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  In February, President Muhammadu Buhari signed the Business Facilitation Bill into Law. The Act, as it is now known, introduced amendments to a number of laws. The government’s stated aim with respect to the Business Facilitation Act (BFA) was to further improve the ease of doing business in the country.
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One of the laws affected by the BFA was the National Housing Fund (NHF) Act, the piece of legislation that backs the National Housing Fund contributory scheme. Changes have specifically been made to who is mandated to contribute, and what portion of income deductions should be taken from. If you’re an employer of labour or an employee in the private or public sector, you probably know that this directly concerns you. In this article, we’ll look at how the new National Housing Fund rules will affect employees, businesses, and the broader Nigerian economy.

What is the National Housing Fund?

The National Housing Fund was established by the NHF Act of 1992, with the aim of amassing funds towards the provision of affordable housing for Nigerians. According to the act, every Nigerian who earns the national minimum wage or more is mandated to contribute 2.5% of their monthly basic salary to the NHF. Employees were to have their contributions deducted at source by their employers—whether in the public or private sector –and remitted to the Federal Mortgage Bank of Nigeria (FMBN). They were also eligible to receive funding from the pool of contributions at interest rates that were lower than the industry average.

What Has Changed?

The Business Facilitation Act, signed into law in February, introduces some changes to the NHF Act. Two significant amendments are:
  • NHF Contributions are Now Optional for Private Sector Employees: For persons who are employed by businesses in the private sector, NHF contributions are no longer compulsory. They may now choose to either continue to contribute to the scheme in order to enjoy its benefits or cease to participate in it. However, self-employed persons and employees in the public sector are still required to remit monthly contributions to the NHF via the Federal Mortgage Bank of Nigeria (FMBN) as they currently do.
  • Deductions will Now be Made from Gross Monthly Income: Prior to the recent amendments, deductions for the NHF were made from basic salary, i.e. 2.5% of basic salary. But going forward, the deductions will now constitute 2.5% of gross monthly salary—a greater portion of any individual’s potential earnings.

How will this Affect Employees, Businesses, and the Economy?

Here’s how these new changes will likely affect employees, businesses, and the broader Nigerian economy:
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If you’re employed in the private sector, you now have the option of exiting the NHF contributory scheme. This may translate to a slight increase in the income you ultimately receive, other factors held constant. The NHF Act does not detail a defined process for requesting and obtaining a refund of previous contributions. But it does say that any contributor who has not received a housing loan from the FMBN and has:
  • Attained the age of 60 years, or
  • Retired from his or her employment and is incapable of contributing to the fund,
can apply for a refund of their contribution. They will be eligible to receive it within 3 months from the application date, at an interest rate approved by the Federal Minister of Works and Housing. It is conceivable that this rule could apply to persons seeking a refund of their contributions after having pulled out of the scheme. Further clarifications regarding this should emerge in the coming weeks.

For Businesses

Anticipatedly, a significant number of current private sector NHF contributors will likely withdraw from the scheme, leading to a reduced level of interaction between the FMBN and businesses. Consequently, fewer employee salary deductions will occur, although the income range subject to deductions has expanded. Notably, self-employed entrepreneurs are still obliged to make NHF contributions.

For the Economy

Nigeria faces an acute (and growing) shortage of residential spaces. According to the Central Bank of Nigeria (CBN), the country’s housing deficit stood at 12 million units in 2007 and rose to 20 million in 2019. The FMBN now puts the figure at 28 million units (as of 2023). Although the NHF and the FMBN were set up as part of a broader strategy to tackle this problem, it’s not clear how much of an impact they have had. The FMBN says it gave out loans to 17.886 contributors in 2022. Its ability to provide financial support for the development of new homes may be hampered by the changes to the NHF Act, as they will almost certainly shrink the pool of funds available to it.
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Final Words

The National Housing Fund has been a part of Nigeria’s business setting for decades. Billions of naira have been mobilized through it to deal with the lack of affordable housing that bedevils the country. The revisions to the rules governing the initiative will no doubt impact individuals and businesses. It will be interesting to see how it all pans out. Featured Image Source: Pulse NG
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This article was first published on 29th April 2023


Ikenna Nwachukwu holds a bachelor's degree in Economics from the University of Nigeria, Nsukka. He loves to look at the world through multiple lenses- economic, political, religious and philosophical- and to write about what he observes in a witty, yet reflective style.

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