Real Estate Investment in Nigeria: Can Finance Companies Bridge the Mortgage Gap?

Introduction: A Promise Unlocked

For Nigerians in Canada, the USA, or anywhere abroad, investing in property back home often feels like a balancing act between heart and logistics. A dream tethered to cultural roots, yet tangled in financial hurdles. Today, local finance firms are stepping up—bringing innovation, structure, and hope to the dream of homeownership. But can they truly bridge the mortgage gap and transform aspirations into reality?

Understanding the Mortgage Gap in Nigeria

Nigeria faces a huge housing shortfall—estimated at 28 million units—while the mortgage sector contributes just 0.5% to GDP (Businessday NG). Global comparisons show mortgage markets typically cover 50%–70% of GDP; Nigeria remains far behind (Real Estate in Nigeria). The result? Many Nigerians are excluded from formal home financing.

Key barriers include:

Short loan tenures and high interest rates reduce affordability. Most mortgages last just 5–20 years, unlike the 30-year models in the U.S. and Canada (Real Estate in Nigeria).
Strained funding institutions, like the underfunded FMBN, leave many low- and middle-income earners unserved (The Sun Nigeria).
Immense credit gap—estimated at over ₦24 trillion, or roughly 68% of GDP—reflects a huge unmet demand for loans in housing and other sectors (Finance in Africa).

Why the Mortgage Gap Persists

Underdeveloped secondary mortgage market: In mature systems like Canada or the U.S., institutions such as Fannie Mae and CMHC provide liquidity and affordability. Nigeria’s equivalent, the NMRC, is still ramping up (Real Estate in Nigeria).
Rigid lending criteria: Formal sector employment, strong credit scores, and significant collateral are often required—excluding many Nigerians working informally.
Economic instability: Inflation and currency volatility make lenders cautious and borrowers wary.
Housing supply gap: With millions of homes missing, even well‑funded mortgages can’t solve the problem without more housing funds and projects.

How Finance Companies Are Filling the Gap

Finance firms—both public and private—are stepping into this void, offering creative solutions:

a) MOFI’s ₦250 Billion Real Estate Fund

Launched in early 2025, this public-private fund offers 25-year mortgages at 11%–12% interest—significantly lower than private bank rates (Real Estate in Nigeria). It’s a bold move toward making homeownership realistic for more Nigerians.

b) NMRC’s Refinance Model

The Nigeria Mortgage Refinance Company (NMRC) provides secondary funding to mortgage providers. This increases loan availability and encourages longer tenures and more affordable rates (Businessday NG, Wikipedia).

c) Private Bank Partnerships

Banks like FCMB partner with developers and housing firms to deliver mortgage products with longer terms and better pricing. These collaborations target first-time buyers and expand affordability (FCMB).

d) Innovative Schemes Like Rent-to-Own

Emergent models, such as Mixta Africa’s Duo, allow prospective homeowners to move in while paying rent-equivalent installments that build equity over time (Mixta Website).

Quick Comparison Table

Finance Solution	Key Feature	Benefits
MOFI Real Estate Fund	25-year mortgages @ ~11%–12%	Affordable, long-term access
NMRC Refinance	Provides liquidity to mortgage banks	Expands loan availability & tenure
Bank–Developer Partnerships	Developer-backed financing	Faster project delivery, lower costs
Rent-to-Own Schemes	Pay rent, build ownership gradually	Low upfront cost, flexible ownership

North American Insight: What Can Nigeria Borrow?

When Nigerians in Canada or the United States hear the word mortgage, they picture a stable, structured, and widely accessible home financing system. Mortgages are so common in North America that more than 65% of households own their homes—most through mortgage financing.

Nigeria, in contrast, has less than 1% mortgage penetration, according to recent housing market reports. This isn’t due to lack of demand—it’s because the systems that make mortgages affordable and accessible in North America are still in their infancy back home.

By studying how Canada and the U.S. structure their mortgage markets, Nigeria can adopt proven policies and financing models that could dramatically close the housing and mortgage gap.

1. Long Tenures Make Homeownership Affordable

In Canada and the U.S., the standard mortgage term can be 25 to 30 years, and in some cases even 40.

Impact: Longer repayment periods mean smaller monthly payments, allowing middle-income earners to buy homes without exhausting their income.
Contrast with Nigeria: Most Nigerian mortgages are 5–20 years, making monthly payments far higher relative to earnings. For example, a ₦30 million loan at 15% interest over 10 years has repayments that are almost double what a 30-year U.S. mortgage of equivalent value would be in USD terms.

Lesson for Nigeria: Expanding loan tenures—like the MOFI ₦250 billion real estate fund’s 25-year plan—can bring affordability closer to North American standards.

2. Lower Interest Rates Attract More Borrowers

In Canada, recent mortgage interest rates range from 5%–7% depending on loan type. Also U.S., rates have historically been lower (3%–6%) but have risen recently due to inflation control measures.

Nigeria, however:

Standard bank mortgage rates often exceed 15%, and sometimes 20%.
Subsidized options, like FMBN’s National Housing Fund loans, offer ~6% interest, but access is limited.

Lesson for Nigeria:

Build more refinance-backed lending systems (similar to Canada’s CMHC or U.S. Fannie Mae/Freddie Mac) to give banks confidence to lower rates.
Encourage competitive mortgage products that reward consistent repayment and stable income.

3. Secondary Mortgage Markets Keep Money Flowing

One of the reasons Canadian and U.S. banks can lend so freely is the secondary mortgage market.

How it works: Lenders sell mortgages to institutions like Fannie Mae, Freddie Mac (U.S.), or CMHC (Canada), freeing up capital to issue new loans.
Why it matters: Banks aren’t stuck waiting decades to recover loan funds—they get fresh liquidity almost immediately.

Nigeria’s NMRC (Nigeria Mortgage Refinance Company) is a similar model, but it’s still developing its reach. Expanding NMRC’s capacity could be transformative.

4. Flexible Loan Products for Different Needs

North America’s mortgage ecosystem offers diverse products:

Fixed-rate mortgages for stability.
Adjustable-rate mortgages for those who expect income growth.
First-time buyer incentives and government-backed loans for low-income households.
Refinancing options to switch to better terms when interest rates drop.

Lesson for Nigeria:
Introduce product variety—including rent-to-own, step-up payment plans, and diaspora-targeted mortgages—to cater to different income brackets and life stages.

5. Strong Consumer Protection & Transparent Processes

In Canada and the U.S.:

Loan terms are clearly disclosed.
There are legal protections against predatory lending.
Foreclosure processes are standardized and regulated.
Buyers can access free credit reports to know where they stand.

Nigeria has made progress in regulating lending institutions, but more needs to be done to:

Enforce transparent loan terms.
Provide standardized foreclosure and dispute resolution.
Educate borrowers on their rights and obligations.

6. Government’s Role in Affordable Housing Finance

In both Canada and the U.S., the government plays a proactive role:

Offering tax credits for mortgage interest.
Funding low-income housing developments.
Guaranteeing certain loans to reduce lender risk.

Nigeria can mirror this through:

Expanding public-private housing funds like MOFI’s.
Providing tax incentives for first-time homeowners.
Creating guarantee programs that reduce default risk for banks.

✅ Bottom Line:
Nigeria doesn’t need to reinvent the wheel—it needs to adapt the best practices from countries where mortgages are a way of life.
By:

Extending tenures,
Lowering rates through refinance models,
Strengthening the NMRC,
Offering diverse loan products, and
Protecting borrowers with clear regulations,

Nigeria’s finance companies could turn the dream of homeownership into reality for millions—including Nigerians in Canada and the USA who want to invest back home.

Remaining Roadblocks to Watch

Even with new initiatives like the MOFI ₦250 billion real estate fund, NMRC refinancing, and bank–developer partnerships, Nigeria’s mortgage and housing market still faces structural challenges. For the dream of widespread homeownership to become reality, these obstacles must be acknowledged and addressed.

1. Interest Rates Still Out of Reach for Many

While subsidized products like FMBN’s National Housing Fund loans offer ~6% annual interest, most Nigerians rely on commercial bank mortgages, which often exceed 15%–20%.

At those rates, monthly repayments consume a large share of income.
Even middle-income earners struggle to qualify for sustainable mortgages.

Why it matters: Without lower, more predictable rates, the mortgage market will remain a niche product for high earners.

2. Low Mortgage Penetration

Less than 1% of Nigerians currently own homes through a mortgage. Compare this to over 60% mortgage penetration in the U.S. and Canada.

This shows that despite high housing demand, mortgages aren’t the primary financing tool in Nigeria.
Cash purchases and informal arrangements dominate, excluding many who could afford structured payments.

3. Funding Constraints for Key Institutions

Institutions like FMBN and some primary mortgage banks (PMBs) face capital limitations.

Without recapitalization, their ability to issue or refinance long-term loans remains restricted.
Limited funding also affects their capacity to expand into rural and peri-urban markets.

Impact: Mortgage availability stays concentrated in major cities, leaving the housing deficit in smaller communities unaddressed.

4. Housing Supply Shortfall

Even the most affordable loan program fails without enough homes to finance. Nigeria’s 28 million unit housing deficit means:

Prices remain high due to scarcity.
Developers may focus on high-margin luxury units instead of mass housing.
Infrastructure gaps in new estates slow occupancy and rental potential.

5. Currency and Economic Instability

Inflation, exchange rate volatility, and high construction costs make mortgage repayment riskier:

Lenders raise rates to hedge against economic uncertainty.
Borrowers face increased living costs, raising default risk.

6. Regulatory and Legal Bottlenecks

Land titling processes remain slow and bureaucratic, delaying mortgage approvals.
Inconsistent enforcement of property laws leads to disputes.
Foreclosure processes are lengthy, making lenders hesitant to take risks.

✅ Bottom Line
Bridging the mortgage gap in Nigeria requires more than just new loan products. Finance companies, government agencies, and developers must work together to:

Lower rates sustainably.
Increase funding for mortgage institutions.
Accelerate housing supply, especially affordable units.
Streamline legal and titling processes.

Only then will mortgage penetration grow beyond a privileged few and become a viable pathway for millions—including Nigerians abroad—to own homes.

Why This Matters to Diaspora Investors

Nigerians in Canada and the USA—accustomed to stable, transparent mortgage systems—can benefit from these African developments:

Affordable long-tenor loans through MOFI or NMRC-backed institutions.
Efficient funding flows, making home projects easier to finance from abroad.
Diversified asset portfolios, bridging North American stability with strategic Nigerian property exposure.

Conclusion: Bridging the Mortgage Gap Is Possible

Yes—real estate investment in Nigeria is becoming more accessible. Through MOFI’s targeted mortgages, NMRC’s financing support, collaborative bank partnerships, and creative rent-to-own models, local finance firms are actively bridging the mortgage gap.

This transformation is not just financial—it’s personal and powerful. With continued reform, supportive policies, and expanded housing supply, real estate in Nigeria can be a viable, rewarding option for both residents and diaspora investors.

FAQs – Bridging the Mortgage Gap in Nigeria

1. What is the “mortgage gap” in Nigeria?
The mortgage gap refers to the huge difference between housing demand and the availability of affordable home loans. While Nigeria has a housing deficit of over 28 million units, less than 1% of Nigerians own homes through a mortgage.

2. How are finance companies helping to bridge this gap?
Finance companies are introducing longer-tenure mortgages, partnering with developers, using refinancing from NMRC, and offering innovative products like rent-to-own schemes to make homeownership more accessible.

3. Why are mortgage interest rates so high in Nigeria compared to Canada or the USA?
Rates are higher due to inflation, currency volatility, limited refinance options, and lenders’ need to reduce risk. In Canada or the USA, strong secondary mortgage markets and government-backed lenders keep rates lower.

4. Are there mortgage options for Nigerians living abroad?
Yes. Some banks and the Federal Mortgage Bank of Nigeria (FMBN) offer diaspora mortgage products that allow Nigerians in Canada or the USA to invest in property back home with payments in USD or CAD.

5. What’s the biggest challenge to increasing mortgage access in Nigeria?
Beyond high rates, the biggest challenge is housing supply. Without enough affordable homes, even the best mortgage program cannot meet demand.

6. How can the Nigerian mortgage market become more like Canada or the USA?
By extending loan tenures to 25–30 years, lowering rates through expanded refinancing, improving title registration, and growing the secondary mortgage market—similar to Fannie Mae, Freddie Mac, or CMHC.