**2. Finance and housing delivery**

Housing finance is one of the most important factors affecting housing delivery and urban policies. Several authors believe that establishing a suitable financing system can improve housing in any given society [5, 7, 10, 14]. Some governments have updated their financial institutions to encourage private sector financing organizations to participate in the provision of housing delivery financing [14]. As Makinde [7] and Mukhtar et al. [14] stated, in Nigeria, housing delivery is affected by the lack of an adequate housing financing system, which undermines housing production.

In Nigeria, housing financing is divided into formal and informal [7, 14, 15]. Formal institutions include financial institutions such as commercial banks, Federal Mortgage Bank of Nigeria (FMBN), and Specialized Development Banks. In contrast, informal sources of housing finance are typified by individuals saving money for extensive periods of time in order to build a house. Most of the houses (80%) constructed in Nigeria were provided through long-term personal savings [7, 10, 14]. Other informal funding sources include: voluntary housing drives and different credit union organizations and individual money lenders [5, 7, 10]. Although informal sources often help provide the necessary funds for housing delivery, because such practices are not planned or documented, it is impossible to statistically measure their impact on housing delivery. Their scope of operation differs [16].

Institutions embedded in formal financial mechanisms make it difficult for many people who want to build houses to obtain this form of financing. In 1991, the Nigerian National Housing Policy (NHP) established a dual system of housing finance. In the 1991 housing policy, the first housing finance system was the Primary Mortgage Bank (PMB), and the second system was the Federal Mortgage Bank of Nigeria (FMBN) created in 1977 to offer financing for the provision of standard housing to the people. One of the main functions of FMBN is to guide and manage the PMBs. Nevertheless, this function has been reallocated to the Central Bank of Nigeria [7]. The two goals of FMBN are to strengthen the formation and expansion of the PMB Bank nationwide and provide funding for housing. It was

### *Housing Challenges in Nigeria DOI: http://dx.doi.org/10.5772/intechopen.99263*

established to oversee the National Housing Fund (NHF), which ensures that public and private employees make mandatory contributions to the fund [7, 17]. In 1992, the NHF was established to provide long-term mortgages at an affordable interest rate to people. However, the achievement level were not successful because only 12,000 people benefited from a total of 3.8 million qualified taxpayers who applied for loans [5]. In order to apply for an NHF loan, certain requirements must be met, including an annual income of more than 3,000 naira and a donation of 2.5% of the employee's basic monthly income. These compulsory contributions and the long wait for obtaining these funds often limit the ability of workers to obtain such funding sources [5]. In addition, the interest paid on such loans must not exceed 9%, and the repayment period is approximately 30 years. In addition, the funds granted to any individual applicant must not surpass 5 million naira [10]. At present, this is not enough to build high-quality houses, and it is also unaffordable for most of the Nigerian population. The capacity to provide housing in Nigeria through access to formal financial mechanisms has been affected by several challenges. These include housing finance problems, for example; people are constrained by various institutional bottlenecks, bureaucratic procedures to obtain land ownership hamper the payment of NHF funds, high inflation and interest rates in the country, and the inability of people and developers to obtain long-term funds loans [10, 14].
