One of the persistent challenges in Nigeria’s housing sector is the inability of many citizens to afford traditional mortgages and achieve homeownership.
Estimates indicate that the Federal Government would require N21 trillion to address the country’s 28 million housing deficit and meet the needs of a population projected at 220 million.
To expand access to affordable housing, the Federal Government has introduced a Non-Interest Mortgage (NIM) system, designed to offer Sharia-compliant, ethical financing alternatives.
The initiative is aimed at providing homeownership options for millions of Nigerians who are excluded from conventional interest-based mortgage schemes.
How the Non-Interest Mortgage System Works
The NIM framework relies on Islamic finance principles, avoiding interest while employing shared ownership, asset-backing, and fair pre-agreed returns. The three main models include:
1. Murabaha (Cost-Plus Sale):
Under Murabaha, the bank purchases the home and sells it to the buyer at a fixed, pre-agreed total price, payable in instalments. For example, a home costing N12 million could be sold for N13.5 million, with payments spread over monthly instalments.
2. Ijarah (Lease-to-Own):
Ijarah functions like a rent-to-own arrangement. The bank owns the house initially, while the buyer pays rent. Portions of the payments gradually contribute toward homeownership until full ownership is achieved. For instance, a monthly payment of N200,000 might include rent and a purchase component, eventually transferring full ownership to the buyer.
3. Musharakah (Diminishing Partnership):
Musharakah involves joint ownership between the bank and the buyer. Both parties own a share of the property, and the buyer gradually purchases the bank’s share over time. For example, if the bank owns 70% and the buyer 30%, monthly payments gradually increase the buyer’s share while reducing the bank’s stake, ultimately resulting in full ownership.
Government’s Perspective
The Securities and Exchange Commission (SEC) and the Federal Mortgage Bank of Nigeria (FMBN) launched the NIM framework to create a nationwide, ethical mortgage ecosystem. SEC Director-General Dr. Emomotimi Agama stated that the commission will develop frameworks for Sukuk issuances and other non-interest capital market instruments to support the initiative.
“Our partnership with FMBN is essential for unlocking sustainable, long-term capital for housing,” Agama said. “A clear regulatory structure for non-interest mortgage-backed instruments will attract ethical investors locally and internationally, supporting continuous funding, construction, and homeownership.”
FMBN Managing Director Shehu Osidi noted that the initiative addresses the limitations of the National Housing Fund (NHF), which has historically excluded citizens unable to participate in interest-based mortgages. “This collaboration ensures mortgage options are ethical, inclusive, and sustainable over the long term,” he added.
The NIM programme is positioned as a transformative step in tackling Nigeria’s long-standing housing challenges, providing millions of citizens with the opportunity to own homes while adhering to ethical finance principles.
