The mortgage market in Nigeria has continued to suffer slow growth despite its growth potential. With a population of over 200 million and a housing deficit estimated at 28 million units, investors still stay away from the market.
Experts explain that the market carries a lot of baggage that investors are scared of and identify as palpable risks that are threats to investments.
Institutional investors, particularly pension funds, place a premium on safety, stable returns, and liquidity when allocating capital. However, Nigeria’s mortgage market currently falls short in several critical areas that undermine its appeal to these investors.
Experts point out absence of standardised and securitised mortgage assets as one major shortcoming of this market. According to them, in mature markets, mortgages are bundled into mortgage-backed securities, providing institutional investors with instruments that are both tradable and backed by real assets.
“Nigeria lacks such structures, making it difficult for pension funds to assess and manage risks effectively,” Adedeji Ajadi, the chief executive officer of Mortgage Banking Association of Nigeria (MBAN), explained in an interview recently in Lagos.
Ajadi added that the market is hampered by inefficient foreclosure mechanisms, explaining that lengthy legal processes and unclear enforcement procedures create uncertainty around loan recovery, increasing the risk exposure for long-term investors.
Another obstacle is the lack of reliable property valuation and titling systems. Without consistent and transparent frameworks for determining property value and legal ownership, institutional investors face significant due diligence challenges and the threat of fraudulent claims or overvalued assets.
According to the MBAN CEO, the market suffers from a dearth of long-term credit ratings and historical performance data, noting that this lack of track record makes it difficult for investors to price risk accurately or benchmark returns, both of which are essential for informed investment decisions.
“Without robust risk management frameworks and regulatory oversight, institutional capital, particularly long-term funds like pensions, will continue to stay on the sidelines. Addressing these gaps is essential for unlocking the flow of institutional capital into Nigeria’s mortgage market, which in turn could drive more affordable and accessible housing finance,” Ajadi stated.
He stressed that interest in mortgage or its penetration remains below 1 percent in Nigeria, even with a housing deficit exceeding 28 million units because most Nigerians lack access to formal financial systems and cannot meet the requirements of mortgage institutions, including verifiable income and formal employment.
Secondly, affordability is a major constraint and this he hinged on high interest rates and short tenures which make mortgages unaffordable for an average Nigerian.
He pointed out that legal and administrative barriers such as land titling and foreclosure processes discourage lenders, adding that a general lack of awareness and trust in the mortgage system has led many to prefer incremental or informal homebuilding.
