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Nigeria, Mixta Housing

Mobilising local capital markets to fund affordable housing

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Context

Africa is experiencing a period of rapid urbanisation, with rates expected to rise from 36% in 2010 to 50% by 2050. This trend presents governments and planners with a number of challenges, chiefly the need to meet increasing demand from lower middle-class families for affordable urban homes. Nigeria’s housing sector faces challenges arising from complex land titling systems, a lack of available mortgage finance and the country’s macro-economic and political instability. With a large and rising population, the country has a deficit of more than 17 million housing units for a population of 182 million people. Demand for housing near the country’s capital, Lagos, is growing by around 20% per annum. The Government of Nigeria has established the Nigeria Land, Housing and Urban Development Roadmap (2014-2043) to address these challenges.

Project

GuarantCo was approached in 2016 by private real estate developer Mixta Nigeria, a company owned by Mixta Africa, to support the launch of a large-scale affordable housing project near Lagos. Mixta Nigeria proposed to secure finance through local capital markets to enable the construction of 10,000 homes during the next six years. Critical to the initiatives’ success was securing reasonable local currency financing to ensure that the new homes remain affordable for buyers. Mixta developed a NGN 8.6bn (US$27.3m) local currency bond to raise the required finance but was unable to attract investors due to its BBB credit rating and the novelty of the bond in Nigeria’s immature local capital markets. GuarantCo’s AAA rating in the region (Bloomfield Investment) and 100% guarantee for the bonds’ two series secured AAA rating for the bond. GuarantCo’s credit enhancement served to boost investor confidence and appetite, securing the finance required to launch the affordable housing project. 

Impact

‘Addressing the housing deficit will have a game-changing impact on our society and our communities.Dr Ngozi Okonjo-Iweala, Nigeria’s Co-ordinating Minister for the Economy and Honourable Minister of Finance

With finance in place, the Mixta Nigeria project will deliver access to affordable housing for up to 24,231 people.  Built near Lagos, the homes will add to the capital’s overall housing stock. In his keynote address to the 6th Global Housing Finance Conference, Dr Ngozi Okonjo-Iweala noted the multiplier effect of a strong housing sector on economic development - creating jobs and demand for housing services as well as building communities. 

GuarantCo’s credit enhancement was crucial to achieving the local currency bond’s target subscription from local investors such as banks, insurance companies and pension funds. Following the success of its maiden bond, Mixta Nigeria is now well positioned to undertake a larger bond programme during the next two years. By increasing the availability of housing stock, Mixta Nigeria will reduce costs and expand provision of affordable housing in Nigeria.  GuarantCo’s involvement served to increase the availability of local currency finance for infrastructure projects which will ultimately reduce pressure on monetary policy and may lead to reduced interest rates. Reduced interest rates and increasing activity in the construction sector will enable developers to keep costs reasonable and homes affordable for buyers in the future.