VZCZCXRO5435
RR RUEHMA RUEHPA
DE RUEHUJA #3200/01 3481739
ZNR UUUUU ZZH
R 141739Z DEC 06
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC 8068
INFO RUEHOS/AMCONSUL LAGOS 5739
RUEHWR/AMEMBASSY WARSAW 0013
RUEHCD/AMCONSUL CIUDAD JUAREZ 0017
RUEHZK/ECOWAS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 03 ABUJA 003200 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT PLEASE PASS TO OPIC AND USTDA 
TREASURY FOR LUKAS KOHLER/DAN PETERS 
USDOC FOR 3317/ITA/OA/KBURRESS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV EAID SOCI NI
SUBJECT: THE WEST AFRICAN PEER EXCHANGE ON AFFORDABLE HOUSING 
 
REF:  ABUJA 3172 
 
ABUJA 00003200  001.2 OF 003 
 
 
¶1. Summary.  At the West African Peer Exchange conference on 
Affordable Housing, Nigerian representatives discussed plans for 
increasing the number of affordable homes in Nigeria and presented 
an action plan.  Most of the West African countries in attendance 
face similar problems on land tenure titling, and foreclosure.  The 
conference ended without a clear consensus on the way forward, but 
participants agreed that an ongoing dialogue is needed as well as 
political will, if not, many cites will be swallowed by uncontrolled 
urbanization.  End Summary. 
 
2006 WEST AFRICA PEER EXCHANGE 
------------------------------ 
 
¶2. The West African Peer Exchange on Affordable Housing was held in 
Accra, Ghana from November 28 to December 01, 2006.  Organizers were 
the Government of Ghana (GOG), United States Department of Housing 
and Urban Development (HUD), and United Nations Human Settlements 
Program (UN-HABITAT).  A major objective was to provide 
participating countries in West Africa - Ghana, Liberia, Mali, 
Benin, Cape Verde, Nigeria, and Senegal - an opportunity to share 
experiences on how governments can best support the private sector 
and the domestic financial services industry to invest in affordable 
housing. 
 
¶3. Leading attendees included John Agyekum Kufuor, President of 
Ghana, Alphonso Johnson, U.S. Secretary of the Department of Housing 
and Urban Development, Anna Tibaijuka, Under-Secretary General and 
Executive Director of UN HABITAT; and Pamela Bridgewater, U.S. 
Ambassador to Ghana. 
 
¶4. The conference agenda focused on three main themes: 
-- Government policies and regulatory framework and incentives to 
support and strengthen existing housing finance institutions to 
stimulate innovations in affordable housing. 
-- Private sector approaches to financing affordable housing; 
existing initiatives and innovations in products and instruments. 
-- The role of public private partnerships and financial 
intermediaries (housing cooperatives, micro-finance institutions and 
community based organizations); and how strategic institutional 
arrangements promote affordable housing. 
 
2005 EAST AFRICA PEER EXCHANGE 
------------------------------- 
 
¶5. In 2005 following consultations between HUD and UN HABITAT 
regarding new sources of finance for housing and basic services in 
the context of rapid urbanization, HUD and UN HABITAT organized the 
first peer exchange in East Africa.  International experts, 
government and private sector officials from Kenya, Tanzania and 
Uganda met in Kampala, Uganda.  Based on the success of the East 
African peer exchange and recent developments of commercial banks 
engaging in retail mortgage lending and community organizations, 
cooperatives, and micro finance institutions emerging as credible 
financial intermediaries in West Africa, participants decided to 
organize a West African peer exchange. 
 
NIGERIA'S CONTRIBUTION 
---------------------- 
 
¶6. The Nigerian delegation was led by E. Austine Aikhorin, Managing 
Director/Chief Executive of Union Homes (a subsidiary of Union Bank 
of Nigeria), and included private and public sector representatives. 
 (NOTE: Union Homes is making headway in innovative financing for 
low-income housing products in Nigeria.  END NOTE.)  The delegation 
presented a country paper during the opening session and then broke 
off into a working group to prepare an action plan for presentation 
at the closing session. 
 
¶7. Aikhorin's presentation provided an explanation of constraints to 
providing affordable housing, the National Housing Fund (NHF), 
planned mortgage bond and recommendations for GON action.  He 
reviewed the historical context of housing programs in Nigeria since 
1985 and the reasons for their failure.  The failures consisted of 
defective and unduly politicized distribution and selection of 
sites, political appointment of contractors, and the allocation of 
units to the political elite. Landmark legislation began in 1989, 
with the Mortgage Institutions Act which recognized the primary and 
secondary mortgage markets.  The act also allowed the Federal 
Mortgage Bank of Nigeria (FMBN) to operate in the wholesale mortgage 
market and primary mortgage institutions (PMIs) to operate in the 
retail mortgage market. 
 
ABUJA 00003200  002.2 OF 003 
 
 
 
CONSTRAINTS TO AFFORDABLE HOUSING 
--------------------------------- 
 
¶8. The FMBN estimates housing needs in excess of 14-16 million units 
requiring financing of approximately 44 trillion naira with an 
average cost of approximately 2.143 million naira per unit. 
Aikhorin commented that the task seems insurmountable with 
constraints that touch many areas.  Nigeria's high unemployment rate 
and very low per capital incomes of the employed make most decent 
housing unaffordable.  He said banks are reluctant to lend because 
customer information is difficult to attain and there is no 
established credit authority. 
 
¶9. Aikhorin noted that the Land Use Act of 1978 complicates land 
titling and foreclosure, and more importantly, vests only in the 
governor of each state the right to transfer property.  In addition, 
there is a scarcity of long term financing, because PMI's must 
compete with other commercial banks in the same markets.  Plus, 
there are high interest rates with short durations, a very small 
primary mortgage market, and a non-existent secondary mortgage 
market.  He said an exacerbating factor is the high cost of building 
materials, primarily due to huge tariffs on imported construction 
materials. 
 
INITIATIVES TO OVERCOME CONSTRAINTS 
----------------------------------- 
 
¶10. Aikhorin explained that the NHF act was passed in 1992, and as 
part of the act, anyone earning over 3,000 naira per month 
contributes a mandatory 2.5% of their income to the NHF.  As of July 
2006, the housing fund had amassed a total of 21.7 billion naira, 
with some 2,876,787 members.  The majority of the loan funds were 
used for mortgages through PMIs for 6.4 billion naira and estate 
development loans (EDLs) for 9.6 billion naira.  Although the NHF 
contributions have increased to record levels there still is an 
erratic collection that is sometimes not remitted due to 
inefficiencies in collection and record keeping. 
 
100 BILLION NAIRA MORTGAGE BOND 
------------------------------- 
 
¶11. Also, Aikhorin reported that the FMBN is in advance stages to 
float a 100 billion naira bond in the capital markets in two 
tranches of 50 billion naira each for mortgage financing.  The bond 
will be guaranteed by the GON as an incentive to attract investors. 
Underwriting commitments as of November 2006 were at 273.5 billion 
naira.  Some of the proceeds will enable civil servants to purchase 
the more than 30,000 federal government housing units up for sale. 
 
 
RECOMMENDATIONS FOR THE GON 
--------------------------- 
 
¶12. Aikhorin said the GON needs to do more and listed a number of 
recommendations: 
-- The present National Housing Policy should be completed an 
approved as a national policy document. 
-- Amendment of the Land Use Act. 
-- GON construction of basic infrastructure (roads, electricity, 
water etc.) for all new housing developments. 
-- GON tax incentives on pre-tax profits in line with best 
international practices. 
-- Injection of government funds to provide low-cost housing to the 
most vulnerable. 
-- Introduction of subsidized building materials for targeted groups 
and encourage the use of local building materials. 
-- GON support for the formation of housing cooperatives, building 
societies, thrifts and credit societies that could tap into some of 
the emerging micro-finance institutions. 
 
AMBITIOUS NIGERIA COUNTRY ACTION PLAN 
------------------------------------- 
 
¶13. The Nigerian delegation envisioned that within four years the 
GON and private sector will increase the number of loans from both 
the private sector and micro finance institutions by 25% and 
completion of 20 slum-upgrading projects.  The action plan requires 
that five objectives are completed, beginning with collection of 
data, information and research, followed by policy and legislative 
reform, government incentives to the private sector, and 
rearrangement of real estate and mortgage related institutions, and 
innovative products for enhanced access to mortgage finance.  Each 
 
ABUJA 00003200  003.2 OF 003 
 
 
of the objectives outlined the activities, outputs, resources and 
lead agencies with the UN Habitat program support office in Abuja as 
the coordinating agency.  UN Habitat will be responsible for 
bringing together the lead agencies, stakeholders and GON 
representatives to put the action plan in motion. 
 
COMMENT 
------- 
 
¶14. The conference provided a good forum for an exchange of 
information among countries similarly situated yet confronting 
different challenges.  There was a diverse group of contributors 
from the pubic sector, but no significant private sector 
participation.  Most countries were grappling with the same issues 
of securitization, land ownership, tenure, titling and foreclosure, 
and the need to pass key reform legislation.  The Nigerian 
delegation came prepared to discuss, listen and offered an ambitious 
action plan.  The question not yet answered is whether the GON has 
the political will to undertake major housing reforms as more cities 
succumb to urbanization, especially during the last four months of 
the current administration. 
 
CAMPBELL