Why Nigeria must rethink pensions, credit, and housing for ordinary people

As Nigeria enters a new year, fixing the housing crisis requires unblocking long-term savings, rethinking credit, and aligning monetary policy with how ordinary citizens live, work, and build.

Nigeria’s housing crisis sits at the intersection of rising construction costs, inaccessible pension savings, and prohibitively expensive credit. For millions of working Nigerians, this combination has quietly turned the dream of home ownership into a distant and often unattainable goal.

Across the country, many citizens are formally employed and consistently contribute to pension accounts. Their aspirations are modest: to build or buy a small home before retirement. Yet these long-term savings remain locked away throughout their working lives. When contributors turn to credit as an alternative, they encounter interest rates so high that borrowing becomes financially destructive rather than empowering.

This contradiction lies at the heart of Nigeria’s housing failure. People hold long-term savings but cannot deploy them for long-term needs such as housing, while the credit available to them is short-term, expensive, and poorly suited for incremental home construction or small business growth.

Microfinance banks illustrate this challenge clearly. Loans are often advertised at rates of about 3.87 per cent per month, a figure that may appear manageable at first glance. In reality, such a rate compounds to roughly 46 per cent annually and close to 93 per cent over two years, excluding administrative fees and other charges. A borrower who takes N10 million could repay nearly N20 million within 24 months.

For small businesses, these terms are equally crippling. Many rely on loans for working capital, yet interest obligations consume profits before sales even stabilise. As a result, businesses shrink instead of grow, employment opportunities decline, and local production remains weak. The effects ripple through the economy, reduced productivity, rising unemployment, and increased social pressure.

Housing finance faces similar structural barriers. The Federal Mortgage Bank of Nigeria (FMBN) often encourages prospective homeowners to purchase completed properties before accessing mortgage financing. This model excludes most Nigerians, who typically build gradually as income allows. Completed homes are expensive, and mortgage availability remains constrained by the limited long-term funding available to banks. Without patient capital, affordable mortgages remain scarce.

The pension system, which should ideally help bridge this gap, offers little relief. Although Nigeria’s contributory pension scheme permits contributors to use part of their pension as equity for mortgages, the process is bureaucratic, opaque, and difficult to access. Multiple layers of gatekeeping discourage participation, leaving pension savings effectively untouchable until retirement even though securing housing is one of the primary reasons people save.

The consequences are far-reaching. First, current financial and housing policies push home ownership beyond the reach of ordinary Nigerians. Most people build slowly, stage by stage. Short-term loans with monthly compounding interest are fundamentally incompatible with this reality. Unsurprisingly, buildings remain unfinished for years or are abandoned entirely.

Second, high-cost credit discourages investment and job creation. Small and medium-sized enterprises struggle to survive under such conditions. Rather than expanding and hiring, businesses cut costs or close altogether, worsening unemployment and social instability.

Third, families become trapped in a cycle of vulnerability. They cannot access affordable loans, cannot use their pension savings productively, cannot purchase completed homes, and cannot wait until retirement to secure shelter. Housing insecurity thus reinforces long-term poverty.

Nigeria’s monetary framework compounds these challenges. The Central Bank of Nigeria’s Monetary Policy Rate (MPR) currently around 27 per cent sets a benchmark that commercial and microfinance banks must exceed. While intended to manage inflation and exchange-rate pressures, this approach has the unintended effect of pricing long-term credit far beyond the reach of households and productive enterprises. In an economy where inflation is largely driven by structural and cost factors, such as insecurity, import dependence, and weak local production, high interest rates alone cannot resolve the problem.

Importantly, expanding long-term credit does not require abandoning monetary discipline. The Central Bank of Nigeria can expand long-term credit without undermining its core mandate by using the MPR more flexibly and deploying targeted instruments alongside it. While the MPR can remain the anchor for short-term liquidity and inflation control, the CBN can introduce differentiated long-term refinancing windows for housing, MSMEs, and other productive sectors, priced below the headline rate and supported by strict eligibility and monitoring. Channeled through mortgage banks, development finance institutions, and the Nigeria Mortgage Refinance Company, such facilities would allow long-tenor lending to coexist with a tight monetary stance, ensuring that inflation control does not come at the expense of housing supply, enterprise growth, and financial inclusion.

Other countries demonstrate that better systems are possible. In the United States, long-term mortgage markets allow households to borrow for 15 to 30 years at relatively stable rates, supported by deep capital markets. Workers may also access regulated loans from retirement accounts for housing, under safeguards that protect future income. South Africa uses pension-backed housing guarantees, where pension assets serve as security rather than direct withdrawals, reducing lender risk and lowering interest rates. The United Kingdom combines fixed-rate mortgages with targeted savings schemes to support first-time buyers.

These models share a common principle: citizens are not left stranded between locked-up savings and punitive credit. Instead, systems are designed to connect long-term savings with long-term housing needs.

As a way forward, Nigeria must simplify and expand the pension-to-mortgage framework (with clear timelines for application handling, openness, transparency and equity) so workers saving over decades can use a regulated portion of their pension to secure housing earlier in life with more ease. This is not about draining retirement accounts, but about designing transparent, ease and safe mechanisms that lower borrowing costs.

The country also needs deeper pools of long-term mortgage finance. Institutions such as the Nigeria Mortgage Refinance Company and the Federal Mortgage Bank must be strengthened to provide stable capital that allows primary mortgage banks to offer longer tenors at affordable rates, and a more simplified and verifiable process. This must come with strict accountability and open reporting systems and requirements.

Finally, greater transparency is needed in lending. Borrowers deserve clear disclosure of the real annual cost of loans. Housing policy must also reflect lived realities through incremental housing schemes, serviced plots, and well-structured public-private partnerships.

As Nigeria steps into a new year, the housing crisis should no longer be treated as an inevitable burden or a distant policy concern. It is a daily reality visible in half-completed buildings, in families struggling to balance rent with school fees, and in workers who save faithfully yet cannot translate those savings into security and dignity.

A system that locks away people’s long-term savings while pushing them toward crippling short-term loans and unregulated increase in rent is not sustainable especially if the government is not doing much to open and expand the building construction market to allow more supply and lower cost of materials. But it is also not irreversible. With deliberate reforms linking pensions to housing more effectively, expanding long-term credit through targeted monetary instruments, and aligning housing policy with how Nigerians actually live and build the country can begin to turn aspiration into access.

The new year offers Nigeria a choice: to maintain a system that quietly excludes the majority, or to build one that allows ordinary citizens to save, borrow, and build with confidence. Housing should not be a privilege reserved for the few; it should be part of the promise of work, contribution, and citizenship.

If Nigeria is serious about shared prosperity, stability, and hope, then unblocking the path between the savings Nigerians already have and the homes they are trying to build would be a fitting place to begin.

Udeh is a Project Officer at Saabi Findings Impact Consulting.

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