Assent-Decline on the National Housing Fund Bill – A Good Call by the President

January 22, 2020


A few days ago, the President of the Federal Republic of Nigeria declined assent on the National Housing Fund Bill (the “NHF Bill”) recently passed by the National Assembly. The NHF Bill has generated an uproar from Nigerians as it is seen to create an unnecessary burden on people it purported to cater for. The assent decline by the President therefore received a lot of commendations from the public as the NHF Bill is seen as a rent-seeking legislation. This article examines the worrisome provisions contained in the NHF Bill which led to the utter rejection by the public and the subsequent refusal by the President to assent to the same.


It is indisputable that the real estate sector has struggled for a while and has been in decline for some years now. Prior to the controversial NHF Bill, there has been and still in existence the National Housing Fund Act, 1992 which established the National Housing Fund (NHF). The NHF is geared towards mobilizing funds that will help in providing affordable housing for Nigerians. Under the extant NHF Act, every Nigerian earning N3, 000.00 or more per annum is obligated to contribute 2.5% of their monthly basic salary to the NHF. The contributions will thereafter be made available to contributors at affordable interest rates to build houses of their choice. A difference between the extant Act and the NHF Bill is the shift in the bases of the deduction from basic monthly salary to monthly income.

The NHF Bill hurriedly passed by the National Assembly attempted to repeal the extant NHF Act and introduced some draconian provisions in the Bill. The key provisions of this NHF Bill include the following:

  • A mandatory 2.5% contribution of monthly income (this is different from the basic salary under the extant NHF Act) by employees earning minimum wage and above in public and private sectors to be deducted and remitted monthly by all employers {Section 5(1) of the NHF Bill}.
  • 2.5% of income by self-employed individuals {Section 5(2) of the NHF Bill}.
  • Banks, Pension Fund Administrators (“PFAs”) and insurance companies shall invest a minimum of 10% of their profits before tax into the Fund at an interest rate not exceeding 1% above the rate payable on current accounts by banks {Section 6(1)(2) & (4) of the NHF Bill}.
  • 2.5% levy on each bag of cement, locally produced or imported into the country {Section 4(1) of the NHF Bill}.
  • Penalty for non-compliance of up to N100million for corporate bodies and N10million for individuals {Sections 23 & 24}.
  • Sanctions include cancellation of operating licences of banks, PFAs and insurance companies for violations of the provisions of the NHF Bill.
  • Any withdrawal by contributors who have attained the age of 60years or 35 years of service will be at the rate of 2% per annum {Section 20}.
  • The Federal Mortgage Bank is empowered to request and inspect books of account and other documents relating to the provisions of the NHF Bill.
  • The Fund and any refund of contributions are exempted from payment of taxes

Major Implications of the NHF Bill

The NHF Bill will have significant impacts on businesses. This is because it introduced a new form of compliance burden on companies and individuals which would trigger penalties if disregarded.

Although the National Assembly had a good intention regarding the NHF Bill, the draconian and burdensome provisions in the NHF Bill have made it a bad one for the real estate sector. The contributors are expected to benefit from the scheme, in reality however, only a minute proportion of the contributors will benefit from it whilst the majority can only withdraw their contributions after attaining the age of 60 or 35 years of service. By this time, the capital is almost completely wind-spent as the return on contribution will be grossly inadequate to cover inflation rates. We have highlighted below the main reasons why we believe the assent-decline by the President was a good call:

  • We believe that the contribution is regressive in nature as it taxes the poor more than the rich. An imposition of 2.5% compulsory contribution is a significant deduction on low income employees. People earning income around the minimum wage band will have to contribute 250% higher than their PAYE.
  • The NHF Bill has failed to address major issues bedeviling the real estate sector such as the land acquisition challenges, the land registration and legal framework for real estate investment. Without addressing these issues, the NHF Bill would increase the tax burden of the contributors.
  • The imposition of 2.5% on every bag of cement produced locally or imported into the country will make housing even less affordable. The manufacturers of cement will naturally pass the burden of this extra tax on the final consumers, i.e., the contributors. The 2.5% levy is a tax on property development.
  • Mandating all employers to deduct and remit the contributions monthly will worsen the ease of doing business in Nigeria.
  • The NHF Bill will have a huge negative impact on Pensioners as the return of 2% per annum on their contributions withdrawn after attaining 60 years or after 35 years of service means their investment will be completely meaningless.
  • The NHF Bill will also have a negative impact on the capital market because the banks, insurance companies and PFAs will have to set aside 10% of their profit before tax for NHF investment which will only yield a 1% returns on their investment. This will drastically reduce the returns that will be available for their shareholders.
  • The Bill may also lead to less liquidity in the economy and a higher cost of borrowing as the funds will be forcefully diverted from other uses.
  • The NHF Bill requires the Federal Inland Revenue Service (FIRS) to impose and collect the 2% levy on the imported and locally produced cement. It is our opinion that this would create inter-agency overlap as the Nigeria Customs Service is already saddled with the responsibility of collecting import levies.


Whilst the NHF Bill may be well intentioned, it is our opinion that the Government needs to create an enabling environment that makes affordable housing possible and not just make affordable funding possible. The housing problem goes beyond the provision or availability of funds within the sector.

There should be an enhanced public-private partnership for the development and delivery of housing to the over 17 million households in need in Nigeria.

There is also the need to fix the Land Use Act, 1978 in order to address the ease of land acquisition and use.

The fact that there is no appreciable progress with the extant NHF Act shows that there is an urgent need to overhaul the extant law. The refusal of the President to assent the NHF Bill is therefore a commendable one. This however does not mean that the extant law should not be revisited. We need to look into the housing issues with a view to finding lasting solutions to the problems facing the real estate sector and revise the NHF Bill to meet all the identified challenges.

Dimeji Sarumi is a Senior Associate with TNP.

Other Insights