The National Housing Fund (NHF) Act No. 3 of 1992 (NHF Cap. N45 Laws of Federation of Nigeria (LFN) 2004) commenced operation on January 31, 1992, having the mobilization of funds for housing development as its primary aims and objectives. A new Act is being enacted known as NHF (Establishment) Act, 2018 to repeal and replace the NHF Act Cap. N45, LFN 2004. The contributions shall be by workers earning minimum wage and above, in both public and private sectors, of the economy including banks, Insurance companies as well as Pension Fund Administrators.
The new Act is expected to impose a statutory deduction of 2.5% of the monthly income of the employee as a contribution to the fund. The same is also applicable to all self-employed persons.
The banks, registered insurance companies, and Pension Fund Administrators are required to invest a minimum of 10% of their Profit before Tax at interest rates not exceeding 1% above the interest rate payable on current accounts by Banks.
The Act is not new to the body of Nigerian laws. A difference between the new Act and the former is the shift in the basis of the deduction from basic monthly salary to monthly income.
The new Act, however, requires the Federal Inland Revenue Service (FIRS) to impose and collect a 2% levy of the value of imported and locally produced cement. This will result in double taxation as the Nigeria Customs Service is already charged with the mandate to collect import levies (including levies other than import duties, as prescribed from time to time) and excise duties in Nigeria on behalf of the Federal Ministry of Finance.
- The contribution is regressive as it taxes the poor more than the rich. It will negatively impact the welfare and spending power of workers especially those at the bottom of the ladder as income may not increase to correspond with the proposed increment in taxes.
- It increases the tax burden of contributors without addressing other fundamental issues such as land legislation. For example, the Land Use Act of 1978 should be fixed to solve the problems of ease of land acquisition and use.
- The 2.5% levy on cement is a tax on property development which is counter-productive to the objective of making housing development more affordable.
- The penalties for violation of the proposed law include a fee of up to N100 million for corporates and N10m for individuals. It also includes cancellation of operating licenses of banks, insurance companies, and PFAs. These penalties are overly aggressive and not commensurate with the violations under the law.
- The term “MONTHLY INCOME” was defined very loosely under the proposed Act and will create a vortex of issues concerning interpretation. Better efforts could be made to determine the emoluments.
While the law may be well-intentioned, mobilization of more funds for the National Housing Fund Scheme will not in itself solve the myriad of issues which is currently facing the housing sector. This is a result of the fact that most of these issues center around the policies and regulations governing the industry. To this end, housing policies and its regulatory framework should be fixed, thus not only creating affordable housing but creating an environment which makes affordable housing possible.
The Government must also not be negligent to the fact that it can solely provide housing to the over 17 million households in need of one in Nigeria. The Public-Private partnership for the development and delivery of housing units should also apply here. As a means to an end, the government should consider other forms of housing which are less expensive such as outbuildings and shipping containers.
More importantly, The Land Use Act of 1978 should be amended to address the ease of land acquisition and use.
Finally, the government must use its obligation to contribute to the scheme as a lever for accelerating fund mobilization and delivery of the housing as a means of redistributing and relieving ordinary Nigerians of the burden of welfare. It should also be able to render accounts to contributors and Nigerians articulating the achievements of the scheme in the past 27 years chronicling its significant changes in the housing sector.
1)THE NATIONAL HOUSING FUND (ESTABLISHMENT) ACT 2018
2) NATIONAL HOUSING FUND ACT CAP N45, LFN 2004
4) CITN TaxbitonThursday; NATIONAL HOUSING FUND ACT- ON THE CUSP OF ANOTHER STATUTORY DEDUCTION
5) PHOTO CREDIT: pulse.ng