Chief Executive Officer of the Mortgage Banking Association of Nigeria, Adedeji Ajadi, speaks on the dwindling mortgage system in Nigeria, among other issues in this interview with JOSEPHINE OGUNDEJI

What factors keep mortgage reliance below 1% in Nigeria, even with a housing deficit exceeding 28 million units?

Several factors contribute to the low mortgage penetration. First, most Nigerians lack access to formal financial systems and cannot meet the requirements of mortgage institutions, including verifiable income and formal employment. Second, affordability is a major constraint; high interest rates and short tenures make mortgages unaffordable for the average Nigerian. Third, legal and administrative barriers such as land titling and foreclosure processes discourage lenders. Lastly, a general lack of awareness and trust in the mortgage system leads many to prefer incremental or informal homebuilding.

What steps can be taken to reduce interest rates and encourage long-term lending by banks?

To effectively bring down interest rates and extend loan tenures in Nigeria’s mortgage market, a multifaceted approach is required.

First, ensuring access to long-term capital is crucial. This can be achieved by deepening the secondary mortgage market through institutions such as the Nigeria Mortgage Refinance Company, which plays a vital role in providing long-term liquidity to mortgage lenders. With more refinancing options available, lenders are better positioned to offer affordable and longer-term mortgage products. Secondly, subsidised financing must be part of the solution. Government interventions, including special interventions like MREIF and Family Homes Funds targeting low- and middle-income earners, can significantly reduce the cost of borrowing, making home ownership more accessible to a broader segment of the population.

Thirdly, macroeconomic stability cannot be overlooked. High inflation and exchange rate volatility drive up the cost of funds and increase risk premiums for lenders. A stable macroeconomic environment, characterised by lower inflation and a more predictable naira, will help reduce banks’ lending costs and, in turn, mortgage rates. Finally, de-risking the mortgage market is essential to encourage longer tenures. Government-backed guarantees and the development of robust mortgage insurance schemes can cushion lenders against default risks. Such measures will not only boost lenders’ confidence but also make them more willing to offer longer-duration loans. Together, these steps create a more enabling environment for mortgage finance, offering Nigerians a realistic path to long-term, affordable home ownership.

How realistic is home ownership for the average Nigerian, with interest rates ranging from 18% to 27%?

At these rates, home ownership is largely unrealistic for the average Nigerian earning below, say, N500,000 per month. Mortgage repayment for even a modest home exceeds 40 per cent of monthly income, far above global affordability thresholds. This leads to a preference for self-construction or informal housing. There is a need for innovative interventions through subsidised interest rates, credit guarantees, or scalable alternatives like rent-to-own and shared equity models.

How do land titling and lack of collateral hinder mortgage access, especially in informal settlements?

In Nigeria, a significant portion of land is not formally registered or titled, especially in informal urban settlements. Without valid titles, properties cannot serve as mortgage collateral. This makes it risky for banks to lend, as they cannot legally foreclose or enforce repayment. Streamlining land registration and digitising land records can help formalise more land for mortgage use.

To what extent do policy shifts affect mortgages in Nigeria?

Frequent policy changes disrupt long-term planning and investor confidence. For instance, inconsistent FX policies affect lenders with dollar-denominated funding. Shifts in regulatory capital requirements, monetary tightening, or sudden withdrawal of subsidies directly impact mortgage pricing and supply. Long-term housing finance thrives in stable, predictable policy environments. Dialogue between the government and mortgage stakeholders is essential to create enduring frameworks.

What lessons can Nigeria draw from advanced economies on affordable mortgage systems?

Key lessons from successful housing finance models around the world offer valuable insights for reforming Nigeria’s mortgage system. One critical lesson is the role of government-backed guarantees, such as those provided by the Federal Housing Administration in the United States. These guarantees reduce the risk for lenders, making them more willing to extend long-term credit, particularly to first-time and low-income buyers. Another essential element is the development of secondary mortgage markets, which help to free up capital for new lending. By allowing mortgage lenders to sell off existing loans, they can recycle funds and maintain liquidity, ultimately expanding access to mortgages. Inclusive credit scoring also emerges as a transformative approach. In many advanced markets, lenders increasingly rely on alternative data, such as rent history, utility payments, and mobile money transactions, to assess creditworthiness. This broadens the pool of eligible borrowers, particularly those in the informal sector who may not have traditional credit records. Subsidised interest schemes targeted at low- and middle-income households further enhance affordability.

These programmes reduce the effective interest rates on mortgage loans, making monthly payments more manageable and encouraging uptake among underserved demographics. Digitising land registries is another game-changing reform. By reducing fraud, ensuring transparency, and speeding up property verification, digitised systems allow for quicker loan approvals and greater investor confidence in the housing market. Lastly, integrated housing-finance strategies are crucial. Successful systems align housing finance with urban planning and development efforts. This means coordinating land use, infrastructure development, and mortgage financing in a holistic manner to ensure sustainable housing delivery. Collectively, these lessons point toward a more inclusive, efficient, and scalable housing finance ecosystem, one that Nigeria can adapt to meet the growing needs of its population.

Why hasn’t Nigeria’s mortgage regulation drawn institutional investors despite PENCOM’s push?

Institutional investors, particularly pension funds, place a premium on safety, stable returns, and liquidity when allocating capital. However, Nigeria’s mortgage market currently falls short in several critical areas that undermine its appeal to these investors. One major shortcoming is the absence of standardised and securitised mortgage assets. In mature markets, mortgages are bundled into mortgage-backed securities, providing institutional investors with instruments that are both tradable and backed by real assets.

Nigeria lacks such structures, making it difficult for pension funds to assess and manage risks effectively. Additionally, the market is hampered by inefficient foreclosure mechanisms. Lengthy legal processes and unclear enforcement procedures create uncertainty around loan recovery, increasing the risk exposure for long-term investors. Another obstacle is the lack of reliable property valuation and titling systems. Without consistent and transparent frameworks for determining property value and legal ownership, institutional investors face significant due diligence challenges and the threat of fraudulent claims or overvalued assets.

Furthermore, the market suffers from a dearth of long-term credit ratings and historical performance data. This lack of track record makes it difficult for investors to price risk accurately or benchmark returns, both of which are essential for informed investment decisions. Without robust risk management frameworks and regulatory oversight, institutional capital, particularly long-term funds like pensions, will continue to stay on the sidelines. Addressing these gaps is essential for unlocking the flow of institutional capital into Nigeria’s mortgage market, which in turn could drive more affordable and accessible housing finance.

How can long-term mortgage plans be structured for youth with unstable incomes?

To address the realities of income volatility, especially among young people and those in the informal sector, flexible mortgage structures are essential. Traditional fixed-payment loans often fail to reflect the income dynamics of many Nigerians, thereby excluding a significant portion of the population from formal housing finance. However, innovative mortgage models can offer a more inclusive path to homeownership. One such model is the step-up mortgage, which begins with lower monthly payments that gradually increase in line with the borrower’s expected income growth.

This is particularly suitable for early-career professionals or entrepreneurs whose earnings are likely to rise over time. Income-linked repayments offer another adaptive solution. Rather than fixed amounts, repayments are tied to a verified percentage of the borrower’s income, ensuring affordability even during periods of low earnings. This model promotes financial resilience and reduces the likelihood of defaults. Hybrid rent-to-own schemes also provide a valuable bridge to ownership. These arrangements allow individuals to begin as tenants and transition to homeowners once their income stabilises. This flexibility lowers the entry barrier and allows households to build equity gradually. Shared equity financing goes a step further by introducing institutional co-investors who contribute a portion of the home’s cost. In return, they share in the future appreciation of the property. This approach significantly reduces the upfront financial burden on the buyer and aligns the interests of both parties. Together, these flexible mortgage models and risk-mitigation tools offer a powerful framework for expanding access to homeownership in a way that reflects Nigeria’s economic realities and income diversity.

How have naira volatility and 2024’s 33%+ inflation impacted the sustainability of mortgage repayments?

High inflation erodes household purchasing power, while naira devaluation increases the cost of construction and imported materials. This raises housing prices and mortgage loan sizes. Fixed-rate mortgage repayments become unaffordable as real incomes fall. On the lender side, inflation leads to negative real returns unless interest rates are hiked, which again affects affordability. Index-linked mortgages or inflation-adjusted subsidies may offer a partial solution.

How can mortgage providers serve Nigeria’s informal economy, which employs 85% of the workforce?

To build an inclusive mortgage system, models must reflect the unique financial realities of informal earners, who represent a significant portion of Nigeria’s workforce. Traditional mortgage structures, which rely heavily on formal employment records and rigid repayment schedules, often exclude this demographic. However, alternative approaches can bridge this gap and extend homeownership opportunities to millions currently left behind. One of the most promising strategies is the adoption of alternative credit scoring. By leveraging data from mobile money transactions, utility payments, airtime top-ups, and other non-traditional financial behaviours, lenders can assess creditworthiness beyond payslips and bank statements. This opens the door to borrowers in the informal economy who have consistent, albeit irregular, income streams. Flexible repayment terms are equally vital. Informal earners often experience seasonal or fluctuating cash flows, which fixed monthly repayments do not accommodate. Mortgage products tailored to these patterns, such as quarterly payments, balloon structures, or income-indexed plans, can improve affordability and reduce default risks. Micro-mortgages also present a practical solution. By providing small, manageable loans for incremental building or land acquisition, these instruments align with how many low-income households already approach housing: gradually, and as funds become available.

Additionally, group lending models or cooperative guarantees can mitigate risk and enhance access. By pooling resources or using collective guarantees, members of savings groups, trade associations, or cooperatives can jointly qualify for mortgage financing, sharing responsibility and building community resilience. Rent-to-own or lease-purchase schemes with flexible down payment structures offer another pathway. These allow informal earners to begin occupying a property with the option to purchase later, often applying a portion of rent paid toward the eventual purchase price. Finally, integrating mortgage solutions with informal housing developers and fintech platforms can greatly enhance verification, delivery, and monitoring. Fintechs can provide innovative credit assessments and seamless payment systems, while trusted local developers can help ensure quality and affordability.

Why are rent-to-own and cooperative housing schemes underutilised in Nigeria?

The underutilisation of cooperative and group-based housing finance models in Nigeria is rooted in a mix of structural, legal, and perception-related challenges. While these models hold great potential for expanding access to affordable housing, especially for low- and middle-income earners, they have yet to achieve scale and impact. A major limiting factor is the absence of well-defined public-private partnership frameworks to support and scale cooperative housing initiatives. Without clear guidelines, incentives, and institutional backing, these models often struggle to attract private capital or gain government support, leaving them fragmented and underfunded. Equally problematic is the limited access to affordable land, especially in urban and peri-urban areas. Cooperatives face difficulty acquiring land at reasonable prices, and bureaucratic bottlenecks around titling and allocation further slow down development efforts. Without secure and affordable land, the viability of cooperative housing projects remains compromised. Additionally, the lack of robust financing models and ambiguous legal structures for shared ownership creates confusion and discourages participation.

Questions around title ownership, exit strategies, and asset transferability are often unclear, making investors and potential beneficiaries wary of committing to cooperative arrangements. Compounding these issues is low awareness and weak trust in cooperatives, particularly among the youth. Many young people view cooperatives as outdated or mismanaged, due in part to past experiences of poor governance, lack of transparency, or failed projects. However, these challenges are not insurmountable. With strong government support, including policy incentives and technical assistance, cooperatives can be repositioned as credible vehicles for housing delivery. Risk-sharing mechanisms, such as guarantees or co-financing schemes, can attract private investors and reduce the burden on cooperative members. Moreover, leveraging digital platforms for onboarding, transparency, payment tracking, and governance can modernise cooperative operations and restore trust, especially among digitally savvy youth.

In what ways can blockchain land records enhance mortgage accessibility?

Blockchain technology holds the potential to fundamentally transform land administration in Nigeria, addressing many of the inefficiencies and risks that currently undermine the mortgage system. One of its most powerful features is the ability to create tamper-proof, transparent records of land ownership. By storing title information on an immutable digital ledger, blockchain significantly reduces the risk of forgery, double allocation, or unauthorised alterations, issues that have plagued Nigeria’s land registries for decades. In mortgage transactions, title verification is often a major bottleneck. Blockchain can streamline this process by enabling real-time, verifiable access to ownership records, thereby accelerating loan processing and reducing the time it takes for borrowers to access funds. Importantly, blockchain can also minimise land-related fraud and disputes, which are frequent causes of delays, legal battles, and transaction failures. A trusted, decentralised system of record-keeping would offer greater confidence to lenders, investors, and buyers alike, fostering a more secure environment for mortgage lending. Additionally, blockchain can enhance interoperability between critical institutions, including land registries, banks, and judicial bodies. Through smart contracts and shared digital protocols, these stakeholders can exchange information more efficiently and securely, improving coordination and transparency across the entire housing finance ecosystem. Pilot programmes in progressive states such as Kaduna and Lagos could serve as valuable testbeds for the technology, offering real-world insights into its implementation, scalability, and impact. Success in these states would lay the groundwork for broader nationwide adoption, positioning Nigeria as a regional leader in leveraging blockchain for real estate and mortgage reform. Ultimately, by embracing blockchain, Nigeria can modernise its land administration, unlock trust in its property systems, and accelerate the development of a vibrant, inclusive mortgage market.

Why are diaspora Nigerians not investing in mortgages despite remitting $20 bn in 2023?

For many Nigerians in the diaspora, the desire to own property back home is strong, but persistent challenges often deter them from taking action. Chief among these concerns is the risk of fraud and unreliable land title systems. Stories of property scams, double allocations, and ownership disputes are widespread, undermining trust in the market. Poor customer experience further compounds the problem. Opaque processes, delays, and unresponsive communication from agents, lenders, and developers make navigating real estate from abroad difficult and discouraging. Additionally, most mortgage products in the market are not tailored to diaspora needs. They often lack clarity on pricing, repayment terms, and eligibility criteria, while failing to consider foreign income patterns and obligations. Legal enforcement is another critical concern. Many diaspora investors worry about their ability to enforce property rights or resolve disputes in their absence, especially in cases of default, encroachment, or mismanagement.

To address these issues, targeted solutions are essential; establishing trusted, diaspora-focused mortgage institutions with clear due diligence procedures and responsive support can restore confidence. Transparent, standardised mortgage products, with digital onboarding and flexible repayment options, would better meet the needs of diaspora clients. Partnerships with reputable developers and guarantors can also reduce delivery risk and ensure accountability. When supported by secure digital platforms and effective legal safeguards, these reforms can unlock the vast potential of diaspora capital.

With the right blend of trust, structure, and innovation, Nigeria can convert diaspora interest into sustainable investment, boosting housing delivery and driving national economic growth.

Can international mortgage-backed securities help Nigeria attract diaspora financing?

Unlocking diaspora investment in Nigeria’s mortgage market is achievable, but only if key foundational elements are established. First, there must be standardised, performing mortgage pools that meet clear underwriting standards and demonstrate reliable repayment. This builds investor confidence and supports securitisation efforts. Equally critical are credit enhancement mechanisms, such as government-backed guarantees or mortgage insurance, to reduce investment risk and boost credit quality. To attract institutional diaspora investors, globally rated mortgage-backed securities are essential. These provide the transparency and credibility required for compliance and risk management. A trusted cross-border investment infrastructure is also vital. This includes secure digital platforms, enforceable legal protections, and robust dispute resolution frameworks, potentially supported by development finance institutions or multilateral agencies to ensure trust and stability.

Nigeria can learn from Kenya’s KMRC, which has successfully issued mortgage-backed bonds, and Morocco, which has effectively used securitisation to deepen its housing finance market. With these structural pillars in place, Nigeria can begin to attract diaspora capital, transforming remittances into long-term investments that strengthen its housing finance ecosystem and support broader economic development.

How does weak consumer protection in Nigeria’s housing finance expose borrowers to exploitative contracts?

Inadequate consumer protection in Nigeria’s mortgage market exposes borrowers to significant risks and undermines public confidence in housing finance. Without clear safeguards, many consumers face unfair loan terms, including hidden fees, excessive penalties, and unclear repayment conditions. These practices often leave borrowers financially vulnerable and unable to plan effectively. A major gap is the lack of full disclosure on the true cost of borrowing, such as the annual percentage rate. Without this transparency, borrowers cannot accurately compare loan offers or understand the long-term implications of their commitments. To make matters worse, consumers have limited recourse when disputes arise, as there are few structured channels for redress or independent arbitration. To address these challenges, Nigeria needs robust mortgage consumer protection laws, supported by standardised loan contracts and clear disclosure requirements. Establishing a dedicated mortgage ombudsman will provide borrowers with a reliable mechanism for resolving complaints and enforcing their rights, ultimately fostering greater trust and participation in the mortgage market.

How can more flexible credit scoring models open the mortgage space beyond traditional salary-based metrics?

Flexible credit scoring models offer a powerful pathway to financial inclusion, especially for Nigeria’s large informal sector. Traditional credit assessments, based on payslips, tax returns, and bank statements, exclude millions who earn consistently but lack formal documentation. To bridge this gap, more inclusive models must consider alternative data sources. These include utility and rent payment histories, which provide evidence of regular financial behaviour. Similarly, mobile wallet transactions and airtime usage patterns offer insights into spending habits and income flows, especially for those active in digital financial ecosystems. Remittance inflows, both domestic and international, can signal a stable support system or side income, while cash-based business revenues captured through point-of-sale records or agent networks can indicate creditworthiness in micro-enterprises. Another promising tool is the use of peer group reputation scores in social lending circles or cooperatives, where repayment discipline is reinforced by group accountability.

To scale these innovations, fintechs and credit bureaus must collaborate to develop robust alternative credit frameworks. This requires clear regulatory guidance and support from the Central Bank of Nigeria and the Federal Mortgage Bank of Nigeria, ensuring that new models are secure, standardised, and widely adopted across the ecosystem.