Nigeria eyes share of pensions for mortgage industry

Nigeria's National Pension Commission and the Central Bank of Nigeria are in the process of exploring a groundbreaking framework that could revolutionize the country's mortgage industry. The initiative aims to allow workers under the contributory pension scheme to access 25% of their contributions for personal home investments, potentially injecting a significant amount of funds into the real estate sector of the Nigerian economy. This move comes as part of the pension reforms initiated by the government to drive economic growth and empower citizens with homeownership opportunities. Niyi Falade, CEO of Crusader Sterling Pensions, sheds light on the implications of this new policy shift in a recent interview with CNBC Africa. Falade acknowledges that the legal framework for this initiative was already established in the Pension Reform Act of 2014. The draft guidelines, released last year, outline the steps required for subscribers to utilize a portion of their pension contributions for mortgage payments in Nigeria. This strategic move is expected to diversify the allocation of pension funds, which currently heavily favor FG bonds and treasury bills, comprising 70% of the investment portfolio. By redirecting investments towards the real estate sector, the initiative aims to boost the industry's contribution to the country's GDP. The eligibility criteria for accessing these funds include a minimum contribution tenure of 10 years and proof of a mortgage offer from approved lending institutions. Falade highlights the collaborative efforts between regulatory bodies, such as the National Mortgage Refinancing Company (NMRC), and primary mortgage providers to streamline the application process. Once the necessary requirements are met, the Pension Fund Administrators (PFAs) will facilitate the transfer of funds to the National Pension Commission for processing. The CEO emphasizes the transformative impact of this policy on Nigeria's mortgage industry, anticipating a significant inflow of funds that could catalyze growth and address the structural challenges prevalent in the sector. With real estate currently contributing only 5-6% to the GDP, the infusion of pension funds is poised to create a multiplier effect, driving expansion and development in the market. In addition to the contributory pension scheme, Falade underscores the inclusivity of the initiative, stating that all active contributors with Retirement Savings Account (RSA) balances are eligible to apply for mortgage financing. This democratization of access to housing finance aims to empower a broader segment of the population and foster socioeconomic advancement. While Nigeria grapples with the issue of affordability and accessibility in the housing market, the new pension reform holds promise for addressing these challenges. By enabling individuals to leverage their pension savings for homeownership, the initiative paves the way for a more inclusive and vibrant real estate landscape. As the country embarks on this paradigm shift in pension regulations, stakeholders are optimistic about the long-term benefits it could bring to both pensioners and the housing sector. As Niyi Falade succinctly puts it, 'It's going to be a huge multiplier effect on the industry as a whole.' The convergence of pension reform and mortgage financing heralds a new era of opportunities for Nigerians seeking to fulfill their homeownership aspirations. With concerted efforts from regulatory bodies and market players, the synergy between pensions and mortgages is poised to drive sustainable economic growth and social development in Nigeria.