The Mortgage Finance Market in Nigeria: Prospects and Future Outlook

Abstract

This study provides a comprehensive and analytically rigorous investigation of Nigeria’s mortgage finance market,
offering new insights into its structural limitations, institutional weaknesses, and reform prospects. While existing literature
typically examines isolated aspects of housing finance, this study advances the field by integrating legal, financial, and behavioural
theories with cross-country empirical evidence to construct a unified analytical framework for understanding mortgage market
underperformance in emerging economies. Using a systematic literature review and discourse analysis, complemented by a
comparative dataset covering fourteen African countries, the study applies the Merton intertemporal portfolio model, risk-aversion
frameworks, and an original regression specification to identify the determinants of national housing deficits. The model
incorporates population growth, mortgage-market depth, interest-rate conditions, affordability indices, and institutional variables.
Findings reveal that Nigeria’s mortgage market remains critically shallow—with mortgage assets below 1% of GDP and a housing
deficit surpassing 28 million units—driven by affordability constraints, limited long-term funding, and regulatory inefficiencies.
Regression results show that housing deficits rise with population growth and the number of mortgage providers, but decline with
improved mortgage-market size and affordability, explaining 47.3% of cross-country variation. This evidences the centrality of
institutional capacity in shaping market outcomes. The study’s novelty lies in its multi-layered synthesis of theory, comparative
African data, and empirical modelling—rare in existing mortgage-finance scholarship—as well as its introduction of a new
conceptual framework linking borrower behaviour, regulatory design, and systemic liquidity. The paper concludes with actionable
policy recommendations, including the development of a secondary mortgage market, recapitalisation of key institutions, and
affordability-enhancing reforms, offering a practical roadmap for policymakers and investors seeking to expand sustainable housing
finance in Africa’s largest economy.