infrastructure can be limited.
Mortgage Market Limitations
The mortgage system in Nigeria serves only around 5% of the population, with interest rates often ranging from 18% to 24% and loan tenures averaging just 5 to 10 years. High down payments—often 30-50% of the property’s value—put mortgages out of reach for most Nigerians.
Pros and Cons of Homeownership
Owning a home offers stability and potential for wealth accumulation, but the financial burden can be overwhelming. High initial costs and long-term commitments mean homeownership remains an aspiration out of reach for many.
Building a Home: Costs and Obstacles
Cost of Building vs. Buying
Building a home is often seen as a more affordable option, but costs for materials, such as cement (up over 40% in the past year), challenge this assumption. Land in urban areas can be very expensive, though rural land remains more affordable—albeit often lacking the necessary infrastructure.
Infrastructure and Bureaucracy Challenges
The home-building process faces numerous bureaucratic hindrances. Obtaining permits, securing land titles, and ensuring access to utilities like electricity and water can be time-consuming and costly. These challenges deter many from attempting to build their own homes.
Pros and Cons of Building
Building allows for customization and may offer long-term savings, but logistical and financial obstacles can outweigh these benefits, particularly in urban areas where land prices are high.
Is Affordable Housing a Myth in Nigeria?
Global Comparisons
Countries like Kenya and South Africa have implemented effective affordable housing strategies through subsidies, tax incentives, and developer-friendly policies. In contrast, Nigeria’s housing policies have lacked consistent implementation and monitoring, resulting in limited success in addressing its housing needs.
Evaluation of Government Efforts
Government programs like the Family Homes Fund and various social housing schemes have been introduced to tackle the housing deficit. However, these initiatives have made only minimal progress and have been criticized for being inaccessible to low-income families. Many of these programs have failed to meet their intended targets due to resource limitations and implementation challenges.
Role of Private Sector and NGOs
Private developers and NGOs play a role in housing development, but the units they produce are often unaffordable for the average Nigerian. With the private sector’s profit-driven approach, affordable housing remains out of reach for many, as there is little incentive for developers to build low-cost units without government support or subsidies.
Challenges in the Housing Market
Nigeria’s housing market faces multiple challenges:
- Economic Factors: High inflation—reaching 32.7% as of September 2024—continues to impact housing affordability by raising the cost of building materials and land acquisition. The weakening of the naira also inflates construction costs, making housing inaccessible to a large segment of the population.
- Policy and Regulation: Historical and current housing policies have faced implementation gaps, leading to policy discontinuity. The lack of a cohesive, sustained policy framework has hindered efforts to address the housing deficit effectively.
- Social and Demographic Factors: Rapid urbanization and population growth, projected to reach 262.6 million by 2030, are putting pressure on existing housing infrastructure. With a significant portion of the population living in multidimensional poverty, many Nigerians struggle to meet basic living standards, let alone secure adequate housing.
Opportunities and Innovations
Even with these challenges, there are opportunities and innovative solutions that could alleviate Nigeria’s housing problem:
- Government Initiatives: The Federal Government’s National Social Housing Programme and the Renewed Hope Cities Program aim to provide affordable housing solutions for low-income families. While still in their early stages, these programs indicate a focus on making housing accessible to more Nigerians.
- Private Sector Involvement: Private developers and investors are also important in addressing the housing deficit. Projects like Wisdom Kwati Smart City spotlight the prospect of private sector contributions to affordable housing when cost-effective methods and community involvement are prioritized.
- Innovative Solutions: Green building practices and sustainable construction methods offer a pathway to reducing construction costs, potentially making housing more affordable. The use of technology in housing finance and construction—such as digital loan applications and prefabricated building techniques—can streamline processes, further lowering costs and enhancing accessibility.
Alternative Solutions and Recommendations
To bridge the affordability gap and create more inclusive housing opportunities:
- Explore New Housing Models: Modular homes, shared ownership, and cooperative housing could reduce costs and increase accessibility.
- Policy Recommendations: Rent control measures, subsidies for first-time buyers, and tax incentives for low-income housing development could drive affordable housing forward.
- Public-Private Partnerships (PPPs): Strengthening PPPs can attract investment and expertise, enabling sustainable, scalable affordable housing projects.
Addressing Nigeria’s Housing Crisis: Solutions for the Growing Deficit
Nigeria’s housing deficit impacts mostly middle- and low-income households, with 75% of its 42 million housing units deemed substandard. The federal budget allocated under N100 billion to housing in 2024, far below the needed N500 billion.
International Investments and Partnerships
Nigeria seeks international partnerships to bridge funding gaps, supplement budget shortfalls, and introduce sustainable housing techniques.
Achieving housing security in Nigeria will require targeted investments, partnerships and data-driven solutions. Reliable data on the housing sector is essential for guiding policy decisions and measuring progress.
Accurate statistics on housing deficits and living conditions can inform more effective policies and help target resources where they’re most needed.
Addressing housing as a human right, not a privilege, is important and there is real potential to close the housing gap in order to create sustainable communities for all Nigerians.
