Worsening An Already Bad Situation

Experts blame the acute shortage of houses in the country on the current banking sector reforms which seem to discourage long term lending by commercial banks

By Raphael Nkwocha

Alhaji Mutari Ango, an estate developer in the Federal Capital Territory, FCT, Abuja had acquired about 15 acres of land along Gwagwalada-Zuba road to build an estate comprising 500 houses, ranging from twin duplexes to two bedroom bungalows. But his plan was put on hold till mid 2010, a period his bankers say would be feasible for them to fund any housing project in the country, due to the present banking system sanitisation ushered in by the Mallam Sanusi led Central Bank of Nigeria, CBN.
At present, Ango has diversified into other businesses to keep him busy till when the bank would be ready to fund the project. Interestingly, the bank was instrumental in his venturing into the estate business, which both agreed to execute in partnership.

In spite of Ango's present predicament, estate business had witnessed a boom in the country in the recent past leading to government’s intervention to checkmate shylock property owners from short-changing unsuspecting clients. Indeed, Ango was among some lucky few that got the federal government's mandate to develop mass housing projects across the country.

Government's policy to provide adequate and affordable housing for its citizens got the needed boost few years ago, immediately after the banking consolidation programme. Private developers left no stone unturned in their bid to secure the much sort after land. In the end, housing projects began to spring up in major cities across the country due to heavy financial backing from banks. Banks were able to finance these projects because of tremendous financial outlay at their disposal, courtesy of the banking consolidation exercise. At the end of the consolidation programme, housing and property business became lucrative for any individual to jump into as banks began to finance housing projects and other urban infrastructure like shopping malls and international market construction. The trend has changed in the last couple of months.
Recently , things have began to look down for estate developers at the start of the global economic meltdown and became worst after the Sanusi led banking system sanitisation as most banks have since stopped funding private housing development across the country.

The financial crunch weighing down on the property segment of the economy has reached a level that has literally compelled players in the sector to speak up. One of them, Mr. Kayode Oyewole, Managing Director of Amorit International Ltd., at the commissioning of Amorite housing estate recently in Abuja warned that unless banks begin to finance housing projects in the next one year, a huge crisis looms in the housing sector of the economy, which will take another five years to emerge from the consequences. According to him, the federal government had early in the year made known its focus in the development and delivery of decent and affordable houses in the next five years. And it should be done with greater emphasis on supporting the private developers and encourage banks to extend credit facilities to the developers, he stated.

Worried by the stifling financial squeeze in the real estate sector, Mr. Sarumi Adeda, an estate developer disclosed that about 50,000 houses were scheduled for completion before the end of the year across the country by private developers but the Sanusi led reform prevented the banks from releasing the funds. He stated that some of the banks who were really funding housing projects across the country are those seriously involved in the financial crisis. According to him, banks like Oceanic, Intercontinental and Bank PHB are surviving on the life-line from the CBN, a situation that has hindered lending to estate developers. A way out of the quagmire, in Adeda's estimation, is for the government and CBN to prevail on the banks to start funding housing projects if government is serious on realising its objective of providing affordable and adequate houses to its teeming population as mass housing project require multi-billion naira investments that an individual cannot afford to bank-roll.

For Kennedy Osuagwu, a chartered accountant and financial consultant, the current banking crisis in the country has impacted negatively on the housing sector as almost all the mass housing projects going on in the country has been stopped abruptly due to financial crunch. According to him, some banks were very keen in financing housing projects until the sudden bank reform by the new CBN Governor shocked the banking sector and brought it to a standstill.
Although he commended the ongoing reforms as being timely and in the right direction, Osuagwu pointed out that the apex bank should have carried it out in a gradual manner, which would have ameliorated the shock now being experienced by the banks with its attendant ripple effects on the economy. In his view, because banks were not prepared for the fate that has befallen them, they have resorted to panic measures to stay afloat and in the process, have stopped financing mega projects like mass housing schemes.

He reasoned that the country will have to wait for at least the next one year before banks will be really willing to fund mega businesses.
Mr. Osuagwu noted that Sanusi's failure to put in place a sort of financial shock absorber before embarking on the reform has led to a slow down in the economic growth indices of the country, stressing that the housing sector which is in the state of comatose is one of the growth drivers of any economy.
He stated that only the presence of a vibrant financial sector can guarantee a long- term credit that will enable the housing sector and others affected by the reform's shock to regain their shape.

The financial industry's inability to grant long term credit to the relevant sectors of the economy has been attributed to the short term fund at the disposal of the banks.