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National Housing Fund (Establishment) Act, 2018: Analysis & Recommendations For Legislative Review

(GDP)[40]. This is abysmally low compared to 80% in the United Kingdom, 77% in the United States of America and 31% in South Africa[41]. 

In spite of the above and the good intention reflected in the main objective of the new NHF Act, the legislation as passed by the National Assembly contains provisions which would make its implementation difficult and which, apparently, have potentially counterproductive effects on the housing sector, financial market and the Nigerian economy at large.

Firstly, the 2.5% contribution mandated for qualified individuals amounts to a regressive tax on the people’s income. For instance, a worker placed on the soon to be implemented monthly minimum wage of N30,000 is required to contribute the sum of N750 monthly to the Fund while a middle class worker earning N300,000 monthly is required to contribute a sum of N7,500. Economists and tax analysts have argued that this is not progressive, as it imposes more tax on low income earners than the average and high income earners; when the contributions are expressed as a percentage of the income tax (PAYE) of the respective workers.

Secondly, the imposition on commercial and merchant banks, insurance companies and PFAs to invest 10% of their PBT in the Fund, will further reduce the amount of credit available from banks to other sectors of the economy; such as loans to Micro, Small and Medium Enterprises (MSMEs) as well as cut the returns on investment to shareholders of banks, insurance companies and PFAs. By forcefully diverting investible funds from more profitable ventures, such as capital market instruments; trade finance; project finance and consumer lending etc. at a meager interest rate of 1% above the interest rate payable on current accounts by banks, the new NHF Act, if operational, will shrink projected revenues and profit margin of banks, insurance companies and PFAs as well as trigger further liquidity crisis in the financial market. This is not desirable at this time when banks are struggling to return to stability and profitability and insurance companies barely struggling to stay afloat amidst economic recession and stagnancy. Also, given Nigeria’s past bitter experiences with provident funds and the sensitivity and fragility of pension fund assets vis-à-vis the poor performance of the Fund since its establishment in 1992; caution is advised in the way and manner the growing pension funds in the country is invested.

Thirdly, there are no provisions as to the duration of the investment which banks, insurance companies and PFAs are to make in the Fund. The new NHF Act is silent on whether the capital invested by the

40 Ibid.
41 Ibid.