Cbn Governor, Folashodun Shonubi

Central Bank’s Interest Rate Hike: Impact on Nigeria’s Housing Crisis


Interest Rate Hike

The Central Bank of Nigeria raised the interest rate from 11.5 per cent in April 2022 to 18.5 per cent in July of the same year to combat accelerating inflation in the country.

Housing Crisis Worsens

The housing crisis in Nigeria intensified with over 28 million people lacking access to decent and affordable housing, and the country facing a staggering 28 million housing gap.

Mortgage Market Challenges

The high-interest rates have significantly affected the mortgage market, leading to rising project costs, strained lender-borrower relationships, and limited affordability for potential homebuyers.

The recent actions by the Central Bank of Nigeria to address the country’s inflation have had far-reaching effects on the nation’s housing market. With interest rates climbing to 18.5 per cent, the Nigerian economy faces mounting challenges in the real estate sector, where the cost of borrowing has surged, causing a ripple effect on construction and housing prices.

The surge in interest rates has led to a significant rise in the price of cement, a crucial construction material, further exacerbating the housing crisis. According to reports, more than 28 million Nigerians struggle with inadequate housing, revealing a pressing need for a sustainable solution.

In a recent virtual forum organized by the Central Bank of Nigeria Financial System Strategy, experts focused on ways to improve the funding status of the mortgage sector. The Managing Director of the Federal Mortgage Bank of Nigeria highlighted the impact of the interest rate hike on borrowing costs and building material prices, ultimately leading to soaring housing prices across the country.

The situation presents a challenge for policymakers, who must seek alternative sources of funding and create intervention funds to support the mortgage sector and provide relief to potential homebuyers. Experts emphasize the importance of reducing dependency on foreign materials and encouraging the use of locally sourced materials to stimulate the housing sector and boost the economy.

The high interest rates and stringent conditions set by mortgage institutions have also hampered access to mortgages, making it difficult for developers to meet requirements and for potential buyers to afford available housing options. As a result, developers often resort to joint ventures to raise funds for their projects.

To tackle these housing market challenges, a concerted effort is required from both the government and the private sector. By implementing policies that support affordable housing initiatives and stimulate investment in locally sourced materials, Nigeria can pave the way for a sustainable and robust housing market that benefits both developers and homebuyers.

The Central Bank’s interest rate hike has intensified Nigeria’s housing crisis, driving up construction costs, limiting access to mortgages, and putting significant strain on the real estate sector. Addressing these challenges will require collaborative efforts from various stakeholders, including the government, financial institutions, developers, and potential homebuyers. By fostering a supportive environment for affordable housing and encouraging the use of local materials, Nigeria can work towards bridging the housing gap and creating a more sustainable future for its citizens.

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