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Title:The interest rate as a policy instrument for resource allocation to the housing sector in Nigeria
Author:Agbola, TundeISNI
Periodical:The Nigerian Journal of Economic and Social Studies
Geographic term:Nigeria
Subjects:monetary policy
interest rates
housing policy
Abstract:This paper gives a broad overview of the structure of interest rates, their use as a policy tool and the effect of this allocative instrument on the Nigerian housing market. It argues that the interest rate is an important variable in both savings development strategies and loan demand management policies. It also argues that an administratively determined interest rate policy, as in Nigeria, overemphasizes the regulatory power of the Central Bank, and produces serious inefficiencies which result in chronically negative real interest rates. This has been one of the reasons why the formal sources of mortgage finance in Nigeria, the mostly government-owned or controlled institutions such as the commercial, merchant and mortgage banks, the various housing corporations, property development corporations, insurance companies, and the National Provident Fund, have never played a significant role in resource mobilization or finance for housing development. In order to develop an efficient mortgage market and channel enough funds to the housing sector, there must be a careful restructuring of the existing mortgage instruments, deregulation of the interest rate, development of secondary and capital mortgage markets and the granting of autonomy to the specialized mortgage institutions. Bibliogr., notes, ref.