Commercial Banks’ Interest Rates on Real Estate Loans and the Implication on Housing Finance in Minna, Nigeria

Abstract

This study explores the trend in interest rates on real estate loans granted by commercial banks in Nigeria. Data used for the study were collected from selected real estate firms in Minna, the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS). Results of data analysis reveal that variation in interest rates on real estate loans granted by commercial banks in Nigeria in the past three years is statistically significant at 0.05 and 0.01 levels, an indication that interest rates on real estate loans granted by commercial banks in the country do not follow a similar trend. The paper examines the implications of this trend on affordable housing finance in Niger State of Nigeria and argues that more than 90 per cent of the households in Niger State cannot afford real estate loans granted by commercial banks for housing development and acquisition in the area at the current interest rates. The paper concludes that greater involvement of the government at all levels in the provision of long-term real estate credit at affordable interest rates is necessary if housing finance must be made affordable for the low-income groups in Niger State, Nigeria.