By YINKA KOLAWOLE
The housing sector is seen as an important sector for stimulating economic growth in most developed countries. Indeed, housing construction indices are some of the most common measures used by analysts to gauge economic trends in OECD countries. Today, housing and construction sector still accounts for only 3.1 percent of the GDP of Nigeria, Africa’s largest economy with a GDP of N80.3 trillion ($510 billion) as at 2013.
Despite the size of the Nigerian economy, mortgage debt to GDP is only about 0.5 percent. Minister of Finance/Supervising Minister of the Economy, Dr. Ngozi Okonjo-Iweala, noted at a recent World Bank forum, highlighted the potential contribution of the housing sector to national development in three possible ways.
First, she noted that the sector can serve as an important contributor to economic growth. According to her, the housing sector has a tremendous multiplier effect on the broader economy.
“Housing contributes to GDP through two main channels, namely: private residential investments, such as, construction of new homes, and also via the consumption spending on housing services.
There are also secondary economic impacts of the housing sector. Housing wealth is often a large component of net personal wealth (about half of net personal wealth in the USA). And in developed countries, housing wealth/assets can often be used as collateral to stimulate additional private consumption and investments,” she stated.
Okonjo-Iweala also noted that the housing sector can support job creation and economic inclusion. “The job creation potential for the housing sector is enormous in Africa and other developing countries. In India, each new housing unit generates 1.5 direct and 8 indirect jobs. In South Africa, each housing unit creates 5.62 direct jobs and 2.5 indirect jobs.
But the key point is that the sector can also help promote economic inclusion by creating jobs for our craftsmen and artisans such as masons, plumbers, welders, electricians, painters and so on. It is estimated that for every new house built 3 direct and 8 new indirect jobs are created. Unlocking the housing sector will mean the creation of thousands of jobs for architects, builders, plumbers, welders, electricians, painters,” she declared.
The minister said the housing sector also provides social benefits by contributing to community – and nation – building. “We know that home-ownership often gives citizens a true stake in their communities. After owning a home, many citizens tend naturally to be concerned about the provision of public goods in their communities – from schools, to clinics, to security.
These are intangible social benefits which a strong housing sector can help to generate,” she remarked. Sonnie Ayere, pioneering CEO of the Nigeria Mortgage Refinance Company (NMRC), said that the company, which was launched in January 2014, is expected to unlock the value drivers within related business sectors further increasing multiple lines of incomes for business.
He added that lower income households are expected to benefit from NMRC through direct jobs created by the construction of new housing units and services required to build a home and deliver it to the final customer. “We expect to see an estimated 490,000 additional sustainable jobs over the next coming years.
The wages earned by workers and profits earned by businesses during the construction period are spent on other local goods and services. This generates additional income for local people, which is spent on still more local goods and services, and so on,” stated.
When Governor Babatunde Fashola inaugurated the Lagos State Home Ownership Mortgage Scheme (Lagos HOMs), he remarked that several jobs were created on construction sites that have benefitted 134 construction companies, 459 sub-contractors employing over 1,168 persons, seven consultancy companies and 5,442 suppliers, artisans, labourers and numerous citizens who are employed in the supply chain of sand, gravel, wood and fittings, as well as food vendors and transports.
Indeed, the impact of housing development goes beyond the valuable social benefits of providing shelter, not least of which is giving homeowners a true stake in their community. Also, at the launching of the first 10,000 Affordable Homes Mortgage Scheme under the Nigerian Housing Finance Programme, Okonjo-Iweala harped on the socioeconomic impact of the scheme.
“It will lead to the increased contribution of housing to GDP from the current negligible 3.1 percent of our rebased GDP to the high tens of emerging and developed economies such a Malaysia and the United States. It will lead to more jobs being created and to greater economic inclusion. It is estimated that for every new house built 3 direct and 8 new indirect jobs are created.
Unlocking the housing sector will mean the creation of thousands of jobs for architects, builders, plumbers, welders, electricians, painters,” she declared. Gregory Ozegbe, Executive Chairman, Housing Alliance Group, estimated that Nigeria’s mortgage market has the potential to contribute more than 50 percent of the country’s GDP.
“To put matters into perspective, assuming that 18 million Nigerians qualify for mortgage loans at an average affordable housing loan of say about $20,000.00, the potential size of the mortgage market would be $360 billion while at the same time adding this amount to Nigeria’s GDP,” he stated.