VZCZCXRO2901
RR RUEHMA RUEHPA
DE RUEHOS #0288/01 2040612
ZNR UUUUU ZZH
R 220612Z JUL 08
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC 0062
INFO RUEHUJA/AMEMBASSY ABUJA 9746
RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 LAGOS 000288 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EINV EAID EIND EFIN NI
 
SUBJECT: NIGERIA: LAGOS STATE TAKES STEPS TO LOWER MORTAGE INTEREST 
RATES 
 
Ref: A) 07 Lagos 621 
B) 07 Lagos 553 
C) 07 Lagos 549 
D) 07 Lagos 472 
 
¶1. (U) Summary: Nigeria's housing shortage, ranging from 12 to 17 
million units, remains a top policy issue for the government at all 
levels.  Stakeholders in the housing construction and financing 
sector identified high and volatile interest rates as a primary 
challenge to developing a mortgage financing market for Nigeria. 
Lagos State Government is working in conjunction with private 
developers to lower mortgage interest rates through public bond 
issuance. End Summary. 
 
Housing Deficit Enormous 
------------------------ 
 
¶2. (U) Estimates of Nigeria's housing deficit range from 12 to 17 
million units.  News media reported that, according to the Council 
of Mortgage Lenders, the number of mortgages for house purchases hit 
a 16 year low during the first three months in 2008.  About 
1,630,000 loans were made for home purchases, the lowest for any 
quarter since early 1992.  Of the 49,000 loans made in February 
2008, around 18,000 loans (36 percent) were for first-time home 
buyers.  In May 2007, the Federal Mortgage Bank of Nigeria (FMBN) 
floated N100 billion worth of mortgage-backed bonds, but succeeded 
in raising only N40 billion.  In early June 2008, FMBN announces its 
intention to float a second tranche of housing bonds in the amount 
of N47 billion. 
 
Bank Mortgages: 30% Down, 30% Interest for 5 Years 
--------------------------------------------- ----- 
 
¶3. (U) Mohammed Santuraki, Managing Director of First Bank of 
Nigeria Mortgages provided EconOff in a May 28 meeting with a bleak 
outlook on housing financing and development.  Banks are still 
focusing on financing middle to high-income housing, and have only 
begun to look at low-income housing, he said.  In a May 21 meeting 
with EconOff, Francis Sheen, Executive Director of U.S.-based 
TransAtlantic, a corporation that specializes in development, 
construction, and financing of large scale residential housing 
projects, said local banks, including Diamond Bank, Zenith Bank, 
United Bank for Africa, and Union Homes, have established mortgage 
divisions, but so far have received little strategic direction from 
the state and federal governments.  In Lagos State, banks require on 
average a 30 percent down-payment and offer home loans at a 30 
percent interest rate for a term of five years.  Santuraki pointed 
to high and volatile interest rates as a major challenge banks face 
in trying to make mortgage lending more affordable.  With lowered 
interest rates and a more stable interest regime, banks wil find 
ways to expand mortgage lending, he contended.  For banks to go 
"downstream" to low-income housing, he also believes the government 
needs to streamline policies and provide subsidies either for 
down-payments or for interest rates. (See septel) 
 
Lagos State Programs Lower Mortgage Rates 
----------------------------------------- 
 
¶4. (U) Nonetheless, Lagos State Government (LASG) is attempting to 
provide lower interest loans to selected civil servants through a 
consortium of four local banks.  Lagos Mortgage Scheme for civil 
servants was launched in October 2007, and in early 2008, offered 
loans to 376 civil servants.  The partnering banks are providing 
syndicated mortgage lending facilities at a 10 percent interest rate 
over a 25 year period. 
 
¶5. (U) Bhargav Purohit, Head of Financial and Capital Markets, 
Africa Finance Corporation (AFC), disclosed to EconOff on May 23 the 
AFC's plan to provide a long-term sustainable mortgage finance 
solution for housing construction ranging from low to high end.  AFC 
will partner with Lagos State Government to issue public bond to be 
backed by credit guarantees from development financial institutions. 
This program will offer naira-denominated mortgage loans at a 14 
percent interest rate and 10 years term.  According to Bhargav, LASG 
allocated the land, and the developer signed the agreement in May 
¶2008.  LASG has also proposed a multi-year issuance of 
infrastructure development bonds, with the first tranche of Naira 75 
billion (USD 640 million) expected to be issued in 2008. The net 
issue proceeds will be used to finance, among other development 
projects, a 1,350 unit housing project for low to middle income 
earners. 
 
¶6. Comment: Banking and financial experts have identified the 
housing sector and the mortgage market as holding the most promise 
in terms of investment and return.  The issues raised by 
 
LAGOS 00000288  002 OF 002 
 
 
stakeholders illustrate that housing need cannot be met without the 
development of a functional mortgage market, which is predicated on 
a stable and low interest rate regime as well as reform of the 
country's cumbersome and outdated Land Use Act. End Comment. 
 
¶7. (U) This cable has been cleared with Embassy Abuja. 
 
BLAIR