E. Mobilization and allocation of financial resources

It has already been globally recognized that

"for the shelter sector to operate in an optimum manner, there will be a need to channel an appropriate level of resources into this sector, in line with an enlightened understanding of its role in the development of the national economy. Financial resources will have to be mobilized in three important areas: public infrastructure investments, operation and maintenance; housing financing; and explicitly targeted subsidies to enable needy families to meet basic shelter needs" (UNCHS, 1990b: 26).

The question of how this recognition is applicable in Nigeria is examined below. The three areas mentioned above are discussed separately.

1. Financing for infrastructure

Currently, the common practice in Nigeria is for the public sector to be directly involved in the provision and operation of infrastructural services. Normally, the Government makes annual budgetary allocations for infrastructure. It is then left to its officials (through direct labour) or for contractors to build or install the road, water-supply and drainage systems, sewerage networks, water-disposal electric power and communication facilities in new residential layouts. But because of inadequate funding, coupled with budget fluctuations, the high cost of these services and the influence of spiralling prices, it sometimes takes up to 10 years to provide these services to a layout after its development. Consequently, in many cases, development precedes the installation of infrastructural services. This makes it even more difficult and costly to provide them later. The impact of this situation in terms of shelter provision and availability is that houses built in these types of layouts are shunned by prospective renters unless as a last resort.

Experience shows that the responsibility for the provision of infrastructure and services is often beyond the financial capability of the public sector, especially at the local-governrnent level. Thus, only the federal and state governments have generally found it possible to undertake services for infrastructural development. However, two recent developments associated with the National Housing Policy has changed this.

Table 3. Programme outline for private estate developers, Lagos

Type of scheme Developers responsabilities		Estimated execution time(years), by area
		Urban	Urban fringe	Rural
Limited lay out	Preparation or provision perimeter survey, lay out earth roads, functional drainage, beacon sheets, report on programming.	2	3	4
Comprehensive sites-and-services	Preparation/provision of: perimeter survey, lay-out plan, beacon sheets, functional drainage, tarred roads, sewage water (borehole), and electricity, feasibility and viability report	5-6	6-7	7-8
Comprehensive	Preparation/provision of: perimeter survey, lay-out	9	9	9
land-development	plan, beacon sheets, tarred roads, sewage, pipe
scheme	borne water, electricity and telephone lines feasibility and viability report, design and construction of buildings

Source: The Guardian, 8 January, 1990.

The first of these developments is the entry of private-sector developers. Private developers in Lagos State like HFP have acquired tracts of lands, laid them out as essentially residential estates and have commenced actual development (see table 3). Thus, the funding of infrastructural development will now depend less on annual government budgetary allocations and more on the money and capital markets. Furthermore, to reduce interest payments, the private-sector developer is likely to execute jobs faster than the public sector.

A second positive development on the infrastructure development scene is the establishment of the Infrastructure Development Fund (IDF), a source of long-term soft loans for state and local governments and their agencies to support infrastructure provision. The origin of this programme lies in the recognition by the Federal Government of the need for an appropriate financing mechanism for urban infrastructure and services and for increased resource mobilization, investment prioritization and programming. While it is expected that the structural adjustment programme would in time alleviate the financial crisis, the states urgently require a viable and sustainable financial mechanism for urban infrastructure and services.

Problems of city-wide infrastructure and urban improvement financing began to be addressed under subsequent projects in the erstwhile Nigerian States Urban Development Programme in the states of Benue, Ondo and Gongola (these are now sub-projects of the IDF). During technical and fiscal preparations and surveys of these projects, the need for a sustainable mechanism for funding investments became increasingly apparent.

In 1983, the FMW&H requested the World Bank for assistance in finding an institutional solution to the problem. The IDF concept was proposed and accepted by the Government in June 1985. Subsequently, consultants were engaged to study the issue of the institutional location of the Fund. Their recommendation to license some of Nigeria's merchant banks to operate the fund was adopted as the institutional framework for the Fund. The Federal Government's acceptance to utilize the merchant banks in this venture is a major policy breakthrough and will facilitate private-sector participation in the financing of urban infrastructure.

The primary objective of the IDF is to initiate the establishment of an urban infrastructure wholesaling mechanism. This mechanism would assist states to manage, maintain and consolidate existing infrastructure and services and to improve financial management and resource mobilization. An equally important and complementary objective of the project is to assist individual states to improve infrastructure investment planning and prioritization.

The institutional framework of the project relies on the demonstrated managerial strengths and track records of the merchant banks. A few banks were selected to serve as financial intermediaries for the project. These were: Continental Merchant Bank Limited, Nigerian Merchant Bank Limited and NAL Merchant Bank Limited. The banks were selected on the basis of size of assets, quality of staff, interest in lending to state governments, willingness to move to longer-term lending for infrastructure projects and readiness to make the changes in their operations and procedures necessary to help states improve their project execution, resource mobilization and financial management capabilities. The minimum size asset base regarded as necessary to serve as an IDF financial intermediary is in the range of N300N400 million ($1.5-2.0 million). Additional merchant banks or other financial institutions may in future be selected as the IDF expands. Recently, Diamond Bank Limited, a purely commercial bank has been added to this group.

The changes introduced by Lagos State (see section I.E.1 and table 3) are expected to relieve the public sector, both financially and logistically. The public servant, for instance, who previously would be engaged in taking his/her staff to the site to instal water pipes or electric poles would now be freed by the private developer to concentrate on specifying and controlling the standards to be met by the developers. In this regard, one sees the changing communities and NGOs undertaking direct responsibilities, in the provision and/or operation of infrastructure and services.

Lagos State was not alone in moving towards an enabling strategy, even before the formal launching of the National Housing Policy. In the community of Ota (Ogun State) a sites-and-services scheme, Benjaville Suburbia, is being undertaken by a private developer. It involves roads (15 km, N9 million), water supply (N 14 million), electricity supply (N6 million), telephone (300 lines, N5.5 million) and recreation facilities (N3.9 million).

At a different and larger scale of operation in the provision of infrastructure and services, the big public corporations - Nigerian Electricity and Power Authority (NEPA), the state water boards and authorities, etc. - are very much in firm control of the situation. There are serious moves to commercialize these operations across the board, in line with the structural adjustment programme. Indeed, both NEPA and NITEL have gone commercial to improve their effectiveness.

From the above, one realizes that adequate investments in infrastructure networks are crucial to meeting shelter needs. Equally, payments for infrastructure need to be collected from users and from those who benefit from increased land values as a result of infrastructure improvements.

2. Financing for housing

Housing finance is the provision of finance or capital for housing. There are three ways of looking at this: housing finance can be taken to mean the capital required for the construction of housing or housing projects, the resources required to acquire or access housing by households, or the credit supplied by housing finance institutions (UNCHS, 1991: 1).

Housing finance has been identified as a key component of a shelter strategy. It is therefore, mandatory for governments to ensure that an appropriate environment is created for the mobilization of funds. The development or reform of institutions engaged in financing housing should be part of an overall effort to strengthen and develop the financial system of a country. The objectives of such an effort should be geared towards the promotion and mobilization of savings, reduction in costs and improvement of the efficiency of financial intermediation, thereby promoting free movement of capital throughout the national economy.

In the past, public-sector efforts to stimulate savings for shelter were insignificant in Nigeria. They consisted of the savings and loans units of FMBN and the state housing corporations, none of which could be described as successful. However, some significant changes may have been recorded under the new National Housing Policy which seeks to encourage and stabilize contractual and voluntary saving schemes whereby individuals obtain future housing loans at low cost, and save at low deposit rates.

The policy also incorporates a mandatory home savings scheme within the framework of NHF, with the following terms:

A mechanism similar to the clearance certificate is also being utilized to gain the participation of the self-employed workers in the scheme.

3. Targeted subsidies

In Nigeria, the Government has all along engaged in the development of layouts for residential purposes. This usually involves the provision of subdivided land and the necessary infrastructural facilities at a very high cost. It is normal practice that each plot allottee is charged a token fee as development charges while the Government bears the bulk of the costs. This could be regarded as indirect subsidization. For example, in the implementation of the sites-and-services programme, there is evidence of cross-subsidization whereby the larger plot sizes are charged more premiums and development charges. Recently, the FMW&H built 100 one-bedroom prototype housing units at the Isheri-Olofin Housing Estate to alleviate the housing problems of junior civil servants. The production cost of each flat was N35,000 ($1750). Each unit was sold for N25,000 ($1250). This represents a subsidy of N 10,000 ($500) or about 12 per cent which excludes the price of land. The prototype housing scheme is an experimental direct construction effort aimed at providing affordable housing especially for low-income groups. It is usually allocated through the balloting method.