As part of Nigeria’s economic transformation, President Goodluck Jonathan has launched the proposed Nigeria Mortgage Refinance Company.

“There’s the Mortgage Refinance Company which is being launched and there is also the supply side initiative because the challenge with mortgage in Nigeria is, beyond the financing, there is a supply constraint which also needs to be unblocked,” Niyi Adeleye, Head Real Estate Finance West Africa, Stanbic IBTC Capital told CNBC Africa.

Currently Nigeria has a deficit of 17 million housing units and needs one million units per annum for the next 17 years to meet the demand. The new mortgage company is expected to create more than 200,000 mortgages over the next five years at affordable interest rates. It will begin in 14 pilot states.

“The mortgage refinance focuses on creating a window, a liquidity window for financial institutions to refinance the long term exposure that they can go back into the market and create new mortgages with the expectation that there’ll be greater incentives for banks to create mortgages,” he said.

Nigerian banks do not offer mortgages because financing is usually short term, so the mortgage liquidity company is attempting to fill this void.

“For a developer the most important thing is, the government has to factor what are the funding alternatives that developers can access to improve the supply of housing stocks into market by virtue of technology or by virtue technical capacity which I believe the government really needs to look into critically,” Damola Akindolire, General Manager Alphamaed Property Development Company told CNBC Africa.

According to Mustafa Chike-Obi, the Managing Director for Asset Management Corporation of Nigeria, the housing market needs N10 trillion annually for the next five years. But because of the new company interest rates are expected to decrease to about 13 percent.

“The company is supposed to create sustainable droppings in mortgage rates. The thing is that if you have a liquidity window that financial institutions can’t access and this is both banks and PMI’s, the liquidity premium that they normally add to mortgages which would be 10, 15, 20 years long, will be shortened or eliminated. The expectation is that over time, that would translate to a drop in mortgage rates,” Adeleye said.